Mercury Drug Research

Mercury Drug Corporation is the Philippines' dominant pharmacy group. The Quezon City-based
company operates a national chain of more than 450 drugstores, including company-owned 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 mid-2000s, 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 pills—in 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, fast-foods, 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 market—as 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's—rates.
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.

How did Mercury Drug Started?

From its humble beginnings, Mercury Drug has gone beyond expectations. Shortly after the liberation
of Manila from Japanese occupation, Mariano Que, realizing the need of the people for medicines,
bought with his hard earned savings of P100 a bottle of 1000 tablets of Sulfathiazole and sold it
"patingi-tingi” for P1.00 per tablet in the sidewalks of Bambang, Manila. Sulfathiazole is a wonder drug
that cures all during that time.

From pushcart – peddling and with his previous working experience in a drugstore before the war, he
eventually opened his first small drugstore in Bambang Street. Mercury Drug has today grown into a
vast network of over 700 company-owned and franchised stores nationwide.

Mercury Drug Stores Success

Mercury Drug believes that it owes its success to the millions of customers who have trusted and
patronized the drugstore chain all throughout these years. Its feat could also not have been possible
without its pool of professional and dedicated staff numbering close to 9,000 today.

As a way of giving back to the people, Mercury Drug vows to bring quality, safe and affordable health-
enhancing and life-saving medicines closer to the public. In the first place, it is what the name
Mercury Drug stands for. In Roman mythology, Mercury is known as the god of commerce and
manual skill. Being the messenger of gods, Mercury needed a winged feet for his swift flights.
Mercury Drug remains committed to its name as seen on its corporate philosophy of total and speedy
customer service: "To serve you, to have what you want, when you want it.”

Aside from bringing its chain of stores closer to the homes of the people, Mercury Drug has constantly
endeavored to reach the hearts of the customers. To achieve this, Mercury Drug has taken pride in
the introduction of many firsts in the drug retailing business ---all in an effort to satisfy, please and
further serve the people.

Mercury Drug Innovations

In 1945, it opened a drugstore and one of its innovations is to sell "tingi-tingi” or piece by piece to
those who could not afford to buy a whole bottle of medicine. Realizing that not everyone could go to
the drugstore, Mercury Drug introduced the first motorized customer delivery service in 1948. Four
years later, it commenced the 17-hour, 7 days a week drugstore service; in 1963, the country’s first
self-service drugstore; in 1965, the 24-hour, 7 days a week service; in 1967, the first computerized
temperature-controlled central warehouse; in 1969, the first drugstore chain to use biological
refrigerators to preserve life-saving medicines and in 1976, the first drugstore chain to expand
throughout Luzon, Visayas and Mindanao.

Mercury Drug believes that quality and life-saving medicines made affordable and accessible are as
important today as it was then. Now more than ever, it is committed to introducing enhanced services
to better serve the customers farther and wider, whoever and wherever they may be. For instance,
Mercury Drug makes certain the availability of less common but life-saving medical products such as
serum, blood plasma, albumin and the like that are stored in a Bio-refrigerator. This would require
Mercury Drug to invest on modern technology and to continuously upgrade its facilities in its head
office, stores and distribution centers. Aside from pharmaceutical products, it now carries basic
household necessities such as food, health and personal care products and others for the buying
convenience of its customers. It has also incorporated value added facilities and services in many of
its drugstores. More and more branches are open on a 24-hour service all days of the week. Aside
from consistently complying with the 20% discounts to senior citizens, Mercury Drug has also
launched its ”Suki” card, a customer program as a way of expressing gratitude to its loyal customers.

As a drugstore with a heart, Mercury Drug has been conducting "Operation Bigay Lunas” every March
1, on their anniversary day together with its business associates. For the past decade, this annual
and all-day free clinic catering to the less-privileged provides medical consultations and free
medicines to indigent patients in selected cities and municipalities nationwide. This year alone, it
served more than 130,000 beneficiaries in around 63 cities and municipalities.

In 2002, Mercury Drug, in partnership with the Philippine Business for Social Progress (PBSP), has
launched a program that has been helping rural and urban marginalized communities nationwide to
have access to potable water system within their communities through the Artesian Well Project. The
installation of this potable water system helped improved the quality of life of the beneficiaries by
promoting better health and sanitation practices.

Mercury Drug Perspectives and its Struggles with the Philippine Government

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 market—as 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's—rates.

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.

Mercury Drug Mission Statement

"Continuously be the leading, trusted and caring drugstore."

In the years to come, Mercury Drug will keep on looking for opportunities to further enable customers
to have more access to quality, safe and life-saving medicines, thus enabling them to have more
meaningful, healthier and longer lives. It will always pursue its commitment to better and further serve
its customers whose trust and loyal patronage has allowed Mercury Drug to be of continued service to
the nation.

Mercury Drug Official Website: https://www.mercurydrug.com Mercury Drugstore|

"This drugstore as I believe have also started as a small pharmacy and they grew to be a big chain of
drugstores"inquire| "I like the idea of what they have presented to their clients and customers, you can
have this Suki Card and earn points as you purchase in the mercury drugstores"inquire| "The best
thing about mercury drugstores is that there are branches, usually near residential areas that have
extended operating hours"inquire| "Mercury drugstore branches are also strategically placed in some
shopping malls that is convenient for customers"inquire|

|||

People in the Philippines, especially those who live in the urban areas are very much exposed to the
drugstores called Mercury Drug. This is a local drugstorechain in the country that has quite a number
of branches throughout the country. This drugstore as I believe have also started as a small
pharmacy and they grew to be a big chain of drugstores. I like the idea of what they have presented
to their clients and customers, you can have this Suki Card and earn points as you purchase in the
mercury drugstores; these points are then converted to cash to be used for your succeeding
purchases. Known for having the most complete varieties of medicines, even those that are not very
common, mercury drug sure has made their way to the top of the pharmaceutical industry as a
retailer. Just a few years back, they have also put up some retail products sold in their bigger shops
which is also good, since you can use your membership card with supermarket items like household
products, or breads, and chips.

The best thing about mercury drugstores is that there are branches, usually near residential areas
that have extended operating hours. This helps a lot to those families who will have emergencies and
would need to buy medicines during these hours. They open early too, for those who will be going to
the office, so they can purchase what they need first prior to their work time. Mercury drugstore
branches are also strategically placed in some shopping malls that is convenient for customers; not
only that, aside from the usual medicine, and healthcare products, Mercury Drug also are selling
some medical equipments common to hospital patients and practitioners.

The first Mercury Drug drive-thru

The company began in 1945 with a single store. Today, Mercury Drug has more than 700 stores.
Even with a wide lead over competitors, Mercury Drug still aspires to reinvent itself. I happen to pass
by Madison St. in San Juan Greenhills and was surprised to see a Mercury with a drive-thru.

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