Good morning, ladies and gentlemen. At this time, we'd like to welcome everyone to RD People, Health and Wellbeing Conference Call to discuss its 3Q 2023 results. The presentation can be found on RD's Investor Relations website, ir.rd.com.br, where the audio for this conference will later be made available. We inform that all participants will only be able to listen to the conference during the company's presentation. After the company's remarks are over, there will be a Q&A period. At that time, further instructions will be given. 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 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, VP of IR and Business Development, and Flávio Correia, Director of IR and Corporate Affairs. Now I'll turn the conference over to Mr. Eugênio de Zagottis. Sir, you may begin your presentation.
Hello, everybody. Welcome to the Raia Drogasil third quarter conference call. I'd like to start by saying that this was another very strong quarter in what we believe is a very strong year. I think not only our results show tremendous consistency with meaningful margin gains, both on a quarterly basis and on a year-to-date basis, but also strategically as we keep advancing a lot in digital and advancing a lot in healthcare as well. We'll talk more about this as we go through the presentation. I'll start here with the highlights. Let's go to the highlights. We ended the quarter with 2,868 pharmacies in operation. We have opened 64 stores and closed three stores so far.
BRL 9.3 billion in gross revenues, a meaningful 16.3%, and most importantly, 6.8% of mature store growth. So real growth ahead of inflation and ahead of the last CMED authorized price increase. Big gains also in market share, 70 basis points increase on a national basis to 15.6%, with strong gains in every single region where we operate. Digital reached BRL 1.3 billion, so this is a major milestone for us. 51% of growth over a strong basis that we had last year in this quarter, and we reached retail penetration of 15.7% of digital channels. Our contribution margin also increased to 10.7%, 30 basis points expansion, and 19.4% growth in absolute terms.
Adjusted EBITDA of BRL 658 million, 7.1% EBITDA margin, 30 basis points margin expansion, 20% EBITDA growth, very meaningful as well. Same with net income, BRL 268 million, 2.9% on net margin, 40 basis points increase, and 33% in absolute terms. And finally, we show a strong, free cash flow and total cash generation in the quarter, and this comes after a second quarter in which, due to cyclical pressures, we had had a cash flow pressure, we had had a cash cycle pressure. So now, as we said it would happen, we are reverting this with a strong cash generation here.
Talking here about the expansion, as I said in the opening, we reached 2,868 stores in operation. We have opened, so far over the last 12 months, 269 stores. This is even more than the guidance of 260 stores we have provided for the year. And we have closed only 21 stores. Of these 21, only one store is still in maturation process. Why this matters? Because when we close a store in the initial years, this is because we made an expansion mistake. Expansion mistakes happen and will keep happening, but they represent only 0.4% of the last 12 months opening. So it shows how strong the assertiveness of the expansion is. These mature store closures, I mean, these are relocation of stores.
These are portfolio optimizations. So generally, we are closing stores we have which have a positive EBITDA, but we're transferring sales, we are shutting down a full cost base, we are redeploying assets. So the overall EBITDA for the company and the overall return on invested capital, it's bigger because of this closure. So for us, this is an opportunity. We look for as many as we can find. But here we're talking of mistakes, and we're happy to see that we have 99.6% of assertiveness in our program. We maintain the guidance of 260 stores years from 2023 to 2025. Total of 780 new openings in this process, with huge demographic and geographic diversification. Moving forward, I mean, as you know, you have a national presence.
We not only operate in every state of Brazil, but we operate with very similar performance, both in terms of return on invested capital, internal rate of returns. Mature store performance, doesn't matter if you're opening a store in the Amazon or in São Paulo, we are looking for the same internal rate of return, and generally, we are delivering those with our expansion. So this is, i t's a very different expansion from everybody else. I'd like to highlight that we reached the mark of 200 stores in the state of Rio de Janeiro, more than 360 stores in the south, more than 400 stores in the northeast. Even the north, our recent frontier, 118 stores in the region as well, and we are gaining share in every single market.
The national share increased from 14.9% to 15.6%. Strong gains everywhere, and most importantly, we have reached double-digit market shares in every market in Brazil, with the exception of the north, and this is so far an exception. Because the north, the share in the north is growing very fast, from 7.1% to 8.9%. If you consider the number of stores we have in maturation, maturation alone will allow this market to reach double-digit share maybe next year. Not to mention that we still have more stores to come here in the market. We have 12 distribution centers all over the country to serve our stores. 90% of stores receive merchandise six days a week, so very fast replenishment cycles.
We are now opening two DCs in the north, which is the most recent frontier of our expansion. A traditional DC in Pará, and a small DC in Manaus, which is a new model for the company. This DC is not a standalone DC. This DC will be supplied by another DC, probably here in the Midwest. This will be an inventory buffer that will allow us to cease shipping merchandise by air, because we're talking here in the middle of the forest, and we'll be able to deliver it by land, which takes very long to do. So the way for us not to penalize the inventories, the replenishment of the stores, is to have this local inventory buffer. So, this is a new model.
It will be very good to test, and if this works, we have opportunity for more DCs like this. In this case, this is only about logistic efficiency, but there are some markets in which, because we don't have a local DC, we have tax disadvantages. And if we're able to have a small DC like that, we may be able to even improve our gross margin in those markets. So we'll start here, and then we see where this takes us, but we're looking forward to this experiment. Moving gears here. We have 562 cities in which we operate in Brazil. So we are increasing our store count very, n ot our store count, sorry, our, the number of new cities at a very fast pace.
In terms of diversification, this is a very well-diversified program. I think it's interesting to highlight that we have been able to somewhat accelerate our expansion in the state of São Paulo. We had reduced a lot the expansion in São Paulo. The return on invested capital of the new stores is just amazing, so internal rate of returns are very high, and we are seeing the opportunity to do more in São Paulo. We're not talking as much about A-class areas in the city, but more like areas in the metropolitan region, countryside, even lower income areas in the city of São Paulo, and here and there, maybe a store in an A area, but mostly B and C areas in the city.
