Raia Drogasil SA
BOVESPA:RADL3
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Raia Drogasil SA
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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 the fourth quarter of 2020. This conference is being broadcast simultaneously through the Internet in the website, ir.rd.com.br. In that address, you can also find the slide show presentation available for download. [Operator Instructions]
Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of RD management and on information with 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 the 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 and Corporate Planning Vice President; and Fernando Spinelli, Investor Relations and Business Development Director.
Now I'll turn the conference over to Mr. Eugênio. Please, sir, you may begin.
Hello, everybody. Welcome to the Raia Drogasil 2020 earnings call. And I'd like to start by saying that 2020 was a landmark year for Raia Drogasil on several regards. I mean, I think, first, I mean, we set a new aspiration for the
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presented in our Investor Day, which is becoming the company that most promotes access to a healthy life in Brazil. So this is a very [indiscernible]. And we have also unveiled our new strategy for us to go after the ambitious aspiration that I mentioned. So the new strategy that was presented also in our Investor Day is based on 3 different and complementary elements. First is the New Pharmacy, which is the resignification of the pharmacy into a health hub
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provided to our customers there. And by adding a digital experience, both inside the store and through an omnichannel experience through which the customer can buy through a
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he or she chooses. And we -- deliver from our stores or the customer can come to the store and collect. So this is the New Pharmacy.
The second pillar that we are just starting to implement and we already have some vendors, and we are in very early days here of our strategy is the Health Platform through which we will support the customer in their journeys related to exercise, healthy food, sleep, mental health, et cetera, et cetera. I can easily say that, I mean, I think we are exactly at an inflection point in terms of our strategy.
As you know, our merger [indiscernible] I think from '11 to '19, we have grown through a traditional retail
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very much based on organic growth, on improving being retail execution. We had
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From 2020 and onwards, I mean, we are really looking at the new strategy of becoming a broad health platform, supporting people to better take care of
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2020 was also the year in which the COVID pandemic started. And I mean, this has been a huge challenge, not only for us and the company, but to the country and to society in general. Then unfortunately
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people have been hospitalized. And obviously, there has been also a very relevant business challenge for the state, especially in the second quarter when social isolation was very stringent. The traffic at our stores reduced tremendously. We had stores at shopping malls initially closed, later on operating with short working hours.
But at the same time, the pandemic has been a tremendous catalyzer for our strategy. And the timing of our strategy has been a very happy one because we have been working a lot in digitalization for at least 1 year when the pandemic struck. And then we had to change a lot and adapt our execution to support our customers in this environment.
So in terms of health services, we have provided life to the health hub. We have done a myriad of COVID testing. Up to now, 1.4 million COVID tests been applied at our stores since May.
And in terms of digitalization of new services, we already had Click & Collect in all the stores. We had the neighborhood deliveries through which the customer orders by social media directly to the store manager. The store delivers food to the customer who lives in the neighborhood, no delivery cost charge. We're doing this on the existing structure. We have also upgraded our normal digital services that are up in the number of stores [indiscernible]. There was a huge adaptation for us to serve this customer, and this adaptation has resulted in only impact financially through the year.
If we look at our performance metrics in the year, we had absolute increases across that, and we had only slight margin losses for the whole year, even though we ended the year with a very positive fourth quarter, great absolute gain in these financial metrics. But the margin has also increased, which I think provides a good momentum this year.
So let's cover the highlights here. And also, let's remember that all the numbers we're talking about in the presentation, they are under the IAS 17 standard, which is, as opposed to IFRS, that in our view, doesn't express well our business. So we try to present in the same way we look internally [indiscernible] If that we pay you handle and this is an expense. And the leases don't belong to rental. We will just have to pay the rental. So we look previous accounting standard, which has full historic comparability, and that's how we look at our business.
So we ended 2,303 stores in operation. These include 4 4Bio stores. So if you talk only about -- we're talking 2,299 stores. So it's possible that, in some charts, we have this number, which is just the retail store picture. We opened 240 retail stores. There was also another 4Bio stores, so it will be 241 that we [indiscernible] count.
And when we talk about market share, we had a lot of bumps through the year related to the shopping malls being closed related to reporting issues to end the year a very positive outlook. We gained 100 bps of market share nationally and in every single region where we compete.
Our revenues totaled BRL 21.2 billion. We grew 15% in the year with mature store growth of 4.5% for the year, which is 150 bps below inflation -- no, no, sorry, sorry, sorry. So we ended the year with [indiscernible] 6% mature store growth which was 1.5% above inflation. So inflation was 4.5%. In the year, we did 3, which is 1.5 below. So just making myself clear here.
So it was challenging during the year. We lost some operating leverage here. We are
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but in the fourth quarter when traffic normalized. Then when we posted real gain in mature stores, then operating leverage appear [ in each plane ].
We had a store margin of 9.5%. So just to clarify, the store contribution margin is gross margin minus sales expenses. This is basically EBITDA pre-G&A. And
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metrics is that because of the transformation undergoing, we see a lot of pressure in G&A. We have some pressure already there. There will be more pressure going forward. We don't
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what's right for the long term and what we create long-term value. But the health of the core business is better captured by looking at the store contribution margin rather than by EBITDA. In the year, we had 9.5%, 12.2% growth increase and 30 bps pressure in margins. But when we look at the fourth quarter
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increase in store contribution margin with 50 bps of store contribution margin gain.
