Pharmaceutical Retailing Industry Report
INSIGHTS Presented by
for BUSINESS
Pharmaceutical
Pharmaceutical Retailing Industry Report Industry Division
Industry Groups
Retail
Other Personal and Household Good Retailing
Industry Subdivision
Industry Groups
Personal and Household Good Retailing
Pharmaceutical, Cosmetic and Toiletry Retailing
The ANZSIC is a hierarchical classification with four levels, namely Divisions (the broadest level), Subdivisions, Groups and Classes (the finest level). At the Divisional level, the main purpose is to provide a limited number of categories which provide a broad overall picture of the economy and are suitable for the publication of summary tables in official statistics. The Subdivision, Group and Class levels provide increasingly detailed dissections of these categories for the compilation of more specific and detailed statistics.
Data referenced in report All data referenced in this report has been updated with the latest available figures when prepared as at October 2015. Data sources used include: ››
ABS: 8165.0 – Counts of Australian Businesses, including Entries and Exits, Jun 2010 to Jun 2014 – released 02/03/2015
››
ABS: 8155.0 – Australian Industry, 2013-14 – released on 29/06/15
››
ABS: 6291.0.55.003 – Labour Force, Australia, Detailed, Quarterly, Aug 2015 - released on 17/09/15
››
ABS: 8752.0 – Building Activity, Australia, Mar 2015 – released on 15/07/15
››
ABS:5671.0 Lending Finance, Australia, Jul 2015 – released on 11/09/2015
››
RBA Interest rates and yields – money market, September 2015 – released on 01/10/2015
IBISWorld Reports: ››
G4271A Pharmacies in Australia
Pharmaceutical
Pharmaceutical Industry Overview The Pharmaceutical Retail industry group consists of businesses that engage in retailing prescription drugs or patent medicines, cosmetics or toiletries, with primary activities including cosmetic, drug, patent medicine, perfume and toiletry retailing; pharmacy retail operation; and prescription medicine dispensing. It sits within the larger industry of Retail Trade. While household consumption levels have recovered since the global financial crisis (GFC), retail consumption remains subdued compared to the strong growth recorded in the five years to 2007. As a whole, the retail sector has suffered as households try to manage their finances following the GFC. Additionally, the industry has had to deal with competition from online sales – which has been accentuated by prolonged strength in the Australian dollar. It has also been affected by the (normal) tendency for goods’ share of household consumption to fall relative to consumption of services as societies become wealthier. The Retail industry is a significant contributor to the larger economy in its own right, employing more than 1.2 million Australians, and generating $384.0 billion in revenue annually. Geographically, the industry group is closely aligned to the Australian population, with the largest number of employees and businesses based in NSW, closely followed by Victoria.
Industry Revenue (2013 – 2014) $384.0 billion
Number of Retail Workers (2013 – 2014) 1.2 million
Number of Retail Businesses (June 2014) 338,313
Average profit margin 5.3%
Proportion of businesses exiting market in 2014 14.0%
Number of Pharmaceutical businesses with more than $2 million in turnover in 2014 8,021
Retail Industry Division ››
Retail trade employs more than 1.2 million Australians (1,313,000), or roughly 11.3% of the total workforce.
››
Employment has fallen by 3.8% in the past years for the total Retail industry.
››
The industry division’s total income represents 12.5% of all industries (excluding financial services), indicating that its role in the economy is akin to the number of workers employed by the industry.
››
Total income has been increasing steadily since 2006-07, including 2009-2010, despite the GFC.
››
Profit margins for the industry are considerably lower than the all industry average, with operating profit before tax only 5.3% of total income, compared to 10.9% for all industries.