So we are somehow accelerating the pace in São Paulo, and this is a good thing for us. In terms of format, we see that the recent expansion is very focused on hybrid stores. We have as many popular stores being opened as we have premium stores, so a much more B and C class focus here. But obviously, when you look at the full portfolio, then there is a big participation of premium stores, which is slightly lower than the participation of hybrid, and then popular is a smaller part. But more and more, the mix is trending towards hybrid stores. And finally, of the 319 Brazilian cities with more than 100,000 inhabitants, we already have a presence established or in the process of opening a store in 305 of them.
So 95% of the larger cities in Brazil, we are present there already or we are getting to be present in the coming quarters. So this is a very unique, very unique footprint that we have established in the, all over the country. In terms of gross revenue growth, our revenues grew 16.3%. It's important to mention that 4Bio, which is growing north of 50% in this quarter, accounts for 2.1% of this growth, while retail accounts to 14.2% of the growth. When you look at the category breakdown, the main highlight is hygiene personal care. We're doing really well in hygiene personal care. We're gaining share over platforms, over marketplaces.
Today, we see much more rationality in the market, not as much free shipping as before, not the crazy prices we saw before, not the crazy payment terms we saw before. So there's a rationalization, and we are gaining share very fast from marketplaces in skincare. That's the only meaningful category for them. But overall, our front store is flying. On the other hand, we see pressure in OTC, mostly because of the strong comp base of last year, when we had a COVID peak. To some extent, this was a milder winter also. And we see a good performance also in generics, and an okay performance in brand. Branded is also affected by the COVID, so there's nothing strange here.
By the time COVID moves out of our comp base, we see a more balanced growth, growth scenario than what we're seeing here. So, it's very good to see the 21% in hygiene personal care, but there is nothing structured, no structural problems in any category, so this is great. In terms of the comps, I'll focus here on mature stores. 6.8% mature store growth, 1.2 percentage point ahead of inflation or ahead of the CMED price increase. But we have to highlight, there is a 70 basis points pressure in terms of COVID tests versus last year, and a 10 basis points calendar effect. So this number would be probably close to 2% real growth, if not for this comp base effect here. So we are happy with the pace that we are here.
I think we are probably maybe the only chain among the listed players in Brazil to be displaying this kind of performance. And even here in the top line, despite the fact that we're expanding the store base these days around 10%, and obviously smaller competitors, percentage-wise, they can do more than that, our top line is still outgrowing everybody. So here we still outgrow everybody, and here we will keep outgrowing everybody because of the strength of the digital execution, and the digital is what moves this figure to this kind of pace. Talking about the digital here, 15.7% penetration. This is an absolute record penetration. Steep increase over the previous quarter, and this number keeps moving up. We started already the fourth quarter with a higher figure than this.
51% digital growth over the strong comp base of last year. In terms of annualized revenues, we are talking here a very, very, very strong pace, BRL 5.4 billion in annual revenues. RD Digital, if it were a standalone entity, we would be fighting to be the fourth chain in Brazil, below São João. Right now, right now we are the fifth. We are ahead of Panvel, we are below São João. I'm comparing our digital with their full, full business, to be clear here. I think in the short term, we will, RD Digital on its own, will have the size of the fourth or be bigger than the fourth largest player in Brazil.
I think what's very unique about our digital is our execution, and we can see here in the channel mix, 65% of digital sales are done in the app. This is an amazing number. Our app has huge engagement, huge conversion. None of our competitors even report the app share in the channel mix because it's much lower than this. As we have solved the IT bottlenecks that we had in the past, our squads are producing more and more code. The frequency of new code releases is increasing very fast, and this is moving our app to a new experience. We are solving bugs, we're introducing new functionalities, we're improving NPS, and the app keeps growing a lot because of this.
Last year, I think it was already, it was around 55%, and now it's 65% and growing. This is the fastest growth channel in the company. The other fast growth channel. Sorry, when we look in terms of delivery mix, we see Click and Collect as the main channel with 61%, but this is the fastest growing channel. We have reduced the delivery lead time to one hour. 23% of total deliveries are done in one hour. The bulk of physical deliveries are done in one hour. If you compare to super apps, who compete, who collaborate, but also compete with our own channels, super apps are stagnant, while our fast deliveries are growing a lot.
It's also important to highlight here that desktop means only 10% of our of our digital sales. And why this matters? Because the customer who use the desktop, the website, the desktop website, is not the same customer who uses the app. This is a much more opportunistic and price-driven customers with much lower loyalty, engagement, and lifetime value. So when we grow in the app, we are retaining the best customers. We're dealing with a customer that looking not only for prices, but for the overall service, convenience, et cetera. So the lifetime value of this customer is way better than the lifetime value of the desktop customer. As I mentioned, super apps are stagnant, which is good. Means that we're capturing more and more of our of our sales in our proprietary channels.
Finally, the call center is now below 1% of the channel mix here. For most of our competitors, call center represents 25% of what they call digital. So 93% of digital sales are done through modern and proprietary channels, 83% mobile, 94% fulfilled by our pharmacies, 91% delivered in up to 60 minutes. It's either customer collecting here or us delivering or the super apps delivering. But this is a unique value proposition that we have to offer, and this explains the digital growth that we have. Okay? In terms of gross margin, we maintain the same gross margin of last year, 27.9%.
But it's important to mention that we have done this in spite of the fact that 4Bio, which has a structurally lower margin, is growing north of 60%. So, we have to deal with a very adverse mix effect. 4Bio growth is amazing when you look at total consolidated figures, EBITDA, ROIC, but in terms of gross margin, it's a source of pressure. In terms of EBITDA, it's a source of pressure, and we are dealing really well. And the same, the same relates to digital. Digital is great strategically because it increases customer lifetime value, it drives mature store growth and sales expense dilution, but we have lower gross margins with digital. So the fact that we are maintaining the same gross margin while absorbing huge digital and 4Bio growth, means that we're gaining a lot of efficiencies here.
