Raia Drogasil SA

BOVESPA:RADL3

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to RD people, health and well-being conference call to discuss its 2Q 21 results.

The presentation can be found on RD's Investor Relations website at ir.rd.com.br where the audio for this conference will later be made available. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of RD management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of RD and could cause results to differ materially from those expressed in such forward-looking statements.

Today with us are Mr. Eugênio De Zagottis, Investor Relations, Corporate Planning and M&A Vice President; and Mr. Fernando Spinelli, Investor Relations and Business Development Director.

Now I'll turn the conference over to Mr. Eugênio De Zagottis. Sir, you may begin your conference.

[Eugenio De Zagottis, executive]

Welcome to the Raia Drogasil 2Q '21 conference call.

I'd like to start by saying that this was a great quarter for the company. We're very proud of that. But not only financially, this has been also a great quarter in terms of how our strategic plan has advanced. And so there's a lot of things that we'll be talking along the call that point to very successful steps in terms of delivering our 3-element strategy, which is new pharmacy, marketplace and health platform.

So to talk about the highlights of the quarter, let me start here. We ended the period with 2,374 units in operation. We opened 62 pharmacies and closed 7. We have market share gains in every market with a national increase of 1.1 percentage point. Revenues reached BRL 6.2 billion, a 32% growth over a very weak comp base of last year, but a very robust 40.6% growth over the 2Q '19. So for a company our size, we're talking about a CAGR of 20% top line growth. So this is really strong number.

Our contribution margin reached 10.8%, 81% of growth and also a significant margin expansion because of the weak comp base of last year. BRL 497 million of adjusted EBITDA, 8% margin. If we talk about the -- this is no IFRS numbers. This is the traditional accounting standard, the one we believe represents better the economics of the business. But for comparison's sake, if we talk about IFRS, we'll be talking about 11.1%, but we really believe the 8% best represents the business because we pay rental on our stores, and that has to be accounted into numbers.

We had a net income of BRL 232 million, 3.7% of net margin. Cash flow, negative BRL 300 million in free cash flow, negative BRL 387 million in total cash flow. It's important to mention that we had a peak in cash cycle every year in the second quarter. And we're comparing here versus the value of the fourth quarter. So this is kind of an abnormal number. And this is a number that will come down as this cash cycle normalizes. So by year-end, I think everything will be normal and probably next quarter, it will be already normal.

I think other highlights of the quarter is the announcement of the launch of Vitat, which is our new health platform, focused on the promotion of integral health. We also announced yesterday the acquisition of another start-up, CUCOHealth. I'll be talking more about that during the presentation. And finally, we disclosed in the quarter not only the objectives that we have into 2030 in terms of sustainability, but also very specific targets for each of those objectives. We'll also be talking about that in the end.

So going forward here, as I mentioned before, we ended the quarter with 2,374 pharmacies, 62 openings, 7 closures. We had 69% of mature stores, 31% of maturing stores and still a lot of maturation potential in our numbers.

And it's also important to highlight that the guidance of 240 new pharmacies both for 2021 and for 2022, it's still unchanged, and we are progressing well towards the numbers guidance.

We have seen over the last 2 years a big difference in terms of strategy. I think until 2018, 2019, we were opening still a lot of stores in markets where we had already a pretty good presence. So it was more about share gain in existing markets than about entering new markets. We can see that from the 2Q '18 to the 2Q '19, we increased only the number of cities where we compete from 311 to 337. But over the last 2 years, there's a significant increase in the number of cities that opening 4 -- opening stores in 40 new cities in the 2Q '20, last 12 months, that's for 1 year, and now reaching 436.

So this expansion means that it is -- that's much more focused in new markets as well as increasing advantage in existing markets. Of course, both happen. But I think that the focus is clearly more now in new markets than before. This results in an expansion that has way less cannibalization than before. And as a result, we're seeing the internal rate of return going north of what we used to do. Generally, we talk about internal rate of return on expansion on real terms, net of cannibalization of 20. We are now more into doing like 25 rather than 20.

