Market Factors Driving Growth, Web Sales in Focus

Q: What main changes did Levic’s operations undergo in 2016?

A: We amplified our portfolio, opened a new distribution center in Vallejo and worked to improve our service. We are a distributor of mostly generic medicines and we have greatly improved our just-in-time model. The company already has a strong portfolio in generics, herbal medicine and wound care, so we have mostly expanded in prescription drugs from transnational companies, which have a slightly higher cost. Our work with transnational labs has grown by 60 percent but in general Levic saw growth of 14.5 percent in 2016.

Q: What have been Levic’s main drivers of growth?

A: Market factors have driven our growth, while prices and accessibility have been fundamental over the past 10 years. Information has also pushed growth because people are increasingly aware and have access to more information. People now know that patented and generic medicines are the same. The difference is only in the cost to patients. As Mexico is an emerging economy, people need medicines and need to be able to obtain it. This theme of accessibility has boosted growth for us.

Q: To what extent does Levic work with the public sector?

A: Only around 2 percent of our sales go to the government, while the other 98 percent goes to the private sector. Previously, a cure for a general illness cost MX$500-1,000 (US$28 -56) out of pocket to pay for a doctor and medicine. Today, patients can receive medical care and medicine at many pharmacies for MX$150-250 (US$8-14). Because of this not everyone needs to use government services. Although we have no plans to change our sales ratio, we will need to work more in other areas, including the government, to maintain growth rates.

Q: How is technology impacting the logistics business and your operations?

A: We are investing in R&D to allow our customers to buy from us online. We have a web portal that clients can log into and browse our catalogue of products and costs, and any order placed will arrive within seven days. We have been working on this since the summer of 2016 and it is continually growing. In the first month, sales were laughable, but by March 2017 online sales represented 9 percent of our total. We are promoting this directly through our sales force and through our logistics. We have no fixed target for where we want to be by the end of the year. It depends on what the market demands because our objective is to cater to market needs.

Q: How will you achieve your 2017 goals?

A: In 2017, we will begin operations in Monterrey. We are also working with restocking technology, that is to say robots that stock quicker than humans and with 99.9 percent exactitude. We are only missing a pincer in our stocking technology. Our goal is to implement this in four of our eight centers, three in Mexico City and one in Michoacan. Levic is working on a project in Central America and in 2017 we will enter the Belizean market, where we have a project with the government to send Mexican medicines there.

Q: How do you prepare for uncertainties such as strikes and protests?

A: Protests do not affect us much. What does impact us greatly is the Hoy No Circula (No Drive Day). In 2016, 40 percent of our vehicles could not circulate on any given day. With one No Drive Day per week, 20 percent of our vehicles are idle but with the double measure, two of every five are out of action. Distributing medicine becomes much more difficult. There are also security issues and areas we cannot enter because drivers are asked to pay bribes. We do not enter areas where the driver will be at risk, or when the risk is larger than the reward. If we were to push this, then we would be putting the health of the driver and the good condition of the medicine at risk.