We're talking about pricing, better buying terms, we're talking also about private label. So all these things happen, allow us to sustain the margin. And when we sustain the gross margin, we gain because the sales expenses are consistently being diluted through the operating leverage. Finally, cash cycle. 63 days of cash cycle, huge improvement over the last quarter. We mentioned last quarter that this was a cyclical peak, and this will be going down very fast, and we have delivered on our promise here. So very good numbers, and these have supported strong cash generation in the quarter. Selling expenses, always the highlight. Mature store growth allows us to gain operating leverage and dilute them. So 30 basis points dilution versus last year, 30 basis points contribution margin gain as a result.
G&A, we have been able to stabilize G&A over the recent quarters, but we still haven't been able to reduce G&A. We are reducing the G&A in terms of people, in terms of labor, but we still see pressures in terms of digital, in terms of cloud, in terms of software licenses and things like that. We're dealing with them. I believe we'll maintain a level like this in the coming quarter, but we still believe we'll be able, next year, to have some dilution here and to start improving here. But regardless of what happens on the G&A, the EBITDA keeps improving, 30 basis points gain.
If we look last nine months, we're talking 20 basis points improvement over last year, despite the fact that we had a much higher, inflationary gain on inventories last year, with 11% price increase versus this year. So and despite the fact that 4Bio is growing 60%, and despite the fact that digital is growing 50%. So this, this 20 basis points increase on the nine months, with higher digital, higher 4Bio growth, and less inflationary gain on inventories, I think it's a big feat from the company, and it shows the consistency of the execution driven by the digital transformation. Finally, net margin, 40 basis points increase. We're talking 30% increase in, 33% increase in absolute terms.
We're talking BRL 268 million in adjusted net income, but the accounting net income is higher than that, BRL 296 million. If you look, almost every quarter, we are posting non-recurring gains. So we are conservative from the tax viewpoint, but at the end of the day, we keep finding gains over previous periods that are not counted here. Nobody counts these things when they talk about our multiple, but they are here. And I think this is also very unique about our company. We see a lot of companies, they take non-recurring gains mixed with existing gains, and they adjust all non-recurring losses. We are not like that. We are very meticulous in the way we go about this.
Finally, very good free and total cash flow in the quarter, driven by the cash cycle improvement, and also reducing and normalizing of the leverage ratio from 1.2x to 1x net debt to EBITDA, which is our comfort zone here. And before I pass to Flávio, our stock has done really well this year. 16% appreciation, 10% alpha versus the Ibovespa, very good daily liquidity, and amazing compounded returns since the company started. I'll pass now to Flávio, who'll provide some more details on the strategy and execution, and wrap up some of these messages. Thank you.
Thank you, Eugênio. So just final remarks here on our, on our results for this quarter. So we really post good results on the quarter, and really decoupled from the retail industry in general, okay? So we had a very strong expansion, growing store count in 10% year-on-year, which is amazing for considering the size of the company already. So our gross revenues grew 16% year-on-year, with mature stores growing at 6.8% year-on-year. This is so we have been growing mature stores above inflation since 2021, just after COVID period. So it is a really quite long period of same-store sales growth above inflation.
On market share, we are now reaching 15.6%, and gaining market share in every region we are present, okay? Digital keeps growing very fast and really decoupled for from the rest of the e-commerce activity here in Brazil, with our digital activity already accounting for 15.7% of our total sales on the company, and growing at a rate of 51% year-on-year. So adjusted EBITDA reached this 7.1% index and growing faster than inflation. So we keep growing, and we keep growing even more our profitability. And financial leverage is totally under control with one-time EBITDA. So all these good results are based on our customer-centric strategy.
So our customer-centric strategy fosters the engagement and bonds with consumers, so to optimize the user experience, okay? All this strategy is based on consistently track the customer reviews and customer experience in the different channels we are in. We engage with the customer, so on pharmacies, but also on our digital activity, both on the e-commerce apps and websites, but also on the logistics and last mile we deliver. So understanding all the comments and all the reviews customers do while evaluating our operations, really helps us to understand customers' needs and improve those opportunities. So this creates a totally different lever for the company to grow. So considering our average, the average for our customers here in the company.
So frequency of purchases per year is eight times per year. But considering the different kind of customers we have here, frequent customers are purchasing with us, or are engaging with us 24 times a year, which is once every other week, of the year, which is highly frequent. But customers that are digitally engaged with us improve this already big frequency 24% in the year. So they reach this frequency level of 29 times a year. So this is quite relevant. Okay, moving on here. So we are also very proud this quarter to announce that we reached this A rating at MSCI ESG Index. Okay, so that together. So this index is very relevant in for mostly for international investors.
But this index, coupled or together with all the index, we are already part of, like, the ISE at B3, like the CDP, and also like IDIVERSA, which is a new index that was just launched here in Brazil. So that together shows that we are in the right track into addressing and improving our ESG activities. And finally, here, we will run our RD Day on November 9th, physically here in our new headquarters, which was just revamped after the COVID season. We know it's a long trip for international investors to be here with us, but if you come, it will be very nice. Thank you.
Thank you, Flávio. Thank you, Eugênio. Now we'll start the Q&A session. The first question is from Igor Spricigo, from UBS.
Hello, Eugênio. Hello, Flávio. Thanks for taking my questions. The first one is regarding the 25% IRR you have been seeing on your openings. Could you describe what are the main reasons why these new stores have higher returns? Is it lower CapEx or higher margins, for example? And also, given that returns are higher right now, do you consider as accelerating expansion, even if slightly? Like, is it a possibility, or are you comfortable with the current pace of 260 openings? Thanks.
Good. Thank you for the questions. I mean, you're correct in the sense that we are seeing this year a stronger internal rate of return than normal. If you look last 12 months openings, we are now at 25% internal rate of return. This is a real figure, net of cannibalization, meaning if a store sells BRL 1 million, but BRL 200,000 is cannibalization, we only count BRL 800,000 in sales towards the internal rate of return. I think this is a reflex of several combined factors. First, today, with less expansion and a more diversified expansion, cannibalization is lower than in the past. So if I have same sales per store, but lower cannibalization, this by itself means that the internal rate of return will be better.