Then finally, the profile of the stores that have been opening has been changing not only geographically, but also in terms of income segments. It's easy to say -- to see here that 2Q '18, 40% of the stores we were opening were still upscale stores, 40% hybrid, 20% only popular. Now the mix is completely different. We have only 10% premium pharmacies opened, nearly 60% hybrid and 31% popular stores. So both hybrid and popular serve the expanded middle class. The popular store serves almost only those clients while the hybrid serves a combination of customer profiles, including those customers.

So when you look today at the total portfolio of stores, 1/3 of the stores is premium pharmacies, 45 is hybrid, 22 is popular. So hybrid plus popular is 2/3 of our total store base. We are present today in every market, but 3 states. And this is something that we're changing this year as we already have contracts signed both in the states of Acre, Roraima and Amapá. So these 3 missing states won't be missing by the end of the year. We'll have stores in all of them. Of the stores we have today, 1,000 are Raia. 1,355 are Drogasil, of course. I think we have advanced in a lot of markets.

I think one of the main highlights has been the South. We have now 260 stores in the Southern region. In Rio Grande do Sul alone, where we still have half the store base of Paraná, those are similar markets. Rio Grande do Sul is actually slightly larger than Paraná as a market, but we have about half the size, but we are advancing very fast here. Our operation is really good. We have added 19 stores over the last 12 months. We have more stores coming here.

And I think another highlight has been the Northeast. We reached 317 stores in the Northeast. This is an amazing operation. We're evolving as well in the north with 16 stores. We already have 10 stores in Amazonas, which is a pretty recent market, 5 stores in Rondônia, which is another recent market. And now entering these 2 -- these 3 missing markets.

So the growth is happening everywhere, but especially North, Northeast and South have been very important areas. Obviously, São Paulo, we already have a very sizable operation, 1,100 stores. We keep growing there as well, but less than in previous years, and I think there's more focus on these new -- on these other markets.

I think this has been a great quarter in terms of market share gain both on a national basis, but also we have gain share in every single market.

Talking about revenues. We -- obviously, when you compare second quarter versus 2Q '20, this is a pretty -- there's a pretty easy comp base as the 2Q '20 was penalized by the pandemic. It was the toughest quarter in recent history. So 32% top line growth. But I think the really meaningful number here is the 40.6% 2-year stack growth when we compare this quarter to the same quarter 2019. So for a company our size, a company which expansion on a percentage basis has been decelerating, obviously, to 40 stores every year over a growing store base. So percentage-wise, this is coming down. But still, we have a CAGR north of 20%. So this is a very expressive number.

And this is obviously a consequence of the digital transformation of the company. As customers have gone digital, the total spending of these customers has also increased, and this is driving a very sustainable growth in mature store sales total demand as well. When we look at the mix, if you split the mix in prescription versus front store, the mix has become -- has been constant. The only difference here is that within the front store, OTC has gained 150 bps. HPC has lost 150 bps. I think this also has to do with the pandemic. Obviously, there are a lot of categories in OTC driven by the pandemic and also, to some extent, HPC is penalized by less traffic.

In prescription, it's flat numbers versus last year. Here, looking at our comps, not only I think the 20% 2-year stack growth is amazing, as I mentioned before. But when you look at mature store sales growing 15% 2-year stack, this is really, really strong number. We are talking here a real growth over this 2-year period of 5%. So we're talking 2.5% per year of real growth for mature stores. This is exactly a reflection of digitalization of our customers, generating more loyalty, more spending, more frequency, et cetera.

And exactly here and the rest, we have some numbers about the digitalization that I was just talking about now. We -- the 2 quarter '20 was a strong number, 7.6%. If you look before this, the numbers were much, much lower than this. So we reached this peak during the peak of the pandemic when -- which was a peak like that when people were fully locked up at home. Over the coming quarters where circulation started normalizing, this number came down but still maintained a very strong residue. But now as we keep pushing digitalization, we see the numbers growing again. We reached 7.7% digitalization in the first quarter and now 8.9% in the second quarter.

