Alibaba and Walmart report strong Q2

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Our blog this week rounds up the latest retail news, including recent Q2 results from Walmart and Alibaba, and a focus on M&A activity in Asia-Pacific. China’s Alibaba trumped analysts’ expectations with a 42% year-on-year jump in quarterly revenues to Rmb114.92bn (US$16.3bn), contrasting with its rival Tencent which one day earlier disappointed the market by falling short with a more modest quarterly growth (though Tencent did report a 26% year-on-year increase in profit).

Alibaba’s CEO, Daniel Zhang, said the company “had a great quarter, expanding our user base to 674mn annual active consumers, and demonstrating our superior user experience. We will continue to expand our customer base, increase operating efficiency and deliver robust growth. With strong cashflow from our core e-commerce business, we will continue to invest in technology and bring digital transformation to millions of businesses globally.” 

Alibaba is also reportedly looking to acquire Kaola’s cross-border online shopping platform from rival NetEase, according to two people familiar with the matter, as China’s highly competitive US$2tn e-commerce market takes early steps towards consolidation.  

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Meanwhile, Walmart has raised its outlook for the USA and said US consumers were in “solid” financial health as it shrugged off the Trump administration’s trade war with Beijing and turmoil elsewhere in bricks-and-mortar retail. Walmart revenues rose by 1.8% in fiscal Q2 2020 to US$130bn (+2.9% on a constant currency basis). USA sales were US$85.2bn (+2.9%) and the retailer noted that it is gaining market share in key categories, including health & wellness; e-commerce sales grew by 37%. International sales fell by 1.1% to US$29.1bn (+3.3% excluding currency impacts). Strength in Mexican subsidiary Walmex and China were offset by softness in UK and Canada. 

In Brazil, No.1 drugstore chain RaiaDrogasil (RD) reported better than expected results, seeing its national share rise to 13% in Q2 2019 (up 1.6% vs Q2 2018). Another drugstore chain quickly gaining share in Brazil is Farmarcas, which looks set to become the No.4 ranked chain by end-2019 after reporting even stronger results than RD, putting pressure on established players Drogaria DPSP and Pague Menos.

As for M&A activity:

• In Japan, drugstore operator Cocokara Fine is pursuing a merger with rival Matsumotokiyoshi in a deal that could create a market leader with sales of around ¥1tn (US$9.4bn)

• Amazon, which is looking to boost its bricks & mortar presence in the fast-growing Indian market, is reportedly in advanced talks to acquire up to 10% of Future Retail, the country’s No.2 retailer

• AS Watson (an affiliate of CK Hutchison Holdings) is in talks with potential partners in UAE with a view to introducing its health & beauty stores there

Take a look at the evolution of Pharmacy and Pharmacy Point-of-Care in the Distribution chapter in our new report, Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself! Other chapters will include Healthcare Trends, Regulation, Digital engagement amongst many others. Nicholas will also unveil the 15 “Infinity Zones” he has identified as being crucial to the future growth of the industry. You can upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to pre-order your copy, please contact melissa.lee@NicholasHall.com.

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eCommerce expansion led by Amazon limits store-based growth

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Continuing our series of blogs on the 10 Infinity Zones for future CHC growth outlined by Nicholas Hall, in this edition we take a closer look at eCommerce, following the news that Amazon has become the world’s most valuable brand, according to the 2019 BrandZ Top 100 Most Valuable Global Brands ranking released by WPP and Kantar.

Commenting on the latest DB6 MAT Q1 2019 figures, which show that global bricks & mortar OTC growth decelerated to 3.7%, Nicholas Hall said that “Amazon goes from strength to strength, and takes a 75-90% share of all eCommerce sales of CHC products, depending on whom you listen to. These are the glory days for the so-called GAFAA companies (Google, Apple, Facebook, Amazon, Alibaba), but will it last?

Top 10 country MAT Q1 2019

The rise of eCommerce is one of the factors causing the slowdown in store-based OTC sales, which now total US$136.7bn. According to Celine Waller, VP, DB6, store-based sales account for 78% of the global OTC market, with direct sales generating 14%. Internet & mail order currently accounts for 9% of the “all channel” universe, with sales dominated heavily by VMS supplements in China and USA.

However, this channel has seen a CAGR of 20% since 2014 and will continue to increase dramatically in importance over the next decade. In China, Alibaba continues to prosper from the Chinese government’s attempts to promote eCommerce and regulate the so-called suitcase trade (daigou), while Amazon remains supreme in the US market.