Also, the fact that the comps are growing so much is a factor of the digital, but it's also a factor of less cannibalization than we had in the past. In terms of capital efficiency, I think we have also optimized the stores, the investment. We have been able to, to get efficiencies, cheaper materials, things like that, simplify some things. And finally, I think there's a performance factor. Our brand today is a national brand. I think the brand is more mature, is mature in almost every market. In the past, there were some markets that we had a catch-up to do. Today, wherever we open, we see very strong stores. So I think it's a combination of, of factors. I don't know if the 25% will persist or not. Previous years, we were already, ahead of 20%.
We're probably 22%, 23%, 24%. I think this 25% we're seeing right now is a record figure. Well, let's say, let's see where we go from here. In terms of new store openings, we have, I mean, right now, we commit to the guidance we have. B ut what, if you look this year, we have, in the initial nine months, have done more stores than we guided for. So we have to see what will happen in the fourth quarter. And obviously, if we think we can do more than guided, at some point, we update the guidance. Otherwise, we keep the guidance.
Just to add on your answer here, Eugênio, it's important really to consider that, considering the different clusters of stores we have here, so the popular stores, the premium stores, and the hybrid, there is no cluster with IRR below 20%. So all clusters are super profitable. And, more important than this, we count now a little bit more than 2,800 stores on the company, and none of these stores are not profitable. So this is an amazing, an amazing track record.
Our next question is from.
Perfect. Thank you.
Our next question is from Bob Ford, from Bank of America.
Hey, good afternoon, Eugênio, Flávio, and congratulations on the results. Could you do me a favor and address any misinformation in the press when it comes to your use of consumer data, particularly the characterization of the incentives to opt in and the ease at which consumers can also opt out? Could you also give an update on where you are in terms of in-store and other forms of digital advertising, please? Then when it comes to, you know, the addressable market for BO, how should we think about that, and how should we think about the longer-term trajectory of the growth in that business? And then lastly, could you comment on the lift that you're getting from Ozempic?
Not only that, but the pipeline of coming approvals for other blockbusters in the weight loss category, the Alzheimer's category, and other very highly relevant drug therapies. Thank you.
Bob, thanks for the questions. I mean, in terms of data usage, I'd like to start by saying that we're very compliant. I think Brazil has a data security law that is very similar to the European law. I think we were very diligent in terms of how we prepared ourselves for the entry of the law. We give the customers the right to opt in, to opt out. We don't sell or share data outside of the company. So, I mean, obviously, data, health data is always a sensitive subject. But we are very, very confident with what we're doing, and any questionings that may arise, we will deal with them. But there's nothing here, there's no, w e're doing nothing wrong, and we are very, very straightforward about that.
I think we are evolving well with the advertising business. We have several contracts. We're doing a good billing this year. We still don't disclose those figures, but we're happy with how we are evolving. RD Ads is a separate company. We have several very interesting use cases, and I can tell about, for example, private label. Private label is something that I run, so I am an internal client of RD Ads. We have done a lot of amazing work in terms of conversion in categories like diapers, for example, with tremendous results. So, I think we have a very powerful platform. There's we have still to have more people. We have still to improving the measurement of the initiatives, how fast we report them to the brands who invest in us.
There are new tools that we are starting to adopt. So there's an evolution curve. In terms of total addressable market, the last time I saw a number, if you look within the categories where we compete, health, beauty, personal care, et cetera, I think the total digital budget of our suppliers is something north of BRL 2 billion per year. Obviously, this is a number that will keep moving up, and we want to grab at least our fair share of this over a certain time. So we'll see where it takes us. But obviously, it's a big pie. It's a very, it's a growing pie, and I think we have solutions to offer to our, to the brands, to our suppliers, that are much more assertive than fishing on the ocean.
We have an aquarium. We know where the fish are, who the fish are, and we go for the right fish. It's not an open ocean fishing, that you don't know. You throw the stuff in the water, but you don't know what you get and if you get. So, the data, we have data not on behavioral things, on what you like on Facebook, Instagram, et cetera. We have data on what we are actually buying. An amazing example is, I think it's a Flávio's example actually, is Ferrari. You may love Ferrari as a brand. You may look for every post on Instagram or go to the website. I mean, it doesn't mean that you are a customer for Ferrari.
But if you look at the traditional customer segmentation from the social networks, they would flag us as interested in Ferrari, and maybe Ferrari would spend money on us, and we're not buyers of Ferrari. We're just admirers of the brand. Here, we know what people are buying, not what they are liking, so the assertiveness is very high. And finally, obviously, Ozempic is a huge success in Brazil. It accounts for a meaningful part of our sales. Ozempic growth over the years has helped our mature store sales growth, and we're very encouraged by the fact that we have new products coming, like Wegovy, like Mounjaro, that may be launched next year and may sustain this wave of innovation.
Maybe to add here, Bob, on your question about Ozempic. So new launches are important for us, of course, and this is part of the macro leverage that this company has. But there are also other important levers, like, non-branded items, like, the generics we have. So every time a patent is going down, we have the opportunity to fulfill customers that are not attended at the price point of a branded item, and now that can be attended by price point of generic items.
So t he more new branded item launchings we have, the better for the company, but the more generics or patents going down, this is also very good for us. Another important macro indicator for us is drug consumption here in Brazil, which is low compared to other markets globally. So we have an opportunity here to grow this participation on drug consumption here in Brazil. And finally, purchase power in Brazil is expected to improve a little during long-term, medium-term, long-term. So all these four levers here, so new launchings, patents and generics, drug consumption, and purchase power, can improve our macro opportunities.
No, this is super helpful, Flávio. And I did ask one question about the addressable market for 4Bio, and how you're thinking about the growth trajectory. But as you talk about low per capita drug consumption, it reminds me of a point you made on the earlier call, and that is your private label efforts with vitamins. So I apologize, but I'd like to ask both questions. Can you talk, you know, the per capita consumption rates of vitamins in Brazil, relative to some of the international benchmarks, very low.
