Medicines in supermarkets and the new minimum wage: the risk for pharmacies

Two bills pending in Congress are leaving drugstore investors distressed.

One of them, PL 1,559/21, wants to increase the minimum wage for pharmacists, while the other, PL 1,774/19, allows the sale of medicines without prescription within supermarkets and hypermarkets.

On a superficial reading, both projects seem to have the potential to significantly harm drugstores – after all, more competition and higher costs are never good news for businesses.

But for Itaú BBA, things are not quite like that.

The bank’s analysts believe that the chance of the two projects being approved is very low – and that, if they are, the impact should not be that relevant, especially the release of drug sales in supermarkets.

“This is a discussion that has appeared every year since at least 2013,” the analysts wrote. “But we continue to believe this is a low-risk situation for the pharmacy chains we cover.”

According to the bank, sales of over-the-counter medicines represent between 10% and 15% of sales at pharmacies – and most purchases of this type of product are made on impulse when the customer is already inside the store, which should not change with supermarket sales.

Itaú also notes that most of the large supermarkets already have pharmacies linked to their operations – which will make the adhesion to the sale of these products in stores to be low.

At the same time, small retailers should also think twice before entering this market, as the sanitary requirements would bring greater costs and complications to the operation.

The increase in the minimum wage for pharmacists, on the other hand, may generate a greater impact, but it should not be a cause for concern, in Itaú’s view.

The bill under discussion wants to approve a minimum income of R$ 6,500 for pharmacists, which would represent an increase of up to 50% in pharmacy personnel costs – which currently represent between 3% and 5% of store sales.

Despite the impact on margins in the short term, Itaú recalls that this increase in costs would have a much greater impact on smaller networks, which are less efficient and are not able to pass this increase on to prices.

In other words: the measure would end up leading to greater market concentration, benefiting the large listed networks.

Source: Brazil Journal