INSIGHTS Presented by
for BUSINESS
Thousand Employed
600.0 1200.0
1154.2
1151.7
2005
2006
1195.2
1202.1
1151.8
1172.1
1192.1
1179.3
1183.5
2007
2008
2009
2010
2011
2012
2013
1246.8
1233.5
2014
2015
400.0 1000.0 200.0 800.0 0.0 600.0
400.0 $500.0 200.0 $400.0
0.0 2005 $304.9
$319.0 2006
2007
$345.9
2008
$380.4
$373.0
$357.1
2009
2010
2011
$384.0
$380.6
2012
2013
2014
2015
Source: ABS $300.0
Retail – Total Income
$200.0 $500.0 $100.0 $400.0
$304.9 $0.0 $300.0 2006-07 $500.0
$ Billion
Pharmaceutical
600.0 1400.0 1246.8 400.0 1233.5 1195.2 1202.1 1192.1 1172.1 1179.3 1183.5 1154.2 1151.8 1151.7 1200.0 200.0 1000.0 0.0 Retail – Employment 800.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1400.0
$319.0
2007-08
$200.0 $400.0 $100.0 $300.0
$0.0 $200.0 Source: ABS
$304.9
2006-07
$319.0
2007-08
$345.9
2008-09
$357.1
2009-10
$380.4
$373.0
2010-11
2011-12
$384.0
$380.6
2012-13
2013-14
$357.1
$373.0
$380.4
$380.6
$384.0
$345.9
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
10.6%
10.9%
5.1%
5.3%
$100.0
Pharmaceutical – Profit Margin 20.0% $0.0 2006-07 15.0%
12.0%
2007-08 11.3%
10.4%
11.5%
12.4%
12.1%
10.0% 20.0% 5.0%
5.4%
4.9%
5.1%
Retail
15.0% 0.0%
12.0% 2006-07 Source: ABS 10.0% 20.0% 5.4% 5.0% 15.0% 0.0% 10.0%
5.0%
5.3%
12.0%
5.1%
All Industry
11.3% 2007-08
2008-09 10.4%
11.5% 2009-10
12.4% 2010-11
12.1% 2011-12
2012-13 10.6%
2013-14 10.9%
4.9%
5.1%
5.3%
5.3%
5.1%
5.1%
5.3%
10.4%
11.5% Retail
12.4% 12.1% All Industry
10.6%
10.9%
11.3%
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
5.4%
4.9%
5.1%
5.3%
5.3%
5.1%
5.1%
5.3%
Retail 0.0%
5.3%
All Industry
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
What’s driving the industry? ››
Increased competition – Traditional service-based pharmacies and discount pharmacies will continue to diverge as competitive business models in the pharmacy retail industry. Supermarkets, niche health and beauty retailers, discount department stores and general merchandise retailers, such as Target and Kmart, will also continue to compete with the pharmacy retail industry.
››
Industry reform and falling profits – PBS reforms into split formularies (F1 single-brand medicines and F2 multiple-brand medicines) will foster greater transparency in pricing, however put downward pressure on pharmacy retail revenue. Additionally, the government has targeted the prices of commonly prescribed medications, leading to significant price cuts between April 2012 and April 2014, and lower revenues.
››
110.0 population – Consumers aged over 50 represent a key market sector, as pharmaceutical consumption generally Ageing increases with age. This demographic represents an opportunity for pharmacy retailers. In 2014-15, an estimated 7.9 105.0 Australians will be aged 50 and older, up 2.2 per cent on the previous year. million
››
Real 100.0household disposable income – During 2014-15, household disposable income is forecast to increase, which is expected to boost front-of-store sales.