Can you expand a little bit on what you're doing with private label in the vitamin category and in the TAM and the growth there, as well as maybe talk a little bit about the addressable market and how we should think about the trajectory in 4Bio as well, please?
Thank you. Thank you. So I'll start with 4Bio, then talk about private label. I mean, we are really, really encouraged by the growth of 4Bio. Sometimes when you talk, it's funny that the market is obsessed about margins, 0.1 plus, 0.1 less, and nobody really asks me if the top line grows 16%, 17%, 14% or 15%. In the end of the day, we spend a lot of time talking about 4Bio in terms of the margin effect, which is obviously a negative margin effect, because 4Bio structurally has lower margin than the pharmacies. 4Bio is a managed care business, very expensive product, and specialty in the U.S. has lower margin than primary care, and the same is true here in Brazil. But in the end of the day, 4Bio is very important for us.
4Bio is accelerating a lot our top line growth, and 4Bio is a great business. It's a great, i t's a business that has 3%, slightly more than that, of EBITDA right now, but it's much more capital efficient than Raia Drogasil, because we don't need to open stores for 4Bio. We don't need to deploy working capital across 3,000 different locations for 4Bio. So at the end of the day, 4Bio has high teens return on invested capital, not that far from our own consolidated return on invested capital. But 4Bio is allowing us to tackle a market that is growing a lot, that will keep growing a lot, because the aging effect is more intense in oncology, for example, than it is for general primary care drugs.
4Bio helps us extend our service to the customer across all their needs. So if a customer needs a normal medication, they can count on Raia Drogasil. If the customer needs a specialty medication, they can count on 4Bio. If the customer needs an apothecary medicine, we now have an apothecary business as well. And in the end of the day, we're also servicing our manufacturing partners across their whole portfolio, which wasn't true before. And the main focus of innovation, the main focus of marketing execution for the leading pharma companies, is no longer in primary care. Primary care has exhausted innovation. It's been dominated by local players. Therefore, the global players, they are very focused on specialty, and we are a key partner in specialty through 4Bio. So we're very happy with 4Bio.
4Bio is very accretive to us, helps us create a lot of value. But yes, it has a negative margin pressure, but we are dealing with the negative margin pressure with a lot of efficiency gains. And one of the efficiency gain sources is private label. We reached a private label penetration of 9% of the front store sales. This is similar to last year, but the difference is that last year, because of the pandemic, we had a huge peak of COVID tests, which were private label, and we were selling a lot. So if you see how the private label penetration outside of the COVID categories. COVID categories are self-tests, masks, and gloves. You take that out, our share is growing very steadily and very well. We are leaders already in categories like, for example, solar protection.
We have the number one brand in solar protection is our private label brand. We are number two in skincare. We are number one in tissues. We're number three in diapers. So we are evolving a lot in terms of private label. IQVIA just released recently some figures, and RD Brands is the 18th largest corporation in the Brazilian consumer health industry. So even though RD Brands only serve Raia Drogasil, RD Brands is the 18th player, and we're counting all the OTC players, we're counting the Johnsons, L'Oréal, et cetera. And if you look the Needs as a brand, Needs is the number four or five brand in the Brazilian consumer health industry, only behind Pampers and two, three other brands.
This is amazing, what we have accomplished. We're very happy. We're investing a lot, and we're trying to expand a lot the category mix that we offer.
Super helpful. Thank you both very much, and again, congratulations on the quarter.
Irma Sgarz from Goldman Sachs, you may now ask your question.
Yes, hi, thanks for taking my question. I just wanted to follow up briefly on the Ozempic question that Bob just asked, and where you provided some very helpful commentary already. But could you somehow try and quantify it a little bit for us? Just how relevant and how maybe sort of across what time frame this has become more relevant in your sales? Because you made the comment earlier that it's quite sort of significant for your sales. I'm just trying to sort of quantify that or size it in broad strokes. And then the second question relates to ultimately. Sorry, I just forgot the second question. Sorry.
Just, let's keep it for the first question. Thank you.
Okay, Irma, thank you. If you remember, the second question, you can throw it after my answer. We don't disclose figures on Ozempic, but it's the number one drug we sell. Because we have a very disproportionate market share on Ozempic. For us, it means more than for the market, because of the fact that we have so many A.
Right.
A-class stores in our store portfolio. But even Ozempic, I mean, what we're selling, Ozempic obviously helps the market growth, helps the category growth. But even before Ozempic, there were products like Victoza, like Trulicity. So Ozempic is, in the end of the day, an expansion that comes on top of things that were already there. And likewise, Mounjaro and Wegovy, when we get them, they may be further upgrades, further expansions for this category over what we already have today with Ozempic. So innovation is an important driver for us. Innovation doesn't happen across many categories. Certainly, diabetes, weight loss, and sometimes central nervous products, these are where we still see innovation. Most other categories, like cholesterol, blood pressure, et cetera, they are already dominated by generics.
So the growth in those categories, as Flávio mentioned, will come mostly from the aging of the population in terms of the market. But we still see innovation in these specific categories, and Ozempic is the main evidence of that.
Another important thing here for you to understand, Irma, think of this company as a BRL 30 billion+ of revenues company. And if you are a supplier for drugs or for any kind of product, we are the number one company to be called for you to enter the market with a new drug or a new product. So we are able to create an additional market of BRL 500 million-BRL 1 billion , on top of an already existent, very solid footprint and portfolio we have here. So this is a very enduring competitive advantage we have here.
But—and just to finalize here, obviously, it's a very meaningful sales figure, but the margin of Ozempic is way, way, way, way, way lower than the average gross margin. So economically, the effect of Ozempic is not as much as it looks like if you look only at the sales figure. But obviously, it's an expensive product, it's an accretive product, it's a product that help us engage this patient in the overall journey.
It's really helpful, and thank you for being patient with my brain freeze. The second question, if I may, was related to G&A. I think you made already quite a few helpful comments. And from what I understand from the earlier call, you mentioned that maybe G&A dilution wasn't quite on the cards for the fourth quarter, but potentially is still something that you think is feasible for 2024. Can I just maybe ask, was there anything that surprised you ultimately in the journey of G&A, or is this all within, like, sort of, you know, upgrades and technology investments that you ultimately had to make and that were already on the cards?