To help keep our clients abreast of these changes, this year we have introduced an “all channels” version of the DB6 dataset, which reports on topline sales of direct sales (MLM), Internet & mail order plus key brands in selected leading markets. eCommerce will also be one of the key topics in our upcoming report, Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself! Examine each aspect of the CHC industry in 20 chapters, with a focus on major issues including Regulation, Pharmacy Point-of-Care, M&A, Switch and much more. Nicholas will also unveil the “infinity zones” he has identified as being crucial to the future growth of the industry. In addition to this, you can upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

Big Data to democratise healthcare

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Another of the Infinity Zones that Nicholas Hall will be exploring in his upcoming New Paradigms report is Big Data. Healthcare is an increasing focus of the global Big 5 tech companies, namely Google, Apple, Facebook, Amazon and Alibaba (with the latter predicted to be the “biggest of all in future” by Nicholas). All of these companies own vast reservoirs of consumer information (“big data”) that can be leveraged to provide targeted advertising and services.

In an interview with CNBC in early 2019, Apple’s CEO Tim Cook said that health will be the company’s “greatest contribution to mankind” and indicated that various services would be rolled out later this year, building on the success of the new ECG-enabled Apple Watch. Over the weekend, it was revealed that Apple has acquired Tueo Health, a California startup developing a smartphone app that works with sensors to detect asthma-related issues in sleeping children and alert the parents or guardians.

Tueo Health

How the Tueo Health app works

In recent years, Apple has also acquired Gliimpse, a startup developing technology to aggregate medical records, and Beddit, a sleep sensor company. Apple sees its mission as “democratising” healthcare by putting its big data in the hands of consumers and empowering individuals to manage their own health via apps and dashboards. Apple’s vast user base gives it an advantage over its tech rivals, and the expected launch of its own medical devices (i.e. hearing aids) and services (i.e. blood glucose monitoring) will expand its healthcare appeal further.

As Nicholas points out, however, privacy concerns continue to plague big data initiatives and European authorities in particular have issued various fines to tech companies for breaching strict new data privacy laws (GDPR). The need for tech companies to process our personal information with ever more sensitivity will become even greater once they have access to healthcare metrics such as our blood pressure, sleep patterns, etc.

Big Data will be one of the key topics in our upcoming report, Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself! Examine each aspect of the CHC industry in 20 chapters, with a focus on major issues including Regulation, Pharmacy Point-of-Care, M&A, Switch and much more. Nicholas will also unveil the “infinity zones” he has identified as being crucial to the future growth of the industry. In addition to this, you can upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

Alibaba buys in to “digital silk road” vision

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According to a report in the FT over the weekend, Chinese e-commerce retailer Alibaba is close to agreeing a deal with Russian internet company, Mail.ru, and sovereign wealth fund, Russian Direct Investment Fund, to form a joint-venture e-commerce company.

As highlighted in our earlier blog on Chinese investment in Africa, there is a clear vision from China and Chinese companies to invest in the physical infrastructure for a new silk road (Beijing’s Belt & Road Initiative) connecting Asia, the Middle East and Europe, and this latest news on a China-Russia e-commerce tie-up underlines the appetite for a digital silk road too.

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In October 2017, the Russian Government approved a Ministry of Health bill to allow the online purchase and home delivery of OTCs, which came into force in January 2018. As a result, Mail.ru announced the launch of its online pharmacy in April 2018. At present, established western e-commerce giants like Amazon are largely absent from Russia, giving Alibaba the freedom to chart new territory in a market of 147mn consumers at an opportune time.

As the FT article points out, Alibaba is also fighting back against Amazon in certain markets, like Indonesia, where the US retail giant has stolen a march. For example, Alibaba has invested heavily in two e-commerce companies, Tokopedia and Lazada, both of which market goods, including healthcare products, across southeast Asia.

Explore the digital landscape at Nicholas Hall’s upcoming OTC.NewDirections Executive Conference. Other topics on the agenda include Medical Device Regulations, Medical Cannabis, Switch and Smart Probiotics. This will be an inspiring day on 12 September in London, focusing on Where Innovation Meets Regulation. For details of the full agenda or to reserve your place contact elizabeth.bernos@NicholasHall.com

OTCs in Action Episode 15: E-Commerce excitement in China

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Online purchases of OTCs in China are in action, according to James Fan, CEO, JOWIN China Group and Nicholas Hall’s Network Partner.

In 2014, Alibaba issued the world’s largest IPO (raising funds of US$25bn), increased its investment in its pharma dispensing e-business and aggressively developed 
its online healthcare shopping arm. It also supported many cloud-based health projects and encouraged traditional distributors to develop their online businesses.

“Double-digit growth of OTCs online and a rise of 20% among big brand nutritionals and cosmeceuticals proves that Chinese consumers are convinced by e-healthcare product providers. Tmall – operated by Alibaba – reported the Top 3 brands purchased on its site last year were Dong-e E-Jiao (Dong-e E-Jiao Group), Caltrate-D (Pfizer) and Fupai E-Jiao (Shandong Fujiao), which grew on average by more than 30% vs 2013. All three products have numerous line extensions that meet a range of daily healthcare needs. Regulations are set to allow the online prescription market to open up, too. Meanwhile, we believe the next digital healthcare hotspot in China will be at-home devices that can be used alongside online and mobile technology.