Apollo Hospitals aims to grow private label business in five years

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Apollo Hospitals Enterprise Ltd (AHEL) is looking at increasing the contribution of private labels to its pharmacy business. Private labels account for around 6.5 per cent of the pharmacy business at present and the company is envisaging to take this up to 20 per cent in five years, said a senior management official.

Adding new products to the private label portfolio, with a focus on health and wellness products, and tie ups with international brands are some of the strategies meant to achieve this aim. AHEL has already tied up with UK-based health and wellness stores major Holland & Barret International and would look at similar tie ups in the future.

"The private label business is currently 6.5 per cent but our aim is to take it to over 20 per cent in next few years," said Akhileswaran Krishnan, chief financial officer of AHEL.

The roadmap envisions adding more products to the portfolio and the company has specific product lines that it can expand over a period of time. Another focus would be on more tie ups for exclusive sales of certain international brands, such as its deal with Holland & Barret. These products would give a better margin than third-party products, said company sources.

If the regulations would be clearer on online pharmacy retail, it would also venture into that model for further growth. However, it is not planning to enter the segment till regulations become clear.

Company sources said that the focus on expanding the product line up would be strategically centred around the health and wellness category, including vitamins, minerals, nutraceutical products, pain management products, and products that address the threat of non-communicable diseases. The second area for growth would be the medical devices business, which includes thermometers and smaller devices that could be sold through pharmacy outlets. Hygiene products such as hand sanitisers and adult diapers are another area of focus for future growth. The company would be looking at expanding its product portfolio in these categories to achieve the target.

Currently, it has around 200 products that are served in over 300 stock keeping units (SKUs). While the roadmap is expected to take the private label business towards rapid growth, the segment has achieved a 6.5 per cent share in AHEL's pharmacy business over a period of almost 10 years and achieving the set target would require the company to work harder, said sector experts.

The Apollo Hospitals Group owns the largest pharmacy chain in the country with a total of around 2,643 stores as on June 30, 2017. AHEL's revenue from standalone pharmacy stores during the quarter ended June 30 stood at Rs 764.2 crore, as compared to Rs 632.5 crore during the same quarter of the previous year — an increase of 20.8 per cent.