I think you answered yourself. I mean, obviously, a lot, b ecause controlling headcount is not something new, it's something we're doing really well. So our labor expenses in G&A are being diluted, but there is a lot of new factors affecting G&A these days, especially technology. So, for example, the cost of cloud, what we call the AWSs of the world, I mean, it's a small fortune. What we call the phenomenon named Software as a Service. Today, a lot of platforms like Salesforce, like SAP, et cetera, they used to be CapEx, they all became OpEx. So these are elements we have to deal. There are other things, for example, we have a big efficiency project with a leading consulting company in terms of indirect buying.
We are finding a lot of cost optimizations, but the problem is the success fee that we pay is on G&A. Most of the gains is in the sales expenses, like consumer materials and other expenses like that. So obviously, we focus a lot on G&A. Stabilizing G&A is not a small feat. We have been increasing G&A very meaningfully for three years, so we're still with the huge focus on investing, on improving, on gaining efficiency. But we cease to expand the G&A.
Now we want the G&A to go down, but in the end of the day, let's not lose the fact that the focus on the fact that G&A is 3.5%, 3.6% of our sales. Sales expenses is 17-something%. So in the end of the day, we're talking about an expense base of 20%. What matters is how fast the 20% get. If we get more on the sale, more gain on the sales expenses or on the G&A, of course, there'll be more gain on the sales expense, because it's a bigger cost chunk.
Yeah.
0.3 of the G&A is 10% of the G&A. 0.3 of the sales expenses, this is a small portion of the sales expenses. So obviously, the sales expense dilution is always more meaningful and more sensitive than the G&A dilution. But everybody's now obsessed about the G&A, 0.1 plus , 0.1 less. I mean, in the end of the day, we believe, I believe next quarter G&A will be similar. I believe there is the opportunity to have a somewhat smaller G&A next year, but that's not what will make the difference. The difference will be operating leverage gains, driving sales expense down. This is what moves the numbers in a sharper way.
And we are not, o bviously, any management team and of unlisted companies has its temptations, and we're not falling to cheap temptations in terms of holding costs, holding investments at any cost, just to show the market how good we are with diluting overhead. In the end of the day, we are still focused on the long term, and we're still focused on the full picture, and the full picture includes gross margin, sales expenses, and G&A. G&A is the smallest line there.
That's really clear. Thank you so much.
Thank you.
Next question, Joseph Giordano from JP Morgan. Joseph, please go ahead.
So hi, good morning, everyone. Good morning, Eugênio, Flávio. Thanks for taking my question. My question goes back into the expansion plan. So you mentioned that the returns remain high, elevated to above the 25% threshold. The trend here is actually above guidance, and when you look at the competitive landscape, it appears to be a little bit weaker than it used to be, given the high rates, and we actually see some smaller players going out of the market. So my first question to you is, when you look at the competitive landscape, do you see any specific regions where you see space to accelerate a little bit more? So that's the first thing, so the competition a little bit weaker.
The second is like, okay, looking historically, higher growth in Brazil, RD now used to be a company that grew its area in the 10% range. And if we take the guidance at this point, it's gonna go, like, the single-digit territory and slowly going down as we move on with the base. So the question is, if we should expect, given the current market context, the market share gains and an acceleration or a potential acceleration to the store openings. Last but not least, going back to the expenses, the company has been very, very strict with its expenses, right? So we look on the selling side, the material dilution on the store expenses.
So even with the digital things growing, and even when you look at the overall SG&A, things are really under control. So my question is that, like, how fast we should be seeing dilution going forward, particularly in the context that you do have some 1-2 percentage points above inflation in terms of growth, and this inflation is coming down. So this 1-2 percentage points becomes even more material for operating leverage going forward. Thank you very much.
Joe, thanks for the questions. I'll answer in what I remember here. If I miss something, you remember me. In terms of expansion, I mean, right now, we are ahead of the guidance. If you look last 12 months, the number of openings is ahead of the guidance. But we haven't issued a new guidance. So right now, the number you guys should consider is the guided number. I mean, we always try to understand what will happen. As we move closer to year-end, we have a better figure of what will happen, because it's very sensitive. I mean, we are, I think, 10 stores ahead of guidance. I mean, we probably have 10 stores to open in the last week of the year.
If these openings get delayed or open, this means making the guidance or making ahead of the guidance. We are surely not below the guidance. If we will do the guidance or slightly above the guidance, we have to see. But for the time being, we maintain the same guidance that we have issued. In terms of competitive landscape, I mean, I think we have some recent. Recently, we have seen data from IQVIA, Close-Up, and these guys, and it's clear that when you look at the market and you break down the market in different segments, there are two clear winners. Winner one, Raia Drogasil . So we have 15% of market share.
Our market share is expanding faster than anyone else, and obviously, you track the numbers, you can see that. Then the next bracket is the other Abrafarma chains. The other Abrafarma chains are solid, but they're not growing as much as we are growing. And within Abrafarma, I mean, it's a mixed bag. There are players who are doing well, generally smaller players, and then larger players who are not gaining share or gaining less share or sometimes even losing share. So there's a mixture of specific players doing well, with several other players showing some kind of weakness. But when you go the next bracket, which is other chains that are not part of Abrafarma, this looks like a war zone. I mean, you have a lot of huge share loss, several players going out of the market, other players closing stores.
So this is where the main pain point in the market, in my view, is in these small chains that are not even part of Abrafarma. Then when you move to the more independent space, independents are also suffering. They are closing these days as many stores as they are opening. And then associations, they are better off, and they are also winners in this market. Obviously, you have to put all associations together to be remotely close to Raia Drogasil. But still in these C areas, small markets where we don't enter, they are doing well. So we see a lot of weakness in the market, especially our addressable market, with the guys that we compete. And I think our mature store performance, our share gain, reflects that trend.