Finally, EBITDA, BRL 1,429 million for the year, 6.7% EBITDA margin with 6.4% of growth. For the quarter, we had 7.3% EBITDA margin. This was a margin expansion, with a total EBITDA growth, [ 22 ], very interesting.
Net income, BRL 600 million. We also had a slight margin pressure for the year, but we ended the year in the same positive pace of the other metrics, with 20% net income growth quarter-on-quarter.
Finally, cash flow is a financial highlight of the year, BRL 291 million of positive free cash flow. So this is not our first year of positive free cash flow generation. We had several years. Actually, I think we had most years but never this much. So high to the point in which even the total cash generation after paying interest on capital, financial expenses, taxes, et cetera, et cetera, et cetera, we generated BRL 104 million, which reduced our net debt by the end of the day. So it was a very positive year.
And finally, another
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the support fund we instituted named Every Care Counts. This is a grant of BRL 25 million. That was -- through which we donated money to support 51 hospitals outside of the major metropolitan centers in Brazil to support the communities in several areas of the country to fight COVID-19 while lasting a positive legacy for the community.
Okay. So next page. I think here, we see that before the big picture in terms of our -- how we did this year, growth and panning together the whole track record. I think the main message here is despite the pandemic, this was another year of sustained growth with value creation. If you look since 2011, the year we merged, I mean, we have multiplied our store base by 3x. And we have evolved from BRL 4.8 billion revenues to BRL 21.2 billion in revenues, and we have multiplied our EBITDA by 5x.
The main point here is of the company, today, 2/3 was built since the merger under your very eyes through this whole time. The only reason why we are able to grow so much, increased EBITDA so much, gain margins, et cetera, et cetera, et cetera, because of the quality of this expansion. And this is something absolutely unique because we have posted very constant expansion, growing numbers up to 240 stores a year at the point in which we maintain 240 stores a year. We have always achieved the same returns of our legacy stores, and we are the only player to do it, to have an expansion this fast, this constant and this accretive to the business. While every other competitor who tried to accelerate, sometimes they had to stop, they had to fix, they have to close stores. And our growth has been linear and undisturbed, and it shows exactly in the numbers that we have here.
Page 5, giving some highlights on the year's expansion. We have opened 240 stores this year, plus 1 4Bio. We have closed only 11 stores in the year and ended the period with 2,299 stores, retail, plus some 4Bio stores.
Our -- we have 33% of our store base comprised of maturing stores, so there's still more growth momentum and operating leverage to be captured here. And we also reiterate the guidance of 240 stores, both for this year and for next year.
Page 6, give you some more color here. We reached this year, last year, 409 cities in Brazil, also a very high number of cities. And here in the center chart, it's impossible -- it's important to highlight the economic profile of our expansion. Everybody knows how geographically dispersed our expansion is, how national our expansion is. What I think we're trying also to give the same disclosure here is in terms of how diversified it is from an income standpoint.
So we have, today, by the end of the quarter, 66% of our store base which is comprised of hybrid and popular stores, which serve the Brazilian expanded middle class. But if you look last year, 86% of every store -- the other store added were hybrid or popular. Only 14% were A class with 2 generally seen by the market as an A class chain. And what I'm on showing here is this is not true. And this will be -- and it will be more and more popular, going forward, as we keep maintaining the diversification approach.
And finally, of the 53 cities we added last year, we can see that they had an average population below 100,000 people. And we see this bar falling, which is a good thing. It shows that -- it can show that we are entering smaller cities, and we're doing that with the same success we always enjoyed in our core cities, in the larger cities. And the reason is because, first, I think we have a model which has tremendous appeal wherever we go due to the quality of our execution. And in these cities, we don't have cannibalization because these are new stores. I mean, we are entering them. Well, when you grow in cities like São Paulo, for example, we have cannibalization, and we have to factor cannibalization into our return accounts which we do. So on a net basis, we have the same returns in these small cities as we have in a city like São Paulo.
And by the way, just before flipping to the next page, I'm talking about the diversification of the growth in terms of historic levels. I mean, actually, it's Page 7 here. I'll start with the bottom here. We see that last year, we opened only 66 stores in the state of São Paulo. So we're talking 72% of all the stores opened outside of our core market, outside of our native market, and again, with the same returns. But the number that is not mentioned here, that for me it's even more striking, this is the fact that we have opened only 12 stores in São Paulo, in the city of São Paulo. Also, all these other 50-plus stores have been in the metropolitan region and in the countryside where we have more white space than we have in São Paulo.
In the city of São Paulo, however, we have 30% of market share, something like that. And we are not opening many stores because of cannibalization. Cannibalization doesn't exist only for those who don't know how to measure. So every player who measures cannibalization has the analytics, capacity to do it. Cannibalization in major areas is an issue that has to be tackled, and this is the reason why we have been so conservative in São Paulo. But at the same time, we are seeing competitors who have -- who are regional leaders in their markets with a much higher share than we have in a much smaller market than our native market and opening way more stores than we're opening in São Paulo. For me, this is a time bomb. This is a disaster waiting to happen.