So this is a very important KPI for us. And this is what's driving the comp and top line performance we have seen. We see that the customers will become digital, they start spending average 20% to 25% more than before. And they do this across all the channels that we offer: app, stores, websites, et cetera. So this increased loyalty is driving the comps we're talking about.

I think another highlight here is the number of cities from where we do motorized deliveries. We have 400 cities with operation like this. Not to mention that we have Click & Collect, our neighborhood delivery, 100% of our stores. So this is on top of that.

And finally, we reached 11.8 million in cumulative app downloads. I'll talk later about digital in more detail, but the performance of our app is very important not only in terms of how much it represents the total sales, but also in terms of the kind of conversion rates that we have seen here and experienced improvement as well.

Gross margin, we reached 28.8% in the quarter. This is a consequence of the price increase. So we have an inflationary gain of inventory every year concentrated in the second quarter. When you compare to the previous year, it's important to mention that last year because of the beginning of the pandemic, the price -- the timing of the price increase shifted 2 months. So the 2Q '20, we saw only 1/3 of the gain. The 2/3 of the gain were in the third quarter. Obviously, this affects our gross margin on base as we move through the next quarter. But 28.8% is a really good number.

And we have taken advantage of this price increase. We have accumulated lots of inventories, as you can see here on the cash cycle. 68.8 days, obviously lower than the 80 days we had last year. These 80 days, it was not only related to price increase, but was mostly related to the supply chain uncertainties brought by the pandemic. So we stockpiled a lot of inventories in order to prevent any disruptions and then it didn't happen. So when we compare the same quarter, it's lower now. But when we compare current cash cycle versus end of year, which affects our year-to-date cash flows, it's a significant increase, but this number will start coming down and it will normalize by the end of the year and so the cash flows.

Selling expense is 17.9%. I think this is a good level. I'm not comparing to the 2Q '20 because it's a completely different scenario with much lower sales and lots of operating leverage. And so these selling expenses, combined with a strong gross margin, generated a very strong contribution margin of 10.8%.

Finally, when you look at G&A, we had 2.9% of G&A versus 3% last year. So similar numbers despite a much lower top line growth last year. What's happening here is exactly that we invested 40 bps in digital transformation, as simple as that. We're talking here IT investments. Not only an -- IT is an accounting line, but looking more, IT likes a -- more like a cost center, then -- so that the agile teams are here. The -- we have cloud here. We have developers here. So we have people, we have services, we have every IT line here. So 40 bps. This is a structural expansion. This is the cost of doing the kind of digital transformation we are doing, the -- of launch -- the marketplace of launching additional health platform as well.

Finally, the adjusted EBITDA, 8%; BRL 497 million. Just for comparison's sake, because some of the players in our industry, for some reason, they prefer to report IFRS 16, which, in my view, are artificial numbers, but if we look at this, it's 11.1%, but the right number to look is 8%.

Here, we have the reconciliation of the EBITDA. The main point here is the nonrecurring gains we have adjusted from our reported EBITDA. We have, in the quarter, BRL 52 million tax gains related to other fiscal exercises. So the accounting EBITDA was even higher than the BRL 497 million we reported. The account EBITDA was BRL 549 million. So very strong. But obviously, we are very stringent in terms of the criteria we use to adjust the number. This is true for nonrecurring revenues as well as nonrecurring expenses. This quarter clearly shows that.

Finally, BRL 230 million in adjusted net income, 3.7% of margin. And as I mentioned before, we had negative total and free cash flows driven by the peak in cash cycle we see in the quarter versus the very, very low level of the 4Q '20.

Finally, despite this peak in cash cycle, we still see 0.8 net debt to EBITDA, a very low gearing ratio and this gearing ratio will fall even more as we normalize the cash cycle in the coming months.