95.0
Producer Price Index – Selected Industry Groups (2004 to 2014)
Clothing, footwear and textiles
110.0 90.0
Selected foods and alcohol Motor vehicles, parts and tyres
105.0 85.0
Retail Industry Division
100.0 80.0 2008 95.0
2009
2010
2011
2012
2013
2014
2015
Clothing, footwear and textiles 90.0
Selected foods and alcohol Motor vehicles, parts and tyres
85.0
Retail Industry Division
80.0 2008 Source: ABS
2009
2010
2011
2012
2013
2014
2015
Wholesale Trade – Total Income $450.0 $400.0 $350.0 $300.0
$ Billion
Pharmaceutical
2006-07
$304.9
$319.0
$345.9
$357.1
$380.4
$373.0
$380.6
$384.0
$250.0
$200.0 $450.0 $150.0 $384.0 $380.4 $380.6 $400.0 $373.0 $357.1 $100.0 $345.9 $350.0 $319.0 $50.0 $304.9 $300.0 $0.0 $250.0 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Source: ABS $200.0 $150.0 $100.0 $50.0 $0.0 2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
INSIGHTS Presented by
for BUSINESS
70,000 60,000 50,000
$ Million
Pharmaceutical
Total Trade: Imports and Exports (2005 – 2015)
40,000 30,000 20,000 10,000
0 2005 Source: ABS
2006
2007
2008
2009
2010
2011
2012
2013
2014
Pharmaceutical Retail Industry Performance ››
The industry currently employs 175,000 workers, representing 15.1% of those employed in the Retail Trade industry, or 1.5% of all workers in Australia.
››
Employment has grown modestly in the past 12 months, increasing by 2.4%. The Northern Territory and Western Australia have seen the strongest growth, with workers increasing by 130.0% and 15.2% respectively. In contrast, the number of workers in Queensland, South Australia, Tasmania and the ACT has fallen.
››
By state, the largest proportion of the workforce is in NSW, where 54,500 pharmaceutical retail workers are based. This is followed by Victoria, Queensland and South Australia.
››
The growing number of discount pharmacies, which tend to employ fewer people than their traditional full-service rivals, is expected to negatively impact employment rates in the pharmaceutical industry in the future.
››
In total, 60 wages and salaries (including the proprietor’s) will account for an estimated 17.7% of revenue in 2014-15, reflecting 54.1 54.5 the high skill-base of the industry’s labour force. 49.5 50 2014 2015 43.6
Businesses 40 in Operation (State, Turnover) 34.4
30
32.5
Operating at the end of FY 2013-14
20
Zero to less than $50k
$50k to less than $200k 13.2
10
no.
no.
New South Wales 0 Victoria NSW Queensland
322
VIC 233 163
QLD
11.2
17.1
$200k 19.7 to less than $2m no.
326
1,115
181 SA 168
720
WA
4.7
$2m or more 3.5
no.
2.3 1 1,030
586
762 NT 614
TAS
Total
2.8
no. 1.8
2,793
ACT 1,896 1,531
South Australia
68
58
194
248
568
Western Australia
89
78
376
371
914
Tasmania
23
17
66
82
188
Northern Territory
6
1
10
18
35
Australian Capital Territory Total Source: ABS
200 150 100 50
9
9
37
41
96
913
838
3,104
3,166
8,021
60
54.1 54.5 49.5
2014
43.6
40
34.4
2015
32.5
30
‘000 Workers
19.7 Number 17.1 Retailing (2014 vs. 2015, by State) 20 of Workers – Pharmaceutical and Other Store-Based
60 10 50 0 40
13.2
54.1 54.5
11.2
49.5
4.7
3.5
NSW
VIC
34.4 QLD 32.5
SA
WA
TAS
2.8 2015 1.8
2.3 2014
1
43.6
NT
ACT
30 20
17.1
13.2
19.7
11.2
10
4.7
3.5
0 NSW
VIC
QLD
SA
WA
TAS
2.8
2.3
1
NT
1.8
ACT
Source: ABS
Pharmaceutical Services Industry Subdivision Businesses in Operation (State, Turnover) 200
‘000 Workers
Pharmaceutical
50
150 100
20050 150 0 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: 100 ABS
Pharmaceutical Services Industry Subdivision Businesses in Operation (State, Number of Employees) 50
0 2005
Operating at the end of FY 2013-14 2006
Zero to less $50k 2007 than2008
$50k to less 2009than $200k 2010
no.
no.
