Wednesday, September 29, 2010

The branding of non-brands

The branding of non-brands
Business World Online
September 29, 2010

Benjamin I. Liuson
The Generics Pharmacy Franchising Corp.

For a country where medical treatment is both prohibitively expensive and sadly insufficient, the concept of generic medicine is a godsend. With little government subsidy on health, Filipino families are hard-pressed to provide for their family’s needs. According to latest data, Filipino families spent an estimated P127.3 billion on healthcare in 2007, 54.3% of the Philippines’ total health expenditure.

The Generics Pharmacy, under the leadership of Benjamin I. Liuson, is doing its best to help society and the pharmaceutical industry by carrying only generic medicines. The company traces its roots back to Pacific Insular Co., a German wholesaler and importer of medicine in 1949. In 1960, Mr. Liuson’s parents bought the firm, which he joined in 1970. He eventually took over in 1974 when his father passed away.

Under Mr. Liuson’s guidance, the company started implementing innovative marketing strategies in 1983. Seeing how the average consumer struggled to make ends meet, they lowered their gross margin to around 30% from the usual 400%. To save on costs, they also did not give out samples and did not employ an agent. Instead, they sold directly to doctors and hospitals. After the Generics Act of 1988 was implemented, the firm established DLI Generics, to serve the needs of government hospitals.

In 1996, doctors from the Philippine General Hospital started referring their patients to the DLI Generics’ office in Quezon City. Mr. Liuson recalls that they had to turn the patients away since the company was a wholesaler and therefore not allowed to sell products to them. This inspired him to open the Philippines’ first generics-only retail store, DLI Pharmacy, in 2001. To set it apart, they focused on selling generic medicines exclusively. They also carry only one generic product for every type of medication. "When a consumer is in a rush to buy medicine, the last thing they need is to get confused by too many brands or chemical names. It also makes inventory-keeping simpler and more efficient," he explains.

The drugstore started to gain acceptance and in 2006, regular customers complained that the lone branch in Quezon City was not accessible to provincial residents. With this, Mr. Liuson re-branded DLI Generics into The Generics Pharmacy in July 2007. They also began franchising outlets through The Generics Pharmacy Franchising Corp.

To help jumpstart the franchise stores, Mr. Liuson had all stocks in the stores on consignment. Having been in the pharmaceutical business for 50 years, he was confident that they understood the needs of their market. Second, as a concession to the first 100 outlets, the company offered to refund the franchising fee should the franchisees opt out for any reason in the first three years.

"We might have been in hot water had it not clicked," Mr. Liuson muses. The strategies seem to be working because the firm now counts over 300 franchisees nationwide. To date, The Generics Pharmacy has 900 franchise stores, only one of which is company-owned. "With only one company store, our franchisees trust us more because they know that we’re not competing with them ourselves," Mr. Liuson says.

Because it only sells generics, the firm can set its own retail price for all its products for the franchisees to follow. It encourages franchisees to put up outlets in areas with heavy foot traffic, even if there are already big drugstores in the vicinity. "Being near a big drugstore is one of my key success criteria. Consumers can more easily compare products. In the end, the public wins," he says.

Over the next three years, the company plans to open 450 more stores. By December 2013, it expects to have a network of 1,500 pharmacies. Mr. Liuson says that they are also considering opening outlets in Indonesia, Bangladesh, Vietnam and the United States.

The company also plans to introduce more products. In the pipeline are dermatological, cosmetic and antiseptic products, as well as medical supplies.

Mr. Liuson believes in the value of building long-term trust and partnership relationships with franchisees, suppliers and retailers. "We work closely with those who share our goals," he relates, "An example is one supplier who, despite objections from a huge competing drugstore chain, chose to continue working with us because their CEO shared our vision of providing the public with affordable and effective medicine." The Generics Pharmacy would eventually become the supplier’s biggest local client.

Besides sound business relationships, Mr. Liuson emphasizes the importance of quality, affordability, accessibility, communication, God’s help and social responsibility to maintain his company’s growth. A deeply religious man, Mr. Liuson acknowledges God’s help in all his achievements. That is why, aside from the usual corporate social responsibility projects, the firm is also involved in what he calls "corporate spiritual responsibility." For three years now, the company sponsors the printing of 200,000 Bibles annually through the Philippine Bible Society. Free copies are distributed with the aim of having one Bible in every home in the country. Copies are also sent to the country’s top corporations.

Reflecting on the company’s success, Mr. Liuson shares that he received the best comment from a franchisee -- that Generics Pharmacy was heaven-sent. This affirmation of how much the company helps people provides powerful motivation to work even harder. "The more people you help, the more successful you are," Mr. Liuson says.


The Entrepreneur Of The Year Philippines 2010 is sponsored by SAP Philippines. The official airline is KLM Royal Dutch Airlines. Media sponsors are BusinessWorld and the ABS-CBN News Channel. Winners will be announced on October 12, 2010 at a banquet at the Makati Shangri-La Hotel.