During its fourth quarter conference call on Wednesday, CVS Caremark officially unveiled its foray into the international drug store space with the acquisition of Brazilian retailer Onofre, the eighth-largest drug chain in Brazil.
Now that the other shoe has dropped, what's next?
While chains are prevalent, Brazil remains a highly fragmented market that is clearly ripe with opportunities thanks, in part, to an aging population, a decline in unemployment and a rise in incomes.
“It’s a maturing marketplace [and] it’s expected to have continued strong growth for the foreseeable future. As people move up the economic ladder, they’re spending more on healthcare as well as education and with increased access to healthcare and pharmacy both are expected to grow over the next several years,” CVS Caremark president and CEO Larry Merlo told analysts during Wednesday morning’s conference call. To be more specific, healthcare and pharmacy are expected grow double-digits for the next decade.
The market in Brazil has been experiencing some consolidation, largely domestic, but some industry observers speculate that the move by CVS Caremark could spark further consolidation.
In fact, Merlo even indicted that, going forward, there could be other opportunities acquisition-wise.
“I think one of the other keys for us is the market is recessive to chain pharmacy. Chains are pretty prevalent in the Brazil market but, at the same time it’s still fragmented. I think the largest player has about a 9% share,” Merlo told analysts.
There’s no doubt that the wheels of globalization are turning. Another clear example is Walgreens and its recent acquisition of Alliance Boots.
The reality is that the problems facing the U.S. healthcare system are very similar to the problems facing western nations throughout the world. By bringing together the two most iconic brands in pharmacy retailing in the world, “you now have the U.S. and the European markets,” Greg Wasson, Walgreens president and CEO, said in an earlier interview. “Close to 1 billion people who are aging, the generic wave coming full speed at us, every country in the world trying to control healthcare costs … and what’s the best way to control healthcare costs? To get more people compliant on generic drugs. This sets us up in two of the biggest economies in the world on a global scale, with the opportunity now to expand beyond Europe into Asia and Latin America.”