Last week saw a major acquisition in Latin America that promises to transform the region’s pharmacy and drugstore sector.

Last week saw a major acquisition in Latin America that promises to transform the region’s pharmacy and drugstore sector.

The deal saw Mexican wholesaler Grupo Casa Saba reach an agreement to purchase Farmacias Ahumada (FASA) for about $637m (£423m).

FASA was founded in 1969, and has grown to become the largest pharmacy operator in Latin America with sales of $1.5bn (£2bn) in 2009. The retailer operates about 1,250 drugstores across Chile, Mexico and Peru, which last year served more than 210 million customers. Grupo Casa Saba serves a significant number of Mexico’s pharmacies, mass merchandisers, retail and convenience stores, supermarkets and other specialised channels.

The new combined company will become the leading drugstore chain in Latin America and one of the largest distributors of consumer and pharmaceutical products in the region, with estimated annual sales of about $4bn (£2.7bn), operating about 1,500 drugstores across Mexico, Brazil, Chile and Peru.

The resulting company provides obvious synergies and organic growth prospects moving forward, but above all gives Grupo Casa Saba a comprehensive network of FASA stores, which will be supplied and strengthened by Grupo Casa Saba in a period of strong competition. FASA’s expertise will no doubt help a company that just entered the retail sector in 2008 with the acquisition of pharmacy chains ABC and Drogasmil.

However, the new company will encounter strong competitors in the three markets where FASA is present, so the company will have to fight hard to hold its ground. In Chile, FASA holds about a third of the market, while competitors Cruz Verde and Salcobrand reach similar figures in a context of a saturated market.

In Mexico, FASA has 5% of a much more fragmented market where main competitors Farmacias Guadalajara and Farmacias del Ahorro also hold similar market shares. Lastly, in fast-growing Peru, Boticas FASA has about 15% of the market, while its main competitor Inkafarma holds a similar share.

In any case, a growing economy and definite room for expansion in the pharmacy and drugstore sectors in Latin America leaves Grupo Casa Saba in an enviable position to take advantage of FASA’s platform to expand in the region.

Robert Gregory, research director, Planet Retail. For more information contact us on:

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