Domestic pharmaceutical companies are diversifying their distribution channels for health functional foods and cosmetics. They are expanding sales channels not only through pharmacies, TV home shopping, and online portal sites but also through low-cost everyday goods stores such as Daiso, health and beauty product specialty stores like CJ Olive Young, and convenience stores like GS25 and CU. They aim to increase their points of contact with consumers to expand their customer base and boost sales.
◇First entry of convenience store-pharmacy shop in shop in Vietnam
Pharmaceutical companies are targeting not only domestic convenience stores for household medicines but also overseas convenience stores. Dongwha Pharm's pharmacy chain in Vietnam, Trung Son Pharma, collaborated with GS25 to open Vietnam's first ‘convenience store-pharmacy shop in shop’ on the 10th in Ho Chi Minh City, Tien Giang Province. The products sold in the store include Dongwha Pharm's medical non-prescription products 'Casswal' and beverages like 'Red Ginseng Gold,' glucosamine, vitamins, calcium supplements, immune-enhancing products, and collagen health functional foods.
Dongwha Pharm acquired Trung Son Pharma, a company operating a pharmacy chain in Vietnam, in August 2023, making its foray into the Southeast Asian pharmaceutical and beauty market. After opening its 200th location last November to strengthen its presence in the Vietnamese market, they have expanded further by establishing a pharmacy in the form of a shop in shop at GS25 convenience stores in Vietnam. Trung Son Pharma and GS25 plan to open more than 10 shop in shop pharmacies in major cities in Vietnam this year, where they will sell prescription drugs, over-the-counter drugs, health functional foods, and cosmetics.
No Wooong-ho, head of Dongwha Pharm’s Vietnam branch, noted, 'The collaboration store with GS25 Vietnam is a case that aligns with a differentiated distribution trend that satisfies both healthcare and convenience,' adding, 'Vietnamese customers will be able to purchase essential medicines and health functional foods more easily.' Collaboration refers to a marketing strategy where different companies or brands work together on joint efforts, partnerships, or cooperation.
◇Pharmaceutical exclusive health functional food displays in domestic convenience stores
Dong-A Pharmaceutical chose convenience store CU, operated by BGF Retail, as its distribution network for general foods. Earlier this January, Dong-A Pharmaceutical exclusively launched the 'Cerium Arginine 6000' at CU convenience stores, and this month began selling four types of 'Vitamin Gran' and one type of 'Ailo Kamut Enzyme.' These products have the same main ingredients as existing health functional foods but are differentiated in terms of content and some ingredients for convenience store launch.
There are also increasing cases where pharmaceutical companies create collaboration products with convenience stores for release. This is mainly for products like probiotics and fatigue recovery functions that have high demand.
Last year, Chong Kun Dang Health launched 'LactoFit Probiotics' through GS25. This product was proposed by GS25 and created by Chong Kun Dang Health. Samjin Pharm's health functional food brand Wish Healthy also released 'Daily Engine Mag Booster Shot' containing liquid magnesium, milk thistle, nine types of vitamin minerals, and aids for fatigue recovery like taurine, arginine, and guarana, for sale at GS25.
The active collaboration between pharmaceutical companies and distribution companies is driven by the mutual benefits of increased sales. According to CU, several dual-form products launched last year in collaboration with pharmaceutical companies like Yuhan Corporation and Chong Kun Dang gained immense popularity, leading to a 137% surge in health functional food sales within a year. These products include vitamins that contain both tablets and liquid forms. CU designated 3,000 stores nationwide last October as reinforcement points for health functional food displays and introduced dedicated display stands and over 40 types of health functional food products.
According to Chong Kun Dang, its skincare brand 'Clearderm' entered Daiso last December and surpassed cumulative sales of 250,000 units in just about a month. Within 10 days of its launch, products like 'Elastic Silkworm Cream,' 'Mist Ampoule,' 'Eye Massage Ampoule,' and 'Tangle Lip Serum' sold out both in Daiso's offline stores and online. Products like 'Nose-Crease Ampoule' and 'Elastic Mask' also flew off the shelves. Daewoong Pharmaceutical, IL-YANG PHARM, and Chong Kun Dang Health operated temporary sales booths at Daiso before fully launching health functional food sales, attracting market interest.
◇Maximizing marketing… triggering backlash from pharmacies
Experts analyze that establishing brand presence across various offline channels will also aid online sales and marketing, as well as overseas exports. Lee Eun-hee, a consumer science professor at Inha University, explained, 'For new brands that are less known to the public, marketing strategies that promote brands through both online and offline channels are essential,' adding, 'When consumers see and experience products directly in offline stores, the marketing effect through word-of-mouth can be maximized.'
The Chah Hospital Group has also begun expanding its distribution channels by reaching out to consumers through medical information. They are developing health functional foods for women through its Chah Comprehensive Research Institute. On the 13th, the Chah Hospital Group’s institution, Seongkwang Medical Foundation, signed a memorandum of understanding with CJ Olive Young to promote women's health. The two organizations agreed to provide medical and health content from Chah Hospital through Olive Young's online malls and official social media. Since Olive Young has a large proportion of female customers in their 20s and 30s and Chah Hospital is a general hospital specialized in pregnancy, childbirth, and women's diseases, they are expected to aim for a synergistic effect through various collaborations.
A source from a domestic pharmaceutical company said, 'Pharmaceutical companies are diversifying their business by branching out into cosmetics and health functional foods beyond pharmaceuticals,' adding, 'The diversification of distribution channels is an effort to increase points of contact between brands and consumers both online and offline, introducing the company’s quality products and widening consumer choices.'
However, the diversification of distribution channels by pharmaceutical companies has faced significant backlash from existing sales hubs like pharmacies. IL-YANG PHARM decided to withdraw from Daiso five days after starting to sell nine health functional foods, including vitamin C chewable tablets and saw palmetto zinc. Pharmacists protested, alleging that affordable health functional foods for Daiso created the misunderstanding that pharmacies had been overcharging.
Consumers did not agree with the pharmacists' claims. The Korea Consumer Association issued a statement stating, 'Health functional foods are not medicines, and therefore consumers have the right to purchase freely,' emphasizing that restricting distribution due to pressure from specific groups is an act that disrupts fair market order. In response, the Fair Trade Commission dispatched researchers to the Korea Pharmaceutical Association in Seocho-gu, Seoul, on the 13th to conduct an on-site investigation regarding allegations of violations of fair trade laws.