Mercury Drug Corporation

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7 Mercury Avenue, corner E. Rodrigu

Quezon City
PH-1110
Philippines
Telephone: + 63 2 911 5071
Fax: + 63 2 911 6673
Web site: http://www.mercurydrug.com

Wholly Owned Subsidiary of Mercury Group of Companies, Inc.

Incorporated: 1945
Employees: 7,000
Sales: PHP 42.98 billion ($8.8 billion) (2003 est.)
NAIC: 446110 Pharmacies and Drug Stores
Mercury Drug Corporation is the Philippines' dominant pharmacy group. The Quezon Citybased company operates a national chain of more than 450 drugstores, including companyowned and franchised stores. Mercury Drug is estimated to sell as much as 60 percent of all
medicines sold each year in the Philippines (the country's hospitals sell about 12 percent of
medicines). Mercury Drug's pharmacies follow the American model, combining drug and

medical equipment sales with over-the-counter medicines, personal care items, basic household
needs, cosmetics and other beauty products, and the like. Most of the company's stores also are
equipped to store and sell serums, blood plasma, albumin, and similar biologically active
medical products. In addition to its drugstores, Mercury operates a chain of Mercury Drug
Superstores. Generally attached to the company's pharmacies, the Mercury Drug Superstores
extend the group's assortment to include convenience store and fast-food items. By the mid2000s, Mercury Drug Corporation operated more than 150 Mercury Drug Superstores. Founded
by Mariano Que, who first sold pills from a pushcart in the 1940s, Mercury Drug Corporation
remains a privately held company. Leadership of the company also remains in the family: The
company's president is Mariano Que's daughter, Vivian Que-Ascona. Mercury Drug is a
subsidiary of the Mercury Group of Companies, which governs other Que family interests,
including the 10*Q convenience store chain and the Tropical Hut fast-food group. In 2003,
Mercury Drug's revenues amounted to nearly PHP 43 billion ($8.8 billion).

Founding a Filipino Pharmacy Giant in the 1940s

Mariano Que started his career working in a Manila drugstore in prewar Philippines. There he
came into contact with many medications, including the newly discovered class of sulfa drugs,
including sulfathiazole. These new drugs, developed by German scientists in the early 1930s,
were quickly hailed as new "miracle" drugs. Indeed, the sulfa drugs enabled the treatment of
many illnesses, such as pneumonia, gonorrhea, and other bacterial infections, that previously
had been difficult, if impossible, to treat. Despite the fact that the sulfa drugs later were shown
to have a number of undesirable side effects (they formed deposits in the kidneys, and bacteria
quickly became resistant), they were credited with saving millions of lives around the world
through World War II.
The end of the war and the liberation of the Philippines by U.S. forces brought new business
opportunities in the country. During the occupation, supplies of medicines had become scarce,
and the immediate postwar period saw a surge in demand for sulfa drugs, and sulfathiazole,
considered by many to be a virtual cure-all. With most of the country's businesses, including its
pharmacies, destroyed during the war, much of the country's trade shifted to its busy
marketplaces. Mariano Que, inspired by the new entrepreneurial spirit, used his drugstore
experience to launch his own business.
At first, Que bought and sold medical vials and capsules. After he had generated sufficient
savings, however, he took PHP 100 (worth about $1.50 at the time) and bought a bottle of

sulfathiazole tablets. Que brought the sulfathiazole bottle to Manila's busy Banbang market and
sold the pillsin single doses. The method of selling, known as "Tingi-tingi," became extremely
popular in the poverty-stricken Philippines, bringing life-saving medications within financial
reach of many more people than before.
Que invested his profits in purchasing more pills, and before long he had generated enough
revenue to buy a pushcart, which he filled with an expanding assortment of pharmaceuticals.
The unregulated nature of the country's drug market, especially its pharmaceutical black
market, led to abuses by sellers, who sometimes peddled fake or dangerous formulations, or sold
medications long out of date, often at extortionist prices.

