Supplier newsletter Autumn 2022

Following the acquisition, the healthcare provider now has a presence in 29 countries, more than 45,000 employees, 224 sites in the business areas pharmaceutical wholesale and pre-wholesale, as well as more than 3,200 own pharmacies and 17,000 partner pharmacies.

Thereby, the PHOENIX group is expanding its position as Europe’s leading pharmaceutical wholesaler, pharmacy operator, and service provider for the pharmaceutical industry.

Due to organic growth and acquisitions, the PHOENIX group expects to expand its market position in Europe in 2022/23. For the year as a whole, the company anticipates an increase in revenue slightly above the level of growth of the European pharmaceutical markets. Profit before tax is forecast to be at the level of 2021/22. PHOENIX expects a slight increase in the equity ratio.

For the same period sales to retail pharmacies only (total market size in the Baltics first half-year 796.7M EUR), we have reached all-time highs likewise. Sales of Tamro Estonia have grown by 20.8% and we have reached the market share of 37.2%. Tamro Latvia has grown by 18.7% and reached all-time high of 26.2% market share. And Tamro Lithuania, similar to the previous countries, has improved sales performance by staggering 29.5% and grown market share by 1.6pp vs last year, reaching 22.4%! 

In the hospital segment, which has been more stable in first half-year with total value in Baltics 139.7m EUR and 6.4% growth, Tamro Baltics is holding 25.7% market share with 17.7% growth versus last year. Tamro Latvia is holding 29.3% market share, Tamro Estonia 27.4% and Tamro Lithuania 21.9%.  

Source: Estonia – Medicube; Latvia – SoftDent; Lithuania – IQVIA.

In total we are currently operating 249 own and full franchise pharmacies (90 in Estonia, 84 in Lithuania and 75 in Latvia) and and cooperate with 179 partner pharmacies (103 in Latvia and 76 in Estonia). On top of BENU pharmacies, Tamro partner pharmacies owners have been opening 5 new pharmacies in different markets.

Pictured: Panorama Center BENU pharmacy. Vilnius, Lithuania. 

2023 PLANS AND OUR VIEW 

We are planning to open around 15 new BENU pharmacies across Baltics and additionally around 5 new partner pharmacies. The planned openings are strongly contributing to Tamro market share growth in Baltics Retail market, and contributing to the wider access to the consumers across Baltics.   

When planning the retail expansion, of course, we need to take into account the challenges which are adding higher risks than in previous years: strongly growing cost base (lack of personnel, lease costs, utilities costs in pharmacies) and longer activation time of new pharmacies locations.  

The demand outlook however for 2023 in certain categories is raising questions, but we believe that with right product mix and promotional offers combined with strong service level from our Suppliers and Tamro respectively – BENU and Aptieka1 pharmacies network will be very good choice for customers across the Baltics market in 2023 likewise.

Last but not least, we are developing our modern pharmacy concepts. In addition to launching the BENU 2.0 concept some years ago, we also invested in our partner pharmacy concept. As an example, Tamro Latvia has developed and implemented Aptieka1 new refreshed concept. Recently a new pharmacy was opened in Jaunolaides (picture below). 

Pictured: Jaunolaines aptieka. Aptieka1 new concept, Latvia. 

First of all, consumers during pandemics got used to visiting grocery outlets less often, which in turn will impact the traffic in pharmacies. This, however, does not necessarily mean lower total turnover, but rather an increase in average basket size. With each customer interaction becoming more valuable, pharmacists' commercial skills and ability to offer high-quality consultation is a key. We already working on improving the quality of consultations in BENU pharmacies. During the coming year, we would like to focus even more on the collaboration with Suppliers on enhancing pharmacist’s products knowledge via Tamro E-learning platform.

Secondly, e-commerce and omni-channel experience has become a standard in the Baltics well-developed retail market. Over 30% of grocery customers in Baltics have ordered their groceries online. At that, consumer of drug categories prefers mostly food supplements, cosmetics and hygiene products as online purchase. Most critical factors of online purchase are the ease of navigation and speed and quality of delivery.  

In 2022, due to recent pandemics, high inflation and war in Ukraine, consumers have become more restricted in their spending. Lithuania- 73%, Latvia - 63%, Estonia – 71% of consumers are changing their shopping habits with the aim to save. Most often consumers are buying campaign items to save (Estonia 79%, Latvia 86% and Lithuania 84% of consumers). Furthermore, on average 74% of consumers buy only the most necessary products and 52% Estonia, 66% Latvia and 58% Lithuania consumers are switching to cheaper brands. The facts prove the ever-increasing importance of campaigns during 2023 and an opportunity for retailers to expand white and private label alternatives as more affordable options.