New South Wales
322
326
Victoria
233
181
Queensland
163
168
South Australia
68
Western Australia
89
Tasmania Northern Territory Australian Capital Territory Total
$200k to less $2m 2011 than2012 2013 no.
$2m or more 2014
Total 2015
no.
no.
1,115
1,030
2,793
720
762
1,896
586
614
1,531
58
194
248
568
78
376
371
914
23
17
66
82
188
6
1
10
18
35
9
9
37
41
96
913
838
3,104
3,166
8,021
Source: ABS
INSIGHTS Presented by
for BUSINESS
Pharmaceutical
Industry Outlook ››
Retail revenue is expected to grow at an average rate of 7.6% from 2014/15 to 2018/19 to $151.8 billion, from its current $141.2 billion.*
››
Over the next five years, competition in the Supermarket and Grocery Stores industry will remain intense, with new entrants including Costco and ALDI, affecting consumer shopping trends. Industry revenue is forecast to grow at an annualised 2.1% over the five years through to 2019-20, to reach $101.4 billion.
››
Over the five years through to 2018-19, clothing retail industry revenue is forecast to grow by an annualised 1.1% to reach $13.5 billion. Competition for the consumer dollar is expected to increase, compounded by the entrance of international players and the increased acceptance of online shopping
››
Over the next five years, the pharmacy sector will continue to face challenging conditions. These include intensifying competitive pressures and the continued loss of market share to external forces, falling prices due to price disclosure and ongoing discounting tactics, the passing patent cliff, tighter trading terms implemented by upstream wholesalers, and rising rents and occupancy costs. Despite this, pharmaceutical revenue is forecast to grow at an annualised 1.1% over the next five years, to reach $16.2 billion in 2019-20.
*Calculated using projected revenue figures for the following retail industries: supermarkets and grocery stores; clothing retail; pharmacies; motor vehicle parts; fast food services; bread and cake retailing.
Projected and Actual Industry Group Revenue ($billion) Financial Year
Supermarkets and grocery shopping
Clothing retailing
Pharmacies
Motor vehicle parts retailing
Fast food services
Bread and cake retailing
Total selected retail industries
$ Billion
$ Billion
$ Billion
$ Billion
$ Billion
$ Billion
$ Billion
2005-06
72.1
13.0
14.9
3.7
12.7
0.8
117.1
2006-07
73.3
12.8
15.0
3.9
12.7
0.8
118.4
2007-08
76.3
13.2
15.2
4.1
13.0
0.8
122.6
2008-09
78.6
13.2
16.0
4.1
13.3
0.8
126.0
2009-10
81.6
13.4
16.4
4.2
15.1
0.8
131.5
2010-11
79.7
13.4
15.9
4.3
14.7
0.8
128.8
2011-12
81.8
12.6
15.7
4.4
14.5
0.8
129.7
2012-13
85.8
12.2
15.8
4.5
14.9
0.8
133.9
2013-14
89.3
12.5
15.6
4.5
15.2
0.8
137.9
2014-15
91.6
12.8
15.3
4.6
15.6
0.8
140.7
2015-16
94.4
13.1
15.4
4.8
15.9
0.8
144.4
2016-17
97.0
13.5
15.5
4.9
16.1
0.8
147.8
2017-18
98.2
13.7
15.8
4.9
16.1
0.8
149.5
2018-19
99.7
13.5
16.0
5.1
16.8
0.8
151.8
2019-20
101.4
13.5
16.2
5.2
17.9
0.9
155.0
Based in part on Bankwest Economic Updates, Australian Bureau of Statistics data used pursuant to the Creative Commons Attribution 2.5 Australia license (available online at: http://creativecommons.org/licenses/by/2.5/au/) and the following Specialised Industry G4271A Pharmacies in Australia.
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