The merger between New Hamashbir Lazarchan and New Pharm Drugstores could spur a war in the cosmetics industry and push Superpharm from its dominant position in the cosmetics market, Dun & Bradstreet Israel said Wednesday.
"The merger between New Hamashbir Lazarchan and New Pharm Drugstores is expected to change the landscape of the cosmetics market," said D&B Israel CEO Reuven Kovent. "Linking the cosmetics section of the New Hamashbir Lazarchan with the New Pharm chain will create a new dominant player in the cosmetics market, enhance distribution and include plans for further expansion."
As a result, D&B expects competition to become fierce, in particular for local perfumeries, leading to lower margins, at least in the first phase.
Furthermore, economists at D&B warned that the new, bigger player created through the merger between Hamashbir Lazarchan and New Pharm would threaten Superpharm's dominant position in the market and cut the chain's market share.
"Superpharm has been coping under the conditions of competition in the cosmetics market for many years and is leading the market. The changes of ownership will probably not change our position," Superpharm said in a statement issued in response to the D&B report.
Under the terms of their proposed deal, Hamashbir Lazarchan will establish New Pharm branches in its 26 department stores, expanding the product range of Hamashbir. New Pharm currently operates 51 drugstores.
According to D&B Israel, the merged chain is expected to claim a 25 percent share of the local cosmetics industry, while Superpharm. with estimated annual revenues of, NIS 600 million takes 33%. The Duty-Free shop at Ben-Gurion Airport is another significant player in the market.
Economists at D&B estimated the cosmetics industry generates annual turnover of NIS 1.7 billion - not including duty-free sales - divided into sales from perfumes (NIS 800m.), care products (NIS 500m.) and make-up products (NIS 400m.).