The main reason why I think our expansion has been so assertive, I mean, obviously, managing cannibalization at home is a big concern, and we are doing just that, and not everybody is doing that. But the other aspect is that we are -- we are swimming in the blue ocean, while everybody else is trying to swim on the red ocean. And the reason is we are, today, present in 24 states within Brazil. We have 2 states that are very recent, Rondônia, where we just entered and opened 2 stores. And Amazonas, where we entered also last year -- sorry, the previous year. We have only 7 stores up to now. So these stores are new, but we're doing really well there. But all of the other stores, I mean, they are core already. These are markets in which our brand is very established. In all these markets, including the new markets, we have operations with mature stores that are very high, in line or better. And even the markets where we don't have mature stores yet, the stores that we just opened, they're trending exactly towards the same direction. So we have to look for stores where we have the brand already established than everybody else. And this is why we are swimming on the blue ocean while everybody else
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And right now, every market is crowded, and the barriers are huge and hence the red ocean I mentioned.
Here, we reached 61 stores in the North region, our most recent region. We have nearly [indiscernible] region. And we have -- we are becoming very quickly the reference player in almost all of these markets.
And it's important to highlight that if you look in Bahia, for example, we are already market leader despite in Bahia I don't 6, 7 years, we are already the leaders in Bahia and the leader in Salvador, the capital.
When you look at Pernambuco, which is the largest state in the Northeast, we are leaders in state capital, and we are close to be the leader in the
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It shows that despite our presence here being relatively new, how important these markets already are for us and how relevant we are already there.
Finally, [indiscernible]., we have 243 stores in the southern region, 59 in the state, and this will allow us to accelerate the expansion into
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a bigger market than Paraná, but we have less than 60 [ years ] versus 1 to 7 in Paraná. So it shows the opportunity that we have. And this DC is instrumental in allowing us to go after it.
Finally, in terms of market share, we gained 100 bps
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in every market. Highlights being in São Paulo, where we reached 27.1, 80 bps of gain; Midwest, we gained 170 bps; South, 130; Northeast, 110; and North [ 3.6%], all the way to 6%.
P.J., talking about top line growth. We had a top line growth for the year of [indiscernible] with 16.7% for the fourth quarter. So retail grew in the fourth quarter 19.5% 4Bio.
The highlights of the mix [indiscernible] which seems very heavily influenced by the dynamic, all the categories that are
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tests, masks, vitamins, et cetera, et cetera, et cetera. But we would like to highlight also the amazing performance in Generics, which grew 18% in the year, in the quarter driven by the price adjustments we made 3 years ago, which continued to sustain tremendous growth momentum for us.
Taking a look at our comps. So I will say to the mature stores, which are the most important number, for the whole year grew 3% to 1.5% below inflation. But for the quarter, it was 6%, 150 bps and show -- and result in tremendous operating leverage, which really explain our margin expansion in the quarter.
On Page 10, it's important to see how
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became doing the pandemic. This has to do with the demand but also the fact that we were ready, to some extent, and we also accelerated a lot of our efforts. In the peak of the pandemic, we got to 7.6%. Now we are at 6.3%. This number is kind of stable, and we believe it starts growing again this year. So we're talking basically BRL 1.2 billion in digital revenues last year versus BRL 0.3 billion in the previous year. So we multiply it by 4x, driven, obviously, by the demand in the pandemic, but also the fact that we already -- and we adjusted very quickly our operation to serve our customers and take advantage of that.
In addition of having Click & Collect enable delivers 100% of our stores, we have 241 stores as hubs for motorized deliveries in 1 to 4 hours. We reached nearly 8 million cumulative app downloads by the end of the year, and our digital channels have a monthly traffic of 24 million [ visits ].
Next page, talking here about gross margin. We experienced gross margin pressure, both in the year, 40 bps; and in the quarter, 70 bps. 20 bps of this is due to the net present value adjustment. These interest rates are lower than the previous year, but this is a noncash effect. It's [indiscernible] bill an accounting factor, and then there is a slight impact also of margin investments from digitalization of operations. So things like smart coupons that we are providing tremendous focus to drive digital onboarding of our clients that, obviously, they have a cost, and the cost shows up in the gross margin. But we are not measuring our efforts here. We will do and invest whatever it takes to digitalize our customers because not only the customers who become omnichannel increase their spend in 20% to 25% by doing that, so there's tremendous value creation, they are in the New Pharmacy, but these customers are the customers who fill the new businesses. Both the marketplace and the platform are purely digital businesses. Without New Pharma digitalizing the customer, they are worth nothing. So the New Pharmacy is the main priority, and customer digitalization is absolutely critical for our strategy.
And finally, on the right, cash cycle reduced by nearly 5 days versus last year and by 30 days from the peak of the pandemic in the second quarter. Let's remember that, in the second quarter, we increased inventories to have a safety buffer in case any supply chain disruptions happen. And also, we had the delay of the price increase from March to May, so we supported high event for much longer. But this reduction, which happened in 2 quarters, show how much control we have of our working capital today. So this gives us tremendous stress to be able to increase in venture opportunistically whenever needed. But we know that in the end of the day, we have full control of it, and it gets back to normal whenever we so desire, like it has happened now.
Page 12, talking about selling expenses and store contribution margin. Despite the fact that mature store sales for the year were below inflation, we were able to maintain flattish sales expenses, actually 10 bps of dilution. But in the quarter, when we got this huge operating leverage that I mentioned before, then our sales expenses dropped from 18.3% last year to 17.5% right now. And this has driven a store contribution margin expansion of 50 bps in the quarter. While in the year, it went down by 30 bps because of the pandemic.
This metric, as I mentioned in the beginning, it's very important to capture the efficiency of the core business because we are at an inflection point in terms of our strategy. We're investing a lot in people, analytics, agile teams, cloud, et cetera, et cetera, et cetera, on our G&A. So it's important not to miss the picture of how healthy the core business is.