Finally, our stock price fell 1.3% in the quarter versus 6.3% appreciation by the IBOVESPA. And we reported an average trading volume of BRL 149 million, which is I think a pretty impressive number. Obviously, our compounded returns since the IPO moved higher for Raia Drogasil. They are really outstanding numbers, and we keep reporting this kind of number as we move forward.

I'd like now to focus on some of the strategic highlights of the quarter. So we have this strategy that is based on 3 elements: new pharmacy, which is the combination of digitalization with a health hub; marketplace, that is in the early days. We just launched that for one of our banners; and finally, health platform. Sort of one by one the main highlights.

So here, we have the new pharmacy highlights. So the first number here, we already talked about this. We reached 8.9% utilization with 11.8 million cumulative downloads. And it's amazing to see that our app has more than 10% sales conversion, which is an amazing number. The app accounts for 60% of our digital sales. Obviously, the Net Promoter Score of the app is still below that of our physical stores, but it's improving and it's improving at a very good pace. So I reinforce what we have been saying. We have a good app. We don't have a state-of-the-art app, not yet, but we'll get there, and we are exactly in the process. And we see the numbers showing the improvement here.

Finally, when you talk about the footprint, these 436 cities where we have deliveries, they represent 99.5% of our total demand. So the cities where we don't have the service, they are irrelevant in terms of total sales. But even those cities, they will have Click & Collect, they will have neighborhood deliveries because we have that in 100% of our network.

Another highlight that I'd like to mention is comparing here the online visits of our websites versus those of our competitors. Obviously, Raia Drogasil is the leader. We have the obligation to be the #1. But the point goes beyond that. We're the #1 individually for the banners. But again, Raia Drogasil is the #1 drugstore brand in the country, but Raia is #2 drugstore brand in the country. So yes, we should still be ahead even on individual basis. But when you look versus the competitors, we have more traffic than our fair share. That's the message here. We are, as a company and even individually as banners, way ahead of our other competitors in terms of traffic.

And finally, when you think about the health care side of the new pharmacy, it's unbelievable that we have applied up to date, 3 million COVID tests. This started in May last year. And this year alone, we have applied nearly 2 million COVID tests. So this is very important in terms of our expanded role not only as a pharmacy retailer, but as a health side, as someone who can support the customers in taking better care of themselves.

On top of this number, another highlight is that we have applied more than -- we have applied a big number of COVID vaccines. Obviously, this is a partnership with several municipalities in the country. So we allow the public system to use our stores as an expanded network for the public service. So this is completely for free. We don't charge the municipality. We don't charge the citizen. And very often, it's a professional from the public health system who does the vaccination within our stores. But this is also part of making our structure available to improve public health. And this also helps showing to the customer this new face of the pharmacy.

Moving to the marketplace. It's still too early to talk about GMV. Right now, we have the marketplace only in 1 banner, which is Raia. So we probably now in August will start rolling at Drogasil because of -- we were introducing a new system release before doing this. Now we're getting ready to do it. But we already have 136 sellers. This number is moving up. We have 28,600 SKUs available as a 3P offering on top of the 13,000, 14,000, 15,000 we have as our 1P operation. And finally, we have sold already 6,900 different SKUs on the 3P operation here. So obviously, this is very early days to have our logistics. The GMV numbers are still not material, but they're growing, and we are happy with the way this is progressing. We are absolutely convinced this is a very important growth lever for the company.

And finally, we launched in the quarter Vitat, which is our integral health platform. We have a specific app for Vitat. The health hub in the store is named Vitat Space. And we have along with this health hub a space in the start in which we also sell curated healthy products, things like sustainable products, organic products, vegan products, et cetera.

So the beauty here of this health platform is exactly the fact that this is an omnichannel offering. So this is not -- this is way more than a simple app that help people take care of their health, which we do. But here, you can through the app schedule a COVID exam or whatever test in the store. Once you do the procedure in the store, we store the data in the app. So we have a health -- the consumer can have a health wallet in the app.

