Traphaco : Choices for the Future

Traditional medicine in the Pharmaceutical industry in Vietnam

Threat of new entrants

LOW. Really challenging to enter this market. The major barriers for a new company are :

• Technology to extract active ingredients from the plants.
• Having the license to manufacture and distribute.
• Few company with strong brand name already on the market.
• Everything based on traditional knowledge and research with Vietnamese universities.

Power of suppliers

MEDIUM. The suppliers do have an influence on the sub-industry. The main reasons are :

• 90% of active ingredients are sourced in Vietnam.
• Large portion of raw materials are imported.
• Only need to harvest once the seed is planted. No need for another « specialized » company.

Power of buyers

MEDIUM. The buyers do have an influence on the sub-industry. The main reasons are :

• Method of preparation does not appeal young generation.
• Look for quality and dosage.
• People diagnostic themselves and request drugs.
• 40% people live with less than 2USD per day and drugs are expensive cause of devaluation.

Substitution

LOW. The risk of substitution can come from :

• There is a higher quality with western products, but they are expensive.
• In some country drugs are way cheaper, example with Chinese drugs, but the quality is low.
• Using modern medicine or simple other Over-The-Counter drugs.

Competition

HIGH. Tough competition on this market. The main reasons are :

• Imitation of the packaging by other companies.
• There is close to 80 manufacturers in Vietnam, highly concentrated in the South.
• Market size not that big, 40% of OTC market, which is 28% of total pharmaceutical market.
• Highly recognize companies with strong brand name.