When you look at the G&A, as I mentioned in the beginning, our G&A reached 3% in the fourth quarter. This is a 20 bps increase versus 4Q '19, but the 4Q '19 had a peak. So in the end, the increase is higher than this. 30 bps of this expansion -- sorry, of these expenses and 20 bps of the expansion is directly related to agile teams, cloud analytics, Microsoft, et cetera. But there are way more indirect expansions like people, structure, new positions related that are not captured here. So in the end, the deal we have to pay for this transformation is higher than this 20 bps [indiscernible] here. This has driven an EBITDA margin loss of 60 bps in the year, but with positive -- with absolute increase. But in the quarter, both happened, not only the number increased a lot in absolute terms to BRL 430 million, but the margin increased also by 30 bps despite the G&A investments we have made.
If you look only at our retail business, our margin for the year 7 -- for the quarter is 7.6%, while for 4Bio, which is 1.3% in the year. And we saw a recovery through the year and reached 1.9% in the fourth quarter.
We had BRL 33 million of nonrecurring/nonoperating expenses. Main ones have been donations, so BRL 25 million for the hospitals and other incidental donation, BRL 29 million in total, donated support our communities, BRL 16 million in consultant expenses. Consultants are very happy about our transformation because we have so many new business and charter territory that we need more support than before. But in this case, it was related to the initial establishment of the platform. So it's adjusted BRL 60 million. Other provisions, BRL 11 million. And finally, tax recoveries from previous years, which have increased our results by BRL 36 million.
Page 15, net income reached BRL 600 million in the year, 2.8% of margin, an increase of 2.4%, with a 27% increase in the fourth quarter.
Cash flow, as I mentioned, the main financial highlights here
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billion of free cash flow, absorbing nearly BRL 700 million in CapEx. And when we deduct interest on equity, financial interest, et cetera, et cetera, et cetera, our total cash generation was BRL 104 million. So this was
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net debt reduction from BRL 920 million to BRL 820 million from 1 year to the other, so our leverage ratio also went down by 10 bps from 0.7 to 0.6.
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highlights both the resilience of our business as well as the strength of our capital structure.
Page 17. We created BRL 6 billion for stakeholders. Homing partner here as it is for all Brazilian companies is the government. 45% of this value
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in the form of taxes. 33% was to our employees and to support their families.
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like landlord service providers, et cetera. And 0.5% to shareholders, 8% of the total pie.
We had a share appreciation in the year of
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IBOVESPA, very high average trading volume of nearly BRL 180 million.
And here on the bottom right, I think some of the highlights of the split, 1:5, in September, exactly to be more friendly to individuals since interest raised 2 things have happened. A lot of money has gone first to local institutional investors that are becoming more relevant. And 2, we're almost absent from our cap table. So right now, with the split and by communicating better to individuals, not very meaningful in terms of the cap table, but they are already -- they start making a difference in terms of trading. And this is very important for everybody
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the efforts.
Finally, we have joined the ICO2 index of B3, which is related
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and our next goal here is to join the Bovespa Sustainability Index, which we haven't done already.
Well, summing up here on Page 20. The first thing is, as the pandemic truck, we became a safe harbor for health and well-being for our communities, for our employees, for our customers. Very rigorous safety protocols. We're the first to implement these protocols in store to separate employees from customers, providing safe distance for everybody. We keep it at the store to give hand sanitizer, control people inside the store at any given time. Another important, we did a lot of things to support our own people. So for every people who had hospitalization, we covered 100% of what was related to COVID who opted out of health insurance, and we also provided for free telemedicine service with Albert Einstein Hospital
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last year, 24,000 telemedicine consultations with the Albert Einstein Hospital
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Brazil's and South America's premier health institution. You could compare it to Mayo Clinic that Israel is really reference centers around care that we look for, for our employees. We preserved every single job post. We actually increased the total number of people in the company. And we also
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remuneration of every employee on temporary leave.
And in our journey to become
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We have performed so far 1.5 million COVID tests. If you look only last year, it was 0.9 million. And up to today, it's 1.5 million COVID tests. This is a huge number. We have put together numbers from the association that represents the labs, like [indiscernible], et cetera. We have today 7% of national share in COVID testing. This is a big number. This makes us certainly one of the leading testers all over Brazil and throughout several different health variables.
We also achieved record NPS
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recognize all adaptations to the pandemic, how our people -- how the store was physically adapted, the service of people
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This was an amazing recognition for Raia. And as I mentioned before, to support the communities, we donated BRL 25 million to 51 hospitals, which equipped
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but also leaves the permanent legacy for those communities.
And financially, I mean, all these efforts translated in mitigated sales
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and actually absolute growth, both for every financial metric with a highlight in the fourth quarter in which both margin and
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went up in a significant way. So I'm repeating myself here, but 17% yearly growth in the fourth quarter, BRL 1.2 billion in digital revenues, which comprised nearly 6% of total sales, [ BRL 0.3 billion ] in the previous year. We fully delivered 240 store openings we promised. We opened a new DC in Rio Grande do Sul and closed our old DC in São Paulo, transferring capacities in the state; and this amazing cash generation, BRL 104 million total cash generation, leverage reduction.
It's very important here. We set this year a very important aspiration, which is becoming the company that most promotes the access to a healthy life in Brazil. So this is
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and this is something we are starting to work towards.