We have 25 free programs that we offer at launch. We have already 4 health hubs working in tandem with the app. We'll have 20 health hubs by the end of the year. And the [ shocking story ] of our app is exactly one of the start-ups that we bought that fit. And in fact, it has brought us 40,000 paying customers who are using some of our digital solutions. So this is an amazing starting base for us to start building up on these solutions, bringing new programs, even further integrating with the stores.

And in the end of the day, all these 3 strategies, they are fully integrated. They are all enhancing the engagement of the customer, increasing the frequency of the customer, increasing the spending of the customer and as a result, increasing the customer lifetime value. In the end, it doesn't matter where the customer is coming from or where the customer is spending their money. What matters is that we have a full solution for taking care of people's health and well-being. And this full solution will have a platform effect within it. So this is very, very, very important for us.

Finally, we have announced yesterday also the acquisition of another start-up, CUCOHealth. And with CUCOHealth, we have an amazing ecosystem in terms of retail and health care solutions. So the basis of everything at the high end of those banners, which are omnichannel retailing operations and they start to become also marketplaces. We have a group of private-label brands that we have in our stores and our digital platforms.

We have -- we also have solutions here for enhancing -- for increasing customer engagement. So we have Stix, our joint venture with GPA, which supports our loyalty program. So it's a common point platform with GPA. We also have RD Ads, which is -- this is an organic development. It's not a company we bought. So this is -- today, it's a business unit, but it will become a company to support digital marketing activities both for the pharmacy and for 3P within the marketplace.

And then when we think about health care, we have a lot of assets related to health promotion. So tech.fit has brought with itself the tech.fit brand, the workout brand and the tecnonutri brand. We have Vitat, which is like the 260-degree health solution that brings along several of these specialized solutions like workout, which is a workout kind of thing. We have nutritionals.

So Vitat combines everything with a focus on the customer journey. And we also have HealthBit, which does health promotions for company and health operators to reduce medical claims to improve populational health. So these are -- help promote B2B and B2C solutions in terms of health promotion.

When you think about access and adherence to the treatment, we have 2 businesses here. We have Univers, which is part of Raia Drogasil. This is not a separate company. What Univers does is increase the access to the treatment. We do partnership with health insurers, companies to bring people to our stores, to provide more discounts, payment facilities and things like that.

And now we have CUCO, which is a start-up specializing in adherence to the treatment. Adherence to the treatment is one of the main gaps in health care all around the world. There are statistics that show that people adherence to the treatment is less than 50%. And this is really a win-win opportunity for us and for the customer because a customer who is fully compliant will live a better and longer life, will have less cost for the health care system and also will increase their spending with us. So we have tried to do several initiatives, some successful internally, but now we have a team, a company fully dedicated to put all our assets together to build adherence -- 360 degrees adherence solution to the customers.

And finally, when you talk about specialty, we have 4Bio, which is specialty pharmacy; and we have Manipulaê, which is compounding pharmacy. So this is an ecosystem in the making. There will be more start-ups joining the ecosystem. We have a nice pipeline of negotiations through our RD Ventures, which is our corporate venture capital platform. But it's easy to see how this is combining to transform our execution in the coming years.

And finally, we have recently announced our objectives and targets for sustainability. So this is a program that we call working together for a healthier society. We have 3 fronts here: healthier people, healthier business, healthier planet. And we have several major objectives here. So when you think about healthier people, taking care of the health of our employees. So any health transformation starts inside the company for employees having better health, also promote healthy habits to our customers and promote health in the community. So these 3 macro objectives are related to healthier people.

In terms of healthier business, we have another 3 macro objectives, which are include and empower our employees through diversity promotion, expand personal development opportunities for them and also promote empowerment and diversity within our supply -- for our suppliers.

And finally, when you think about the healthier planet, potentialize the circular economy within RD's value chain and contribute to a zero-carbon world. To do this, we have set 35 goals, which are aligned to these macro objectives and to these objectives. And we have the link here for the detailed 35 goals that we have set for 2030. But we have here several of the main goals like reducing by 50% health risk factors of our employee, become a net-zero company and a zero-landfill, boost professional development certification, gender equality, minority representation. So all these goals are very clearly set. And now year after year, we'll start monitoring them and reporting them.