According to the estimates of research and financial institutions, an even greater focus on consumer activation (campaigns, secondary placements, communication etc.) and competition is expected in 2023, which applies to both online and brick-and-mortar channels (physical stores and pharmacies). While inflation is continuously increasing prices of both media buying and pharmacy costs per m2, consumer activation will become more expensive. For services, where the input prices have increased significantly, the pressure of price increase is considerable, leaving retailers no chance of keeping the prices at the current level. BENU chain is not an exception in this case – prices of marketing services, where costs have grown, will need to be revised for the upcoming year. On average, depending on the market situation, a 5-10% increase is expected. 

Last but not least, in FMCG novelties are the biggest contributor of growth in front of price increases. People in the Baltics tend to like new products and new launches are always welcomed by Tamro Baltics.  

LITHUANIA 

In Lithuania, most positive outlooks are expected in VMS (Vitamins, minerals and food supplements) category with half of the forecasts landing to the range of 4-7% growth, the rest between 8-11% and 12% and more. In OTC category, the split is equally 50/50 between groups 0-3% and 4-7%. A similar forecast has been proposed for the Personal Care and Cosmetics category with one exception – a slight negative outlook of up to -3% decline was also forecasted in this category. In generics, the majority expect modest 0-3% growth, but also a decline of -4-(-7%) has been suggested. In the rest of the other categories all respondents expected a positive outlook with a majority of 4-7% growth. As positive supporting arguments, price increase, consumption growth, new products and less OOS were mentioned. From negative trends, legal changes and the general economic situation were highlighted. 

LATVIA 

General forecasts for Latvian performance are the most negative from all 3 countries. In all categories negative outlooks were also forecasted, which makes Latvian forecasts most dispersed. In generics and OTC, the same outlook has been suggested with half of respondents proposing 4-7% growth. The rest of the forecasts were lower, up to -3% with the most negative scenario. Likewise, VMS and Personal Care & Cosmetics are expected to perform in a similar trend, with the majority proposing 0-3% growth, but also up to -3% decline as well as 12% and more growth were proposed. In Other categories, majority expect 4-7% growth – the rest of forecasts were below, with minimum of -3%. As keywords, similar to Lithuania, inflation and economic situation were highlighted as well as general VMS category consumption trend, expected strong cough and cold season and refugees impacting population. 

ESTONIA 

Estonian forecasts were the most homogeneous. In all categories majority of respondents expect 0-3% value growth. However, in most of the categories (excl. generics) also more positive outlooks were proposed with VMS category being with the most optimistic outlook. Half of VMS respondents expect growth of more than 3% with responses varying between 4-7%, 8-11% and 12% and more. Only negative scenarios in Estonian case were proposed in Personal Care & Cosmetics categories up to -3% decline. From keywords no differences between Latvia and Lithuania were proposed – inflation, strong cough and cold season, improved OOS and new launches were mentioned as top factors impacting the market. 

TAMRO BALTICS EXPECTATIONS FOR 2023

In 2023, Tamro Baltics is expecting continuously to grow market shares in all three countries and core business areas. Throughout the years, Tamro has been consistently investing in profitable partnerships with our clients and suppliers, which ensures strong long-term value proposition and execution of projects. As majority of our suppliers, our forecast is moderately positive towards the upcoming year. In medicine categories Tamro expects relative stability for generics sales, while continuous growth in OTC, which will be impacted mostly by price increases and new product launches. In non-medicine categories, expectations are slightly different by markets.

For all countries profitable growth will be the key focus during the upcoming year.

After the pandemic subsided and almost all restrictions were lifted, the growth of e-commerce also slowed down due to high baseline. The observed total traffic of all Baltic pharmacy e-commerce platforms compared to the first half of 2022 grew by only 11%, and the majority of this growth was accounted for by the Latvian E-pharmacy market, which grew by an impressive 40%, while the growth in Lithuania and Estonia was only 3%. BENU e-commerce pharmacies at that period have increased their sales YTD August by 47% in value. 

The e-commerce channel is expected to continue driving the sales in 2023. The channel gives customers ability to compare prices faster and select chain with the best offer. Based on BENU survey from spring 2022, customers expect e-commerce to have good prices and simplicity of check-out. This means that short term targeted campaigns remain very important in all categories, especially in beauty and wellness (VMS). In medicines categories, speed of delivery was mentioned to be as important as the rest of the factors.