So how we got to this? I mean the first thing is that we are looking to an expanded service to our customers. It's not only about being a drug store but looking integral health as a whole. Our world has been widened. Our market has been expanded. This aspiration is for purpose, which is taking close care of people's health and well-being in all times of their lives. And for the first time, we have an aspiration that drives both our business strategy, which is more and more related to the health care and to promoting connection to a healthy life and to
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our focus is no longer on mitigation but in regeneration, either helping develop a healthy society. So all these connect and
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more aspiration that we are going after.
To deliver this common aspiration, we have the new strategy that we unveiled in our Investor Day, which has here -- it also stems from our 3 pillars: New Pharmacy, Marketplace and Health Platform. And it shifts our markets just from -- to integral health, as I mentioned before. So this is a journey that is very important for us and a digitalized customer spends 20% more when asset head up digital. And Marketplace and Health Platform are purely digital businesses. So they rely on the people we are able to digitalize with the New Pharmacy.
The pharmacy for us is a cornerstone of the model. It's both a customer acquisition machine and a digital onboarding machine. So if we are successful in the New Pharmacy, the number of digital customers will start increasing a lot, as it has happened last year, and this will feed this new business. So this is how we look at this. But we are starting to build this business also as we speak. Marketplace is already up and running for one of our banners. We already have a reasonable number of sellers, but it's very early days. And the Health Platform is still being just stated, but it will see the light of day still this year.
And we have several enablers here to do this, one of which is RD ventures. And on the next page, I highlight the recent investments we have made through RD ventures, which is our corporate bank [indiscernible] platform. We have recently invested in 3 start-ups, 3 health techs. It started in July with Manipulaê. Manipulaê is a marketplace of apothecary pharmacies. Apothecary pharmacy is a vertical very close to our core business. Several competitors, they have their own apothecary pharmacies. We don't. But now through Manipulaê, we can integrate into our marketplace, into our stores also, and we are already starting to offer new service for customers. So it's a very obvious synergy. They have a team of 35 people.
We announced very recently, if I'm not mistaken, last week, the acquisition of tech.fit. So it was actually February 18, so it's more than wasn't last year -- last week. So what is this? This is a startup that has been around for something like 10 years, and they are focused on developing digital solutions to promote healthy habits, behavior change. They have a 31 million customer base. They have several paying customers in this base, and they have a myriad of solutions for healthy eating, for exercising and an expertise to change the behavior of the customer that will fit perfectly into our platform. So basically, all these features, all these platforms will be incorporated into our apps to support our full customer base in taking better care of their health. So it accelerates a lot the development of our platform. We have a team of 41 people.
And yesterday night, we signed HealthBit. So this is a startup that has big data solutions focused at companies to reduce their health care costs. But it's not only a cost play, this has to do with health promotion and disease prevention to 1 million employees. I'll give you an example, like pregnant women. So a lot of companies that HealthBit works for, they have put in place programs for tracking pregnant women, making sure they do their prenatal exams, that they are fully tracked. And this, in the end, translates to better health for the mother, better health for the child and lower cost for the co-pay. So this is a B2B company. But in the end, it touches the lives of the employees. And they have a team of 57 people.
Finally, I would like to highlight how broad our mandates can be with RD Ventures. In the case of Manipulaê, we have a minority stake with best to control, and later on, full ownership. In the case of tech.fit, this is so basic to the product we're creating that we decided to buy 100%. It is almost like an acqui-hire. These people start becoming part of the health platform team. And with HealthBit, we already have control. And I have a path in 5 years to full ownership. But we could just as well have another -- have a startup with only minority stake, without any past control or to full ownership, if that makes sense. So we are very open here. And it has very flexible mandates. And we're tailoring the idea of mandate for each situation. They do structure, sorry, for each situation.
And finally, to conclude here, the challenge and opportunities for next year. As I mentioned, the #1, 2, 3, 4 and 5 priority is digitalizing the experience of our customers in the core business, becoming a true digital company. So the whole focus on the New Pharmacy. As I mentioned before, stores at the gateway, both our customer acquisition and digital onboarding, with very low fee. We don't have to pay Google. We don't have to pay Facebook. The CapEx, you already saw fully paid in our cash flow, is bringing these new customers, and the store is also converting them to digital. As I mentioned before, because the new business will be fully digital, we need the New Pharmacy to digitalize the customer to feed them. So this is absolutely important.
And another thing here that's paramount is the experience. The NPS we have in digital is too lower and significantly lower than in the stores. So our first milestone here will be having an experience and obvious the split is different. But it has to be just as good as experience in the store.
And the other thing is that the benchmark of our customers is not our competitors. The benchmark is happy. The benchmark is [Foreign Language]. The benchmark is [Foreign Language]. The benchmark is [Foreign Language]. So our people who are experienced towards state-of-the-art apps, when they get our app, they are not happy yet. And our app has improved significantly over the last year. This is -- it has to be mentioned, but it's not where it needs to be yet. So we have a tremendous focus in making sure the experience gets there, not only increasing the number of agile teams with customer focus, but also eliminating barriers that prevent them to be as productive as they can be. We want to unleash the full potential digital team. So there are things in infrastructure. There are things in culture that we still have to do, and this is our priority.