So these were our prepared remarks. We would now like to open for the Q&A. Thank you very much.

[Operator]

[Operator Instructions] The first question is from Maria Clara Infantozzi from Itau.

[Maria Infantozzi, analyst]

Congrats for the results. So I have two main questions. Could you please give us more color on what are the main drivers for the constant improvements that we are seeing in the digital penetration? In other words, does it come from new clients, from better conversion rates or from a higher average ticket? We are also impressed with the app conversion of 10% that you've showed in the release. Could you please give us more details on what do you see as the main drivers that boosted this conversion rate at this level in the app?

[Eugenio De Zagottis, executive]

Okay. Maria Clara, thank you for your questions. And so let me talk about the digital penetration. I mean, as I mentioned in the beginning, we have a strategy that has 3 very complementary elements: new pharmacy, marketplace and platform. Marketplace and digital platform are almost fully digital businesses. So in the end of the day, the capacity of this business to create value depends on our capacity to digitalize the customers and onboard them at our pharmacies.

So the digital penetration within the new pharmacy is the main KPI for the company because the highest the number of people who will be using our apps and digital platforms, the highest the potential that spending in the marketplace and the potential usage of the health platform as well. So we are boosting -- we're trying to boost the digital penetration. We have been very aggressive about that.

Obviously, a lot of that has to do with improving our delivery services. So having delivery in more places, having a better operation, faster operations. So this all increases usage and usage brings people back to the app. This has to do also with boosting the users within the store. So 2 examples, Stix. So every customer who gain points and wants to redeem those points for products, those Stix points, they have to use the app. The app is the only platform where they can track the points as -- exchange the points, et cetera. This is another driver of digital penetration.

And finally, our exclusive offers, which are one of our main elements of our front-store execution, they are moving to the digital environment. So not only do we have the coupon, the physical coupon we have always had, but we have a high and increasing penetration of the smart coupons. And obviously, we are giving a lot of discount incentives as well. So the prices online are more aggressive. The smart coupons, the digital smart coupons are more aggressive than physical smart coupons.

And this is on purpose because we want people to use more and more our digital platforms. We want people to buy digitally more and more for us because these people, they increase their loyalty, they increase their frequency and they become customers of the new businesses, of the marketplace and of the digital presence.

So this is what we're doing. We're very healthy with this number, but we want to keep increasing that. We are glad, but we're not happy. We believe that this digital penetration can be much bigger, and we'll keep pushing them. Obviously, it's a gradual buildup. It's not a turnkey process, but I think we've been very successful here, and this opens all these optionalities for the company in the future.

In terms of the conversion, I think it has to do, first, with the relation that we have with the customer. We have a very strong loyalty, a very strong relationship with these kind of customers. So the customer gets used to the app. And obviously, when the customer gets the app, it's generally because he wants something specifically. So this results in a high conversion.

The second thing is that when we send a push for the customer about an offer, that offer is relevant, is in categories the customer is interested about. So the conversion on the push is also high. The experience of the app has been increasing as our squads have been working month after month after month, building new functionalities, eliminating bugs, improving navigation, user experience, et cetera, et cetera. So all that has -- is really driving this amazing success of the app that represents like something like 60% of digital sales and has a 10% conversion rate.

[Operator]

The next question is from Gustavo Senday from XP.

[Gustavo Senday, analyst]

I have two questions here. The first is on the RD Ventures. I was just wondering if you could give us more color on the acquisitions pipeline. I mean are you guys focusing on specific segments or specific type of company? And the second question is about market share. I was just wondering also if you gained share over smaller and regional players or are you also gaining share over -- from larger and well-established players.