Then, I remember you had other questions, but then I got lost here. Can you repeat them, please?
Just let me add another information here, which is quite relevant. Joe, you focused on the expansion, but let's not forget that our growth is also based on our e-commerce business, okay? So the e-commerce business, if you take all the big levers of growth from an year-on-year for Raia Drogasil, you see expansion as a big lever, you see digitalization as a big lever, and 4Bio as well. So think of regions that are highly densely populated and are already quite relevant, considering our existing footprint. We don't need to open additional stores in areas like this, but we can tackle, we can address the consumers in the area with the digital activity.
So remember that, our market share, as a whole in Brazil, is around 15%, but our digital market share, or our e-market share, is close to 40%. So this is a very important lever for us to, to grow. The other question was about, expenses and dilutions.
Ah, okay. So, I think you already mentioned that before, but, I mean, I think we are diluting expenses really well, based on efficiency gains, based on operating leverage at mature stores. What happens over 17% of our sales means way more than what happens over 3.5% of our sales, although I think there's space also to gain on the 3.5%-3.6% of our sales that are made of G&A. And I think you have a fair point, also. As inflation gets lower, the real growth, the 1%-2%, whatever that is, real growth that we deliver is way more meaningful than it is over a high inflation base.
Perfect. Thank you.
The next question is from Enzo Hahn, from Aster Capital.
Hi, Eugênio, Flávio. Thank you for taking my question. First of all, congratulations on the result. Could you please give us more detail on 4Bio strategy for the next, next three years? Can it, can it maintain these growth rate, growth rates? Thank you.
Thanks for the question. I mean, the answer is no, we cannot maintain this growth. If you look in the first semester, 4Bio was growing 90%. Now, 4Bio is already looking at a much higher comp base, and that growth is decelerating. So year to date, I think it's 60%, and the quarter was close to 50%, and fourth quarter will be slightly lower than that. So I don't think it's feasible to maintain that growth. But for sure, 4Bio should grow a lot. 4Bio should grow ahead of Raia Drogasil, for sure, because it's a market that is growing faster, especially because of the age of the population.
The age effect is more relevant in a category like oncology, that is the main category 4Bio sell, than it is for most categories we sell on retail. The other thing is that the innovation is much more meaningful for 4Bio than it is for Raia Drogasil. When you talk about innovation for Raia Drogasil, I think Ozempic and a couple other drugs, they are kind of outliers in a more commoditized mix that goes more and more toward generics. When you talk about specialty, there's a lot of new drugs coming, targeted therapies, oral, the oncology therapies. So, 4Bio, for sure, will grow ahead of Raia Drogasil, but no way I believe 4Bio can grow what's growing today. And by the way, we never expected 4Bio to grow what is growing today.
4Bio is way, way, way over budget, for example. So we never predicted this growth, and for sure, we don't predict that for the future, but that growth will be meaningful. What 4Bio does, what's the strategy of the company, is basically serving health operators, players like SulAmérica, Bradesco, Amil, Unimeds, et cetera. These guys, by law, even though they don't pay out-of-pocket for general pharmaceuticals, they have to pay for oncology treatments and for some other, like, immuno, immunotherapy treatments, that, a nd this is defined by law. So this is a managed care market, just like in the U.S. While our normal retail market is 100% out of pocket, is not managed care at all.
So our aim is to provide the best solution for the payer, and the best solution for the patient, and the best solution for the manufacturer. So, we are very efficient in terms of our last mile logistics. All our competitors for 4Bio are all wholesalers who are trying to do some retailing, but they don't have the retailing DNA, they don't have the service DNA. They are amazing to inbound logistics, but we are way better in terms of last mile logistics. Getting a product that is temperature-controlled, delivered in this exact day in Manaus at an efficient cost. This is what we do for 4Bio, that nobody else has the experience to do. And for 4Bio, borrow some of the experience of Raia Drogasil and some other things they developed on their, on themselves.
The other thing that we do is overlooking is taking care of the patients. In a classical oncology treatment, which is infusional, the patient is monitored by the physician almost 100% of the time. The physician knows when the patient took the drug, what was the effect, what was the side effect, if they have to adjust the, the physician is there, the nurse is there, et cetera. All of a sudden, we have now oral oncology treatments that are very different. The patient takes a box of pills to their home and take their, on their own, without the physician, without the nurse. So we are the missing link here. We are the guys who make sure that the customer is being monitored.
We call the customers every week to make sure the customer is taking the drug, to understand if the effects are happening, to see if there is any undesired side effect. Sometimes customers, because they don't feel symptoms, they stop taking the drug, or sometimes they lose weight and the dosage must be adjusted. And sometimes the drug has a side effect that is not expected, and the physician has to change the drug. We are the guys who are there for the patient, to understand what's happening, and promptly notifying the physician to adjust whatever that is to be adjusted or only to inform the patient as needed. And this is what we'll keep doing.
Thank you.
Our final question is from Alex Wright, from Jefferies.
Yeah, thank you. So a couple of questions from me, please. First of all, just on the market share gains this quarter. Obviously, there's nothing new in that, in itself. You've been gaining share consistently for a long time, but it looks like, you know, there was an acceleration in the rate of market share gain this quarter. And I wondered if there's anything that you would point to specifically, either for yourselves or for the market as a whole, that contributed to that faster rate of market share gain? Or do you think there's any reason to believe that there's some, you know, structural acceleration or change going on there relative to the rest of the market?
And then secondly, please, one thing I've discussed a little bit with the team, but just be interested in getting more color on, as you pointed out, you know, you're opening many more hybrid and popular stores than premium. But the premium stores, as a percentage of the base that you report, have actually increased despite that over the last year or so. And I believe that what is happening is that many of the younger stores, you're initially opening as popular or hybrid, but then subsequently upgrading, if you like, or reclassifying to premium. So if you could just talk a little bit about, you know, what is happening there, please, and, you know, the color behind that. That would be great.
Thank you.