Also related to that is our team, developing the team to support the digital strategy and the agile execution. This is a paramount importance. So attract and retain and developing people with a digital mindset. And we have all the capabilities required, there are technical capabilities, there are customer-driven capabilities. There are health capabilities, so we have to attract, retain those people, and we are doing that well, but we want to intensify this. This means hiring outside specialists when we don't have the skill at home. This means leveraging the people from the acquired startups to provide some parts of the job, and finally, changing the culture internally, supporting our current employees for developing new competencies and adapting to our new culture.
And finally, we want to advance in sustainability. We are improving the reporting of sustainability, providing more transparency in the upcoming 2020 annual sustainability report. We will, this year, unveil our 2030 commitments and goals detailed once that we'll start tracking regularly. And we're already working on the strategies to drive both our aspiration and to drive those goals.
So those are my prepared remarks. Let's go to Q&A. Thank you.
[Operator Instructions] Mr. Joseph Giordano from JPMorgan would like to make a question.
I have a question here concerning the expansion plans for the company's concrete market leadership in new regions. So my question here is how do you see the potential saturation in terms of stores in the main markets you operate? We [indiscernible] in the Northeast region, but I'd like to hear from you how do you see that playing out regionally, particularly in light of expansion plans being announced by your main competitors?
And the second aspect is what do you think about digital and actually like the New Pharmacy model that you guys are developing? How do you think like the digital platform should help you to have more flexible store models and actually expand materially your addressable market on top of like the recent initiatives into more, let's say, popular shot?
Okay, Joe, thanks for the question. I mean the first thing is understanding our market shares. So if you look today, for example, in the state of São Paulo, we have a market, which is our native market, where we have to change both bond in São Paulo coming together. We have 27% of share.
In the city of São Paulo, it is already more challenging, so -- because we measure -- and let me be clear here. Open a store, selling 600,000, 700,000 is easy. Open a store, selling 600,000, 700,000 and making sure that they can -- they are marginal sales. They are not cannibalized sales, this is the challenge. Very often, you can open up 600,000 stores. And when you realize you were adding just 400,000. And then the 400,000, the returns are not what you think they are because the other 200,000 is cannibalized. It's just an example.
So we have tremendous control of cannibalization. We measure cannibalization. We project cannibalization for every new store. So we know in São Paulo, the neighborhood where we still can grow and the neighborhoods in which our presence is already very densified and which it's not safe for us to grow now.
Longer term, as the market keeps growing, even in neighborhoods like [indiscernible], we have more stores. But now it has to follow the expansion of demand, the age of the population. So we have to be more careful.
But we still have a lot of opportunities outside the city of São Paulo. Even in the -- if you look at [indiscernible] São Paulo, they are bigger than [indiscernible] region. In a region like [indiscernible] here, close to São Paulo, they are way bigger than us. In others, we are bigger, but we still have room to grow. In the countryside, there are a lot of places where we can still increase our share. There are new cities that are opening up for us every day as they keep growing and as our model gets more flexible.
Not to mention that with [ Parkinson Paulo, 27], outside of São Paulo, our highest share in the Midwest was 18%. When you look at markets like Southeast, Northeast, we have below 10%. Northeast, north, we have 6%. So there's a lot of opportunity for us to grow. The only thing is that they may not be as much in the capital as they were before. They will be more -- they'll be more in metropolitan region, countryside and in other states.
When I look at the expansion that other players are doing, I mean, I see an enormous anti barrier for them. As I mentioned before, we are swimming on the blue ocean because we have the brand seal over the country. And every market that we go today, the brand we roll on and we have experience going there. Compared to today, they have a red ocean when they go outside of their core market because every market today is crowded in Brazil. It's too late for organic growth, in my view, if you don't have the brand already there. And in their existing markets, I mean, they have a much high -- we're talking about much smaller markets than São Paulo in which they have much higher shares than we have in São Paulo, in which the ad is way more stores than we had in São Paulo.
So I mean, for me, history repeats itself. We saw everybody accelerated growth, destroying value, having to stop growing, having to close stores, trying to fix and trying to tell the market that now [indiscernible] less. We never had to do that because we measure every step we take here. We measure cannibalization. And we do things because we believe not because the market demands or because my merge will depend on that, so it's a completely different thing.
Having said that, obviously, I think with the recent [indiscernible], there will be an expansion. There will be an increased expansion by competitors. So this is very clear for me.
But I think, overall, it's still a balanced scenario. When we look -- obviously, today, we're almost growing alone. For several quarters, we have opened ourselves more than the sum of all the others in terms of new stores. So -- but now with the IPO, I think there will be more stores coming.
When I look nationalize, this is not a number that scares me. I think we are probably going back to what we had '14, '15, '16 in which there was a lot of activity in the market. Let's now remember, back then, DPSP was opening 100 stores. Brazil Pharma still exists, was opening a lot of stores and many other players opening stores. So I think it's a similar situation to that, very far from what we saw in '18 and '19 in which the numbers went overboard. [indiscernible], 180; São Paulo, 130. And many other players doing numbers that prove to be unsustainable. And then in the end, they had to stop growing, closing stores and trying to -- and just now trying to grow again.
So I'm not worried, overall, because I think the numbers are balanced out. I don't know if they will be successful or not. Time will tell. But if they overdo at home and if they have to fight into the outside, then I tell you, it doesn't work. But for us, I mean, that's not a concern.