Que, however, built a reputation for the quality and freshness of his products, and also for the
fairness of his prices. Before too long, he had built up a steady clientele, and in March 1945, Que
opened his first store. Que named the Bambang-located store Mercury Drug, after the Roman
god and bearer of the caduceus, the symbol of the medical profession.

Branching Out in the 1970s

Mercury Drug remained a one-store operation into the 1960s. In the meantime, Que continued
to drive innovations in the Filipino pharmacy sector. In 1948, for example, Que began a drug
delivery service, becoming the first to use motorized vehicles for swifter delivery times. In the
1950s, Que expanded his store hours, introducing a 17-hour-per-day, seven-days-per-week
opening schedule. Part of the motivation behind the move came in recognition of a Filipino
tendency to auto-medicate their illnesses. By remaining open longer, Mercury Drug responded
to its clients' demands for increased access to pharmaceutical products. Launched in 1952, the
new opening schedule was expanded to 24 hours per day in 1965.

Mercury Drug began its drive to become the Philippines' dominant drugstore group in the next
decade. At the beginning of the 1960s, the company was contacted by the Ayala Corporation,
which was building a shopping center in Makati. Ayala offered to lease space to Mercury, in

order to include drugstore services at the center. Mercury agreed, and once again revealed its
penchant for innovation, opening the country's first self-service pharmacy in 1963.
Two years later, Mercury opened its third drugstore, in Quiapo, which became the company's
flagship and set the model for its further development. In 1967, the company opened a
centralized warehouse to serve its growing store chain, introducing computer-guided
temperature controls to safeguard its products. Then, in 1969, the company became the first to
introduce biological refrigerators in its stores. This permitted the company to assure the quality
of its life-saving medicines.
Mercury Drug began building out its network of drugstores, staying close to the Manila market
for much of the early 1970s. The company also began branching out beyond pharmaceutical
sales. A significant early purchase was that of Medical Center Drug Corporation (MCDC).
Founded in 1946, MCDC focused on sales of pharmaceutical supplies, equipment, and
basic surgical instruments.
The purchase of MCDC, complementary to its existing drugstore business, led Mercury Drug to
change its structure. In 1972, Que created the Mercury Group of Companies, Inc., which in turn
oversaw Mercury Drug and MCDC. Both companies remained independent of the other; in
1980, MCDC changed its name, to Medical Center Trading Corporation (MCTC), in order to
highlight its difference from Mercury Drug. MCTC then grew into the Philippines' leading
importer and distributor of medical, hospital, laboratory, and related equipment, with branches
throughout the Metro Manila and surrounding region.
MCTC was not the only venture by Que (who was joined by daughter Vivian Que-Ascona, later
president of Mercury Drug) to expand beyond his drugstore empire. The introduction of the
convenience store concept in the Philippines in the early 1980s represented both a new source of
competition for Mercury Drug and a new opportunity. Mercury developed its own convenience
format in response to the growth of competitors such as 7-11. Typically located next to its
drugstores, the Mercury Drug Superstores expanded the company's range of goods beyond
drugs and into wider consumer categories, such as beauty and personal care products, fastfoods, and the like.
Separately, the Que family added other interests, including the Q*10 convenience store format
and the Tropical Hut fast-food restaurant chain. Nonetheless, Mercury Drug Corporation
remained the focus of the family's holdings.