Finishing last year with an average growth in the Baltics +45%, Livsane continues to show a stable growth in all 3 countries with average growth +46% YTD September. By October 2022, Livsane's assortment includes more than 200 products in the Food supplements, Commodity and Personal Care categories, adding at least 20 new products to its portfolio annually. Growth faster than the market and the categories where Livsane products are presented, allows the brand to take a firm position in BENU's portfolio and increase significantly its share every yearin non-medicine sales.

BENU's annual customer satisfaction survey shows that Livsane brand awareness has increased double-digit over the year, meaning that more than half of BENU visitors knows the brand and every fourth buys Livsane products.

In the near future, Livsane will continue its active development, both in the PHOENIX countries and at the Baltic level. Already confirmed by Phoenix, new product development pipeline gives confidence that Livsane will strengthen its position in the presented categories, but in addition to this, also in OTC and Skin Care categories.

What are the benefits of the new system? First of all, the system has central data management in place – meaning that assortment management, pricing, recalls, campaigns and other operations can be supported better by the head office and be more efficient. 

In addition, for our Suppliers, we have cross-sales and up-sales functionalities available, and integration with Next Best Offer – showing the personalized offers to the customers. Likewise, for pharmacists, the fast ordering, improved e-prescription processing are just few examples of the benefit of the system. Furthermore, possibility to use POS computer dashboard for news and advertising is available, so that the pharmacists are up-to-date on the newest campaigns. 

According to Rasa Montvilė, Tamro Lithuania CEO, the new premises were designed not only to meet the highest expectations in terms of comfort, infrastructure and location, but also in terms of "greenness." The building will have an A++ energy efficiency class and will generate part of its own energy. In addition, the car park will be equipped with charging points for electric cars. 

Pictured: Tamro Lithuania new warehouse in Kaunas Free Economic Zone.

"Our priority is, of course, to fully meet the needs of our employees and to provide the highest quality storage conditions. Therefore, the minimalist, cosy interior will not only be ergonomic and highly functional, but will also have the smartest ventilation, air conditioning and dehumidification systems. Furthermore, we have emphasised to the developers how important the sustainability aspect is to us - that the building should meet the highest energy performance class and the requirements of the international BREEAM standard for sustainable buildings," says R. Montvilė. 

Last but not least, the warehouse will be capable of storing more than 6000 pallets (current capability 3700 pallets) and will have separate areas for narcotics, clinical trials, labelling and cold room.  

According to the Tamro Latvia management, the expansion is important as we are currently occupying substantial part of the warehouse capacity, which is limiting the possibilities of offering new pre-wholesale services to our Suppliers. Likewise, the current warehouse is facing bottle-necks in the in-bound area, which will be renewed. Last but not least, a new cold storage area will be built to better cater to the needs of our clients. 

Similar to Latvia and Lithuania, Tamro Estonia is enhancing the warehouse capabilities by investing into new cold storage area, which will be taken into the use in October 2022. The area of the new cold storage is 165 m2 and the capacity is approximately 140 pallets.

The scalable and smart platform for higher forecast precision and replenishment decision will help us also to automate a large part of demand planning as well as enable more efficient pharmacy inventory management.  

For our suppliers in the mid-term the change means better results from product availability towards Tamro customers, a reduction in write-offs and faster and more precise implementation of campaigns and secondary placements. In the short term, however, a reduction of stock levels in both retail and wholesale is expected.

We deliver the following range of services under one roof:  

• storage and distribution  
• sales and marketing, incl. key accounting and digital marketing 
• tender management 
• supply and demand forecasting  
• customizable business intelligence analytics 
• pharmacovigilance and regulatory affairs, incl. function of marketing authorization holder in certain countries 
• market access  
• medical affairs and medical information services 
• investigational product storage and distribution  
• re-labelling and re-packaging 

Our dedicated professionals shape representation project approach around your individual needs, adopting processes, procedures and policies to the countries and sectors you operate in staying fully compliant with regulations, standards and business obligations.  Our one-stop service range is operated by local personnel complemented by regional coordination with PHOENIX HQ oversight. As one of the biggest pharmaceutical wholesalers in Europe, we have an access to extensive network of hospital and retail pharmacies. One of our biggest representation clients in CEE region is well recognized pharmaceutical giant – GlaxoSmithKline. Every day our partnership portfolio just grows. We would be happy to meet you and discuss your potential needs.