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CT&F products account for more than a third of drugstore sales and lead large Brazilian chains to invest in own-brand products

The challenge for the pharmaceutical retail industry is to convince the consumer that their products are not only competitive in terms of price, but also in quality.

Own brands are nothing new in Brazilian supermarkets. They cost up to 30% less than well-known brands – as they exclude costs such as marketing – and had a turnover of R$ 3.25 billion in 2013 in Brazil, according to the 19th Global Private Label Survey conducted by Nielsen. However, the segment has grown at an annual rate of around 5% since 2007, a figure that reflects the consumer’s lack of trust in the quality of the products. Nielsen said 57% of Brazilians – the largest percentage among all Latin American countries surveyed – believe these items are targeted at people who cannot afford the cost of a name brand.

Hair care line Pluii, by Raia Drogasil

Hair care line Pluii, by Raia Drogasil

Nevertheless, if own brands are still not leaping off supermarket shelves, the scenario is different when it comes to drugstore chains, particularly in terms of personal care products, cosmetics and fragrances. “The CT&F category expanded by 30% in 2015 over the previous year,” says Francisco José Barros, executive manager of own brands at Pague Menos. The drugstore chain has had its own range since 2007 and 12% of its revenues stem from the Amorável and Dauf lines, which range from baby soaps to cosmetics with anti-ageing nanotechnology. “We felt we had to forcefully enter this segment when we saw its sheer size on the domestic market,” Barros says.

The CT&F category is the most outstanding in Brazil’s pharmaceutical retail industry. From January to September 2015, the main retail chains had revenues of R$ 26.37 billion, 12.31% over the same period of the previous year, according to the Brazilian Association of Pharmacies and Drugstores (Abrafarma). Drug sales rose by 11.02% and “non-drugs items” – which include CT&F products – increased by 14.99% in accumulated terms over the same months in 2014. The category currently has a 33.42% share of sales of Abrafarma members.

The hardest job is to make the customer purchase and experiment. Once this has been achieved, repeat purchases are guaranteed,” says Andreia Bernabe, product manager at Ultrafarma. The chain opened its doors in 2000 and started its own-brand business in 2006. “These products exempt us from dealing with brand holders as they come straight from the plant to our shelves at much more competitive prices,” she says.

Ultrafarma has over 100 own-brand products, including body creams and intimate washes of the Rahda line. Bernabe says their quality is equal to that of name brands. “The suppliers of our products are also the outsourced manufacturers of a number of large brands.

Ariane Haddad, manager of Raia Drogasil’s home brands, says the idea that all own-brand products are of inferior quality is a myth. Raia Drogasil was created in 2011 following the merger of Droga Raia and Drogasil and has more than 1,200 stores. Its catalogue includes hair and body care products from the Pluii line, personal care items from the Needs range, and make up and hair accessories from the recently launched TRISS brand.

The expectation is that pharmaceutical retail chains will continue placing their bets on their own cosmetic brands. “The growth of our home brands and their share of sales are poised to remain strong in 2016,” says Haddad. She believes the delicate period Brazil is undergoing may even boost the segment’s performance. “Customers who want to buy a particular personal care product can opt for the home brand and pay less”. Ultrafarma’s Bernabe agrees. “The economic scenario we are currently experiencing will lead to an increased search for more cost-effective, yet still high quality, products. We are ready for this.

Renata Martins

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