[Eugenio De Zagottis, executive]

Thank you, Gustavo. Thank you very much. So I mean when we look at the ecosystem chart, obviously, we have more -- we have a company like 4Bio, we can hardly call it a start-up. It's BRL 1 billion company, BRL 1.1 billion, BRL 1.2 in revenues. We have the joint venture with GPA and Stix, which is also a very specific thing. I wouldn't call it a start-up. Even though it's a start-up, it's not a traditional start-up in the sense of that it was something that we buy from entrepreneurs, it's something that we build together with GPA.

So we have today 4 start-ups, 3 we already own. CUCO, we just announced yesterday. We'll go through the antitrust clearance, and then we will actually start owning it. But these start-ups, I mean they already -- they're becoming very important for us. For example, tech.fit is the whole chassis of the digital platform. We have 40,000 paying people per month at that business. And all the solutions that we're bringing, they started with start-up, and now we are enhancing them.

We have Manipulaê, which is a compounding pharmacies marketplace. So it's also green, it's also growing. We have HealthBit, which is a company that serves corporations and the health insurers in terms of reducing lost medical claims, improving populational health. And this is a gateway for us not only to offer Univers to more accounts. But also tomorrow, when we have a deeper suite of solutions in our health platform, then we can maybe have a B2B platform as well and HealthBit will be very instrumental in doing that.

And finally, CUCO is a company fully focused on adherence to the treatment. We have done some initiatives, sometimes more successful, sometimes less, but we have that. We have had some success even internally in increasing adherence to the treatment, but doing that as a full time -- on a full-time basis as a full-time business, I think it would be very difficult.

So this is a huge opportunity for us economically and for the customer in terms of improving the health. We are negotiating with all the start-ups. I don't want to be specific, but there are health techs in this process. There are also companies that are enablers to our digitalization. But as we sign and as we are able to announce, you'll see more clearly what we do.

[Operator]

The next question is from Renan Prata from Citi.

[Renan Prata, analyst]

I think I have only one from my side. It's a follow-up from Maria's question. When you look to the digital competition, I mean we understand that Raia has an important competitive advantage given the company's capillarity across all regions. But I mean when you look to the big retailers or the big e-commerce players, do you already see these names as a directive competitors? Or do you expect that this name will focus on the health segment in the near future? And if so, what will be the -- I mean the main strategies to handle this competition?

[Eugenio De Zagottis, executive]

Well, thanks, Renan, it's a very, very good important question. I mean, obviously, we are looking a lot to the leading platforms, B2W, Magalu, Mercado Livre, I think these guys have been through this path before us. There's a lot of learning for us. I think they have an amazing execution. The numbers are really impressive. But in the end of the day, they are general easy platforms. What we want to do is different. We want to be a vertical platform, a specialized platform. And I think we have assets also that allow us to differentiate our offers.

In terms of pharmacy, today, there is a very -- there are regulatory barriers that prevent other general platforms from becoming online pharmacies. Obviously, they want to discuss these barriers. I think these barriers, they are there for a reason, to protect the customer. What the barriers -- in the end of the day, you cannot have a medicine being delivered by a company who's not a pharmacy without a fully audited and a fully licensed value chain, without the supervision of a pharmacist. So if anyone can become a pharmacy, they become a pharmacy, they can do it. But without becoming a pharmacy today, they wouldn't be able to do it.

But even if they want to do it, I mean,when you think about pharmacy, we are very happy that 9% of digital penetration today, guess what, 91% of the penetration is in the stores. We have 80,000 pharmacies in Brazil. It's different for a customer to buy a pharmaceutical product because you have a pharmacy with parking, with amazing experience in every corner. It's very easy and convenient.

So the main enemy of any digital pharmacy, us or anyone else's, is the physical presence and is the high level of convenience that the pharmacy offer. So this is something very important. The other aspect is that we have a capillarity of 2,400 pharmacies all over Brazil. We reached 2,400. So we can deliver very fast with a very low cost. We have a wide array of partnerships with manufacturers with Juris programs with -- that they support. We have a lot of partnerships with health insurers and payers that give specific discounts.