"Oligopoly" in the New Century

Mercury Drug, meanwhile, continued to grow strongly. In 1976, the company expanded beyond
the Metro Manila market for the first time, and over the next decades added locations in the
Luzon, Visayas, and Mindanao regions of the Philippines as well. Supporting this network was
the implementation of a fully computerized warehousing, inventory, and order processing
system, installed in 1985.
Mercury Drug's growth was impressive: By 1995, the company operated more than 270 stores.
Less than ten years later, Mercury had expanded its number of branches to more than 450,
giving it a near monopoly grip on the country's drug sales. By 2004, Mercury controlled as much
as 60 percent of all drug sales in the Philippines.
Ironically, Mercury's dominant position led the group, which had achieved its early growth
based on its low prices, to be criticized for what many considered as its restrictively high prices.
Indeed, as some critics pointed out, similar drugs could be purchased in India and other
markets for as much as one-third the price Mercury Drug charged.
In the early 2000s, the government began taking action to force the Philippines' drug industry,
including Mercury Drug, to lower prices on many life-saving medicines. As part of that effort,
the country's Trade and Industry and Health departments began encouraging the parallel
importation of pharmaceutical generics from India, which had earned worldwide recognition for
the quality of its generic equivalents.

Company Perspectives:
The company's mission is continuously be the leading, trusted and caring drugstore.
In 2004, the government stepped up its pressure. In September of the year, the government
passed legislation expanding drug discounts for the country's senior citizens. The country's
smaller independent drugstore owners protested the decision, in part because it was expected to
serve only to increase Mercury's dominance over the marketas the country's largest retailer of
pharmaceutical products, Mercury was easily able to negotiate discounted prices from its
supplies. Also in that year, President Arroyo established the lowering of drug prices as one of the
government's priorities.

In December 2004, the Filipino government announced a new plan to break what some were
calling Mercury's "oligopoly" on the country's retail market. The Philippine International
Trading Corp. (PICT), owned and run by the Filipino government, announced its intention to
organize up to 300 of the country's independent pharmacies into a new network of privately
owned and operated drugstores, dubbed "Botika ng Bayan." The new network would then sell
drugs, sourced by PICT directly from drug companies, at prices as much as six times less
expensive than "market"i.e., Mercury'srates.
Despite these pressures, Mercury Drug Corporation remained a fixture on the Philippines
pharmacy market. The company also remained one of the Philippines' largest corporations,
ranking in eighth place among the country's largest corporations and third place among the
corporations in the high-quality services/products bracket. Mercury Drug appeared to have
discovered its own "miracle drug" for success.

Principal Subsidiaries
Mercury Drug Superstore.

Principal Competitors
Caltex; I-Mart International Corporation; Phils. Corporation; Easy Mart; Petron Corporation;
Philippine Seven Corporation; Robinsons Convenience Store Inc.; Seaoil Philippines Inc.; Shell
Philippines Inc.; Philippines Corporation.

Key Dates:
1945:
Mariano Que begins selling sulfathiozone out of a cart, then opens a store in Manila and
founds Mercury Drug Corporation.
1963:
Mercury Drug opens its second store, in a shopping center built by the Ayala Group.
1965:

Mercury Drug opens a third, flagship branch in Quiapo.

1970:
The company acquires Medical Center Drug Corporation (MCDC).
1972:
Mercury Group of Companies, Inc. is set up as a holding company for MCDC and
Mercury Drug.
1976:
Mercury begins expanding beyond the Manila market.
1985:
The company sets up fully computerized warehousing, inventory, and ordering systems.
1995:
Mercury celebrates its 50th anniversary with more than 270 stores.
2004:
Mercury operates more than 450 stores, with annual sales of nearly PHP 43 billion ($8.8
billion).

Further Reading
Aning, Jerome, "City Hall Clarifies Mercury Contract," Philippine Daily Inquirer, July 11, 2002.
Balabo, Dino, "Pagdanganan Vows to Break Oligopoly in Pharma Industry," ABSCBN.com , December 17, 2004.
Flores, Shirley, "Mercury Drug Not Planning to List in Stock Exchange Yet," Corporate
News, December 7, 1999.
Jiminez, Cher, "Drugstores Protest Discounts," ABS-CBN.com , November 23, 2004.
"Mercury Drug Corporation Honored by the Philippines," Stamps, November 11, 1995, p. 13.
"MSD, Mercury Renew Deal to Increase Access to Drugs," Business World, September 17, 2003.

M.L. Cohen