Obviously, there could be regional issues. So you think about the south, for example. We are growing in the south. There is more players growing. There is 2 more players with both special plans in the south that are not the player trying to do an to grow in the south. So it's possible that something an unbalance like '18/'19 happens in the south. But the south is 10% of our
[Technical Difficulty]
Ladies and gentlemen, please stay connected. RD conference call will return in some minutes. Ladies and gentlemen, please stay connected.
I think we can continue. We can -- I can take over [indiscernible].
Our next question.
On this one question. I think Eugene is back, right?
I'm back. Sorry. I was dropped.
Next question from [indiscernible]. You may proceed.
Hello. Are you able to hear me?
Yes, yes, please.
Okay. We just have 2 questions. One about HealthBit. HealthBit, you already explained a little bit during the call. But if you could share more details with us and especially focusing about the synergies part that we might see between HealthBit and also RD core business, it would be great.
And the second question about the new store format, about the health hub. Also, if you could share more details about this new store and new format, it would be also great.
Okay. Well, thanks a lot for the question. I mean, HealthBit is a slightly different acquisition than the other 2. Because the other 2 are B2C models, that they are very clear where they are plugged. One is another vertical to the marketplace. The other is the journey to support the health platform.
In the case of HealthBit, HealthBit is a company that works with middle-sized, mostly large companies to help them manage their health costs and improve the health of their employees. So they are an advisory company. What they charge the company is services. So they look into the medical expenses. They see opportunity to save money. They develop programs to improve things like endurance of the treatment, things like tracking high-risk patients, programs for pregnant women and things like that. So they are an independent partner of the company to measure the health cost because, obviously, when you think about the health insurer, the health insurer is an interest party. The highest the billing, the best. So they help the company understand -- open all the bills presented by the health insurers, understand what they're spending money and how they can save money and how they can improve the care they provide to the employees. So this is what they do.
In our case, I mean, first, there is an obvious synergy with [indiscernible]. We already have relationship with something like 1,000 companies in Brazil. In it's a leading PBM in the corporate sector in Brazil, so we have a lot of companies to which we can introduce HealthBit for them to advise. And HealthBit, most importantly, can happen -- can help us develop new solutions to improve the health of the employees of these customers.
So by today, what we invest is just a discount problem. With the advisory of HealthBit, we can develop innovative health solutions. Maybe they can involve, for example, the health hub. They can even involve tech.fit and the journeys. So in a way, it can be a potential gateway for the platform to go to B2B and not only to be B2C.
Regarding the health hub, we are starting to pilot. We have 4 stores up and running. Obviously, this is like a soft opening. They are not fully operating. There are a lot of adjustments to be made. The apps are not still fully integrated, but we already -- we already have 4 units from which we are learning. Our idea is to consolidate the model this year and to be able to expand through the year and start offering more and more services.
So health hubs have -- they do services like vaccine shots, like flu vaccines. They -- COVID testing has been the main one. We have done, up to now, as I mentioned, 1.5 million COVID testing. There are other sorts of tests we can measure. Blood pressure, we can measure; glycemia. And a lot of services to support. And certainly, at some point, we have telemedicine in the health hubs. So the health hub will be very important going forward.
Next question comes from Mr. Guilherme Assis.
I have a follow-up question, I think, regarding the health hub but more specifically about the vaccine part, right? So we're in the middle of the pandemic, and the vaccination schedule has been like an ongoing concern in Brazil. Is there anything or any part of RD operations that could benefit and help in Brazil to go forward with the vaccination schedule for COVID? Or do you think it's too late for that? I know there were some talks at Abrafarma to use like the whole Abrafarma store network to do that. How has that evolved, Eugênio? Is there anything that has been done or that should -- that will be done in regards to helping the COVID-19 vaccination schedule in Brazil?
Sure. Well, thanks for the question. And the honest answer is that it's too early to tell. Well, I mean, our aim here -- so we look at COVID vaccination not as something that we want to benefit from or make money from, rather it's the opposite. Abrafarma offered the government, federal state municipal to do vaccinations at our stores for free, 0 fees, 0 profit. Obviously, they have to supply the vaccine. They have to supply the syringe, the needles, everything that's required, but we will provide the service for free.
We have in Brazil, according to Abrafarma, something like 4,000 to 5,000 stores that we could use for public vaccination, and this could help accelerate the public schedule. So this is the aim. There's no individual action here. It's all through Abrafarma with the spirit of helping the country accelerate the process.
Today, what's happening is that the first -- just a step back. The first thing is that Brazil already has a pretty good vaccination infrastructure. Brazil has always had a very strong public vaccination program, so Brazil is probably more equipped than other countries to start with the vaccination.
The problem that we have is the delay in securing the vaccines for various reasons that you know. So the number of vaccines available today is still very limited. And because the number is limited, right now, I don't think the government needs us to be able to apply those in -- the immunization with the vaccines available. I think we'll go to just to reach a point in which there will be more and more vaccines coming as the global shortage problems get solved. So every schedule for every country, it starts very soft in the year, and then it accelerates about March, April, May. And in Brazil, it looks like it will be like that. So right now, it doesn't make -- we have offer, but it doesn't make sense because it's so many. So the amount of vaccines available is still so limited that the government can tackle on its own, but we could get to a point in which there is more vaccines than pace of vaccination, and this is where we believe we can create value. So we maintain our conversations with the several instances of government, but nothing is defined as of yet.
Our next question comes from Mr. [indiscernible].
So if you could give us an update regarding top line growth perspectives for 2021, especially in the short term, with the increase in restrictions due to COVID-19 and also what to expect for the year with the possible economy reopening.