So pharmacy execution is a very specialized execution. The best example I can give is that supermarkets, the physical ones, who own a pharmacy have never tackled the challenge of being a great pharmacy. You look at supermarkets today, they become irrelevant in the pharmacy because they have the customers, they have the space, they have the pharmacy, they have their pharmacists. They don't have a dedicated specialized pharmacy execution. They don't have a dedicated logistics, they don't have dedicated systems. The only thing we do in life is being a pharmacy. Now we will do more in terms of health. But we come from this very strong experience that we are moving online what we already do on the physical world.

So it's not easy for anybody to penetrate on the physical stores. But if anyone can penetrate in the physical stores with a digital offering, it's us by having the same level of specialization online that we have off-line. Obviously, there are some that are -- in terms of the 3P, we will be developing categories that nobody has. An example is compounding pharmacy. Nobody has it. We want to have optics. We want to have other kinds of things that they don't have. Some categories they have and we have like beauty, like personal care. And so these are open categories. And yes, there's competition already. So I think we have our own space where we can lead, where we can develop this business and become a very relevant virtual place.

[Operator]

We wish to thank all the participants for the questions.

Now I'll turn the conference over to Mr. Eugênio De Zagottis for his final remarks.

[Eugenio De Zagottis, executive]

Okay. First, thank you all for attending the conference call.

Just to summarize on some of the things we have talked today. First is that I think this has been a great quarter. Financially, very, very good margin expansion, very robust 2-year stack growth, 20% CAGR, 40% 2-year stack growth. So this is a very impressive number, and it's a number that is driven by the digitalization of the company. This 40% 2-year growth implies in a 5% real mature store sales growth over the 2-year period. It's like 2.5% real growth in mature stores per year. This is driven by digitalization because the people who start using digital, according to the numbers we have in the company, they start spending 20% to 25% more than before. They spend more online, they spend more off-line. And we are agnostic in terms of channel. Our commitment is to provide the best, the best possible service to our customers regardless of the channel that they choose.

So I think the new pharmacy is progressing really well. We have the initial health hubs being implemented. We have done this year alone nearly 2 million COVID tests and more services and vaccine shots, flu shots, a partnership with the public system to do COVID immunization. So the significance of the store that's bringing digital element and a health care element, it's happening at full steam.

We're also launching our marketplace. I think it's very early days, but it's very encouraging what we're seeing. We are being able to attract a lot of great partners. We are starting to look at our sellers as another customer of the company, a customer that deserves a value proposition on our part that we help them be effective. We offer them logistics solutions, market advertising solutions and other solutions. This will be all built in the coming years. So -- but today, it's early days, but very encouraging scene. I think over time, as the numbers become more material, we'll start sharing GMV numbers, but I think it's still too early for that.

Today, we are in a single banner, which is Raia. We are now starting to launch the Drogasil banner. So this is another important stage.

Another highlight has been the launch of Vitat, our digital health platform. It's an omnichannel platform. You can think about a customer, for example, who has diabetes. This customer can subscribe to a program today, the programs are free. I think in the future, we have like a freemium format. So this diabetic customer, they can buy pharmaceutical products from us with more discounts. They will be able to gain more points when they buy from us. They will be able to go to the health hub, I don't know, once a week, once every 2 weeks to do exams, to measure the sugar level in their blood, weight, cholesterol or whatever they need to measure. It's an omnichannel offering. So there's a platform that helps them in the everyday management of the disease, adherence, eating healthy, sleeping well, exercises, but then it integrates with the service. So it's, again, early days.

The acquisition of tech.fit has been instrumental for us to launch this platform that fast. And we're ramping up and I think the -- this is a longer-term process even than the marketplace, but I think this can also -- this will be a very important piece of the whole puzzle that we're building.

And finally, we see RD Ventures progressing. We just acquired our fourth start-up. We're starting to leverage the start-up to transform the company, to accelerate our digital and health and execution.

So this is I think the main points we discussed today. I'd like to thank you all for your support, shareholders, and we remain available for you whenever you need to talk to us. Thank you very much.