Many shifting focus to emerging economies in struggle to stay afloat
Major Japanese pharmaceutical makers are expediting projects to construct plants and expand sales channels in emerging economies, such as China and India.
With sales both at home and in Western countries slowing due to such factors as caps on health care expenditure, the drugmakers' moves are aimed at cashing in on the emerging economies by including them among their targeted markets.
An increasing number of companies in many other business fields also are trying to find ways to survive by engaging with such emerging economies.
Eisai Co. completed construction of a plant in southern India on Dec. 17, having invested a total of about 5 billion yen. The plant is scheduled to start full operations next fiscal year and will mainly produce drugs to treat dementia.
Eisai plans to lower production costs by utilizing the country's low wage levels and aims to supply products to neighboring countries. An official of the company said, "We'll use the plant as a foothold to expand sales in emerging economies."
Astellas Pharma Inc. plans to begin in January selling medicines in China to treat frequent urination. The company already has increased the number of its medical representatives–staff that promote products among doctors and hospitals–by 25 percent from the previous year to about 300, in preparation for promoting sales in China.
Takeda Pharmaceutical Co., the nation's top drugmaker, established a sales subsidiary in Mexico in October and will establish another in Brazil in February, with the aim of full-scale entry into emerging economies' markets.
Emerging economies are highly attractive due to the surprisingly rapid growth of the pharmaceutical products markets.
According to a forecast by IMS Health, a U.S. research company in the pharmaceutical industry, growth rates of pharmaceutical markets in seven emerging economies, including China, India, Brazil and Mexico, will reach 12 percent to 14 percent in tandem with general economic growth.
On the other hand, the growth rate in the United States is 3 percent to 5 percent, and in five major nations in the European Union, including Britain, Germany and France, the rates are between 1 percent and 3 percent. In Japan, which has a graying society and a falling birthrate, the growth rate is between zero and minus 2 percent.
Furthermore, compared with Western rivals, industry analysts say Japanese pharmaceutical makers are about 10 years behind in terms of full-fledged entry into emerging economies' markets.
In the 1990s, Japanese makers secured profits at home and in Western countries by mainly selling drugs for lifestyle diseases, but major Western drugmakers, such as Britain's AstraZeneca and GlaxoSmith Kline, were already focused on exploring the markets of emerging economies.
In the worldwide pharmaceutical industry, makers have been struggling to come up with the massive funds needed to develop new medicines, partly because of the proliferation of generic products. Thus, it has become increasingly important for pharmaceutical makers to sell their products in emerging economies, where rapid economic growth is continuing.
The key for Japanese companies lagging behind in terms of brand recognition is whether they can quickly secure talented human resources in the targeted countries, such as skilled medical representatives and people with a deep knowledge of their country's medical and patent systems.
But Japanese companies will face fierce competition as companies in other business fields accelerate moves to cash in on the same markets.
On Wednesday, FamilyMart Co. became the first Japanese convenience store chain to open a branch in Vietnam, where the economy recently has been growing more than 6 percent annually. In the store, which is located in central Ho Chi Minh City, packs of sandwiches and rice balls made in an attached kitchen were put on sale. FamilyMart plans to open five more stores in Vietnam by the end of 2010.
Sapporo Holdings Ltd. will construct a brewery in a suburb of Ho Chi Minh City and begin shipment of Kuro-label and other beer brands in 2012.
Many Japanese companies have tried to enter the huge markets of China and India.
Isetan Co., a department store chain, plans to open a new store in Tianjin in China by the end of 2010, and aims to open a "flagship store" in Shanghai in 2011.
Unicharm Corp., a major daily goods maker, will also construct a plant in India, where such goods as diapers will be produced starting next year.
In many of Japan's industrial sectors, companies are shifting their focus to other Asian countries, many of which are expected to lead the world economy.