February 22, 2024

Tsuruha and Welcia Towards Business Integration

AEON announced that its subsidiary Welcia Holdings, the largest drugstore operator, and Tsuruha Holdings, the second largest, have entered into talks to merge their operations. The Welcia-Tsuruha alliance, the world's fifth largest drugstore chain by sales, is targeting the 2 billion person market in China and Southeast Asia, where the population is rapidly aging. The world's major players have a head start in markets that still need development.

The combined sales of Welcia Holdings and Tsuruha Holdings for the most recent fiscal year was 2,114.2 billion yen. According to the fiscal year 2021 retail sales rankings compiled by Deloitte Touche Tohmatsu, it will rise to fifth place worldwide in "drugstores and pharmacies."

The medical care system needs to be better equipped for an aging population. According to the World Bank, the number of healthcare workers per 1,000 population is significantly lower in Thailand, Vietnam, and Indonesia, at 0.9, 0.8, and 0.7, respectively, compared to 2.6 in Japan. China has 2.4, almost the same level as Japan, but advanced hospitals are concentrated in large cities, and there are differences in the level of medical care in the regions.

Drugstores offer over-the-counter medications, supplements, and other products to relieve or prevent symptoms of minor illnesses. They complement medical services in areas with few hospitals and doctors, and there is significant room for business development in Asia.

If a dispensing pharmacy can be attached to the building or combine the functions of a supermarket, it will be more convenient and attract more customers. China and Southeast Asia are the remaining "Blue Ocean (untapped market)" for domestic drug companies.

According to Euromonitor International, a UK-based research firm, the market for over-the-counter drugs in 2028 will expand by more than 20% from 2023 in all five countries: Thailand, Vietnam, Indonesia, Malaysia, and the Philippines. China is also expected to grow by 14%.

However, overcoming hurdles such as regulatory compliance and the recruitment of pharmacists will be challenging. Will Japanese drugstores be accepted in Asia? The actual value of integration is being tested.