Marcus, thanks for the question. I mean, what I can tell you is what I see until now. We had a very good fourth quarter, and we started the first quarter in the same pace. So if you look today, if I had to publish my first quarter today and maintain the same momentum, I think it's a good quarter as well. No doubt about it. But the thing is the restrictions are exactly kicking in, as we speak. São Paulo is likely to put more restrictions, I think. So we don't -- it's very difficult to imagine how this will pan out.
I tend to think that we have enough cushion. And given we are in mid-March kind of that -- I mean, I think it still should be a normal quarter, even for some reason we see a softening by the end of March. But then for the second quarter, I don't have a clue. I don't think we'll ever go back to the second quarter last year because people learned to live with the pandemic. So this problem we have today, the second wave, it's not happening because people are going to the pharmacy or to the supermarket. It's happening because people are partying, people agglomerating and things like that. People think they have learned that if they use a mask, they can go. And they use hand sanitizers and maintain distance, et cetera, they can go to the pharmacy, supermarket. They can even go to work on a relatively safe basis. Obviously, there's no 0 risk. But -- so even if we see a very strike social isolation, I tend to think it to be better than the second quarter. But I don't know if it would be something like the third quarter, in between the second and the third, slight above the fourth, then at this point, it's a guessing game.
But whatever happens, it will be temporary and less reason. So we are not worried because the most important thing now is fighting the pandemic. It's doing whatever it takes for -- to prevent that, to maintain people healthy. If you need closing stores, if you need less people in the store, so be it. We have a very robust capital structure to navigate whatever we have to navigate. So we're not concerned in the short term, and nothing changes in the long term.
[Operator Instructions] There appears to be no further questions. Now I'll turn the conference over back to the company for their final remarks.
Okay. So first, thank you all for attending this conference call. Thank you all for your support as long-term shareholders for the company. I will try to summarize some of the points we discussed during the conference.
The first is the point that 2020 is a landmark year for the company. On the positive side, I mean, I think we unveiled a new and very bold aspiration of being the company that most promotes access to healthy life in Brazil. We unveiled to the market the strategy to accomplish that, which is based on 3 elements: New Pharmacy, Marketplace and Health Platform, and we have been working on this strategy for at least 1 year.
So when the -- I think the other aspect to the year, and that's also the negative aspect, is the pandemic. That has been a huge health challenge for everybody around the world. And for us, it was different, and it has economic repercussion. But the fact that we were already working on this new pharmacy strategy allowed us to adapt in a much better way than if the pandemic have happened 1, 2 or 3 years before. So a lot of things were already in place.
In terms of infrastructure, we were able to move fast in terms of adding new services, like neighborhood delivery and in terms of doing everything we did to support the customers, to support our own people, et cetera, et cetera, et cetera.
So our focus right now is on the New Pharmacy. As I mentioned, Marketplace and Platform are almost fully digital businesses. We're not acquiring customers through Google, Facebook, any of that. Our people are coming from the New Pharmacies, the stores who acquire the customers, who does the digital onboarding of the customer, hosting these new businesses. So this is absolutely the priority we have. And again, we were already working on them, and the pandemic accelerated tremendously this process.
We did in the year BRL 1.2 billion in revenues from digital channels. This is 4x more than in the previous year, and this helped us a lot mitigate the financial effects in the business.
So in the end, when you look metrics like profit, like EBITDA, contribution margin, they all grew. Obviously, there was some margin contraction, but I think it was a modest one, considering the proportion of the challenges we face. And in the fourth quarter, as normalization happened, so we thought, we'll see if it happened or not, we were able to have a very strong fourth quarter, firing on all cylinders in terms of EBITDA margins, revenue growth, contribution margin, et cetera, et cetera, et cetera. And we will keep driving this strategy, accelerating the New Pharmacy.
Experience is a very important concern for us. I think we provide a reasonable experience, but it's not on par with the stores. It's not on par with benchmarks like [ Magalu ], [ Meli ], [ Chispa ] and others. They are customers are used to. So the whole journey of the company is getting there. This means more agile teams. This means removing bottlenecks, structural infrastructure for the teams to do that. This means changing the culture of the company, having people have more digital mindset, bringing the talents who had new confidence from outside, helping our people adapt to the new culture, leveraging startups, RD Ventures for us to be able to instill this new culture.
And -- but again, this is a transformational journey for the company. This expands our sales market from pharma retailing to health care at large. And this allows us to provide a much better experience for our customer overall and service our way broader array of needs.
Just like digital, digiital is just a means to an end. We don't have digital because of the digital channel. We have digital as a means to increase loyalty engagement, et cetera. That shows up across every channel. So we are gaining 20% more spending from the customer by having digital. But part of this marginal spend happens in the store as well. The same will happen with the other businesses. It's wrong to think that marketplace is only a business on its own, that the platform is only a business. They are very highly synergistic. Not only the customer comes from the new pharmacy to the other businesses. But when the customer starts buying things from the marketplace and enjoying services from the platform, the overall frequency will grow even more. The overall spending will grow even more. The value creation will grow even more. So this is a transformational journey for us, a transformational journey for the health of Brazilians, who, today, suffer from a system that is focused on treating the disease and treating the disease in the lowest cost possible and sometimes low quality as opposed to preventing disease and promoting health. So this is our mission. This is what we will accomplish.
Thank you all, and we are available directly for any conversations. Thanks.
We'll be disconnecting.