Thanks, Alex. In terms of the share gain, I mean, if you look, the structural answer is, as the digital becomes more and more important, we are accelerating our comps, and the faster comps means faster share gains as well. When you look specifically in the quarter, I think there are two things to mention. One is we have to be careful when we compare these figures on a sequential basis, because there's a lot of methodological limitations in how the market shares are calculated by IQVIA and Close-Up. Things like selling by smaller pharmacies, they affect a lot these figures, for example. So I think these figures are really useful when you look on a longer range, but less useful when you look quarter-by-quarter basis.
Having said that, I think there is something happening this quarter, which is we see a market deceleration that is clear, clearly shown by IQVIA, by Close-Up, and even, I mean, one of manufacturers, we have, a supplier who's listed that also reported recently, also slower figures and talking about a market deceleration. I think the market deceleration, to some extent, happened, but we see way less of that. So in the end of the day, our comps are similar to previous quarter, maybe slightly lower, while I think for the rest of the market, I think they are feeling way more this environment. Because, because of the difference in execution that we have, because of digital, even pricing, I mean, we survey prices on a very continuous basis.
Whenever we see in a specific market something different happening, if all of a sudden there is a gap that wasn't there, we go, we adjust. So we first do what we have with our prices, then we ask ourselves how we pay that. This is how we do, and it works. But we are paying that because market, because private label is growing, because of, w e just ran recently a generic tender that was very successful for us. So we are gaining efficiencies, and we are reinvesting sometimes the efficiencies. Other times, the efficiencies are paying for things like higher 4Bio mix, higher 4Bio share in the mix, higher digital share in the mix, and things like higher, even higher Ozempic share in the mix. As I mentioned, Ozempic has a very low margin.
So when Ozempic grows a lot, this is another driver of pressure that we have to somewhat mitigate, but, but we have been able to do. But the fact that we see a weakness, we look at the prices and we move very promptly, means that in moments like that, we have the firepower to invest, to defend, or even to gain share, where other companies must be much more careful.
Alex, just going a little bit deeper here on the answer. First, oh, thank you for the re-initiation of your coverage. But going a little bit deeper on this answer, you mentioned these different clusters we have, and it's true that we changed some stores among clusters here during this quarter. More effectively than we have been doing in the past quarters. But this is, we do it frequently. So we upgraded some of our stores from popular to hybrid, and from hybrid to premium stores. This is related to not only changing prices or addressing prices in a different way, but also related to different assortment we bring in the different clusters.
So we increase assortments on specific categories, and this improves revenues for, for the store. So our average of BRL 1 million per month per store average sales is not happening by hazard, it's happening by design. So we are constantly tracking these opportunities for a store to improve sales, and this is the way we do it.
Yeah, I just to complement on that, I mean, obviously, when you look at the geographic footprint, a store in São Paulo doesn't move to Rio. So, well, it's a fixed basis. When you talk about clusters, we are always able to review the decisions, and very often, we are more conservative when we open a new store for two reasons. Generally, a store that has a very luxurious look and feel, if it's in a new area, customers may be reluctant and believe the store is expensive. The other thing is that premium stores, they take more investments in working capital than standard and popular stores. So very often, we start more conservatively, and over time, as the store gets established, and as we believe there is opportunity for premiumization, we will change the classification.
So we'll put more, working capital in, in additional inventories. We'll sometimes, when we renovate, we may bring more, more luxurious, fixtures to the store. So it's not a fixed base like the, the regional bases is, and, I think Flávio explained well that, we had a reclassification. And the, and the reclassification is very seldom. It very seldom goes down. It's generally the store stays where it is, or we premiumize it. Premiumization is a good opportunity for us. We are eager to do it whenever we can.
Great. Thank you very much.
Thanks.
Thanks.
The Q&A session is over. And now, Mr. Eugênio will present the final messages.
[audio distortion] the call and for your support as shareholders. We are very appreciative of that. And just to summarize on some of the messages that Flávio and I shared with you today, I think this was another very strong quarter on top of a very strong year. So if you, when you look to the quarter, 16.3% top line growth, very meaningful growth, probably the fastest growth of any listed drugstore, with 6.8% in mature store growth. If I believe we have the fastest top line growth of the pack, I am sure we have the fastest comp of the whole pack. That's absolutely, a nd this is a reflection of the whole digital transformation that the company is undertaking.
Mature stores have systematically outgrown inflation and allowed us to dilute sales expenses, to gain efficiencies, and to increase our margins. If you looked year to date, we have an EBITDA margin of 7.4%. This consolidated, this EBITDA margin is 20 basis points higher than nine months last year. But let's remember that nine months last year, we had a much higher inflationary gain on inventories because of a 10.9% price increase that obviously didn't repeat itself again, so this is a headwind. Huge 4Bio growth, which margin-wise is another headwind. Huge digital growth with margin-wise is another, obviously, lifetime value growth is amazing, just like for 4Bio, but margin-wise is a headwind. Ozempic growth, which is also a headwind. Despite all these headwinds, we are able to expand 20 basis points.
So I believe this is an amazing figure, and this is an amazing performance by the company. And we believe we can sustain this company, and our aim is always to keep expanding, expanding the margin. But we have been very successful, and we're very happy so far about the results. And these results, they underscore the strength of the digital transformation of the company. We had record digital channel share, 15.7%. Very unique mix, very focused on the most, on the healthiest and best channel there is, which is the app. Very little or almost nothing in call center, which for most of our competitors, is 25% of what they call digital. Another aspect is that we have the fast deliveries growing very fast, and the fast deliveries, they are faster than in the past.
By the way, this is another expense headwind, because it's more deliveries on a shorter term that cost us more, but we're also dealing very well with this by gaining productivity all across the business. And digital, in the end of the day, has reached BRL 5.4 billion in annualized revenue. So Raia Drogasil, if it were a separate, Raia Drogasil digital, if it were a separate company, we'll be fighting for the to be the fourth largest chain in Brazil. Right now, probably the fifth, close to be the fourth. So I mentioned the unique mix. I mentioned the fact that web is only 10%, and the web customer is an opportunistic customer. The app customer is an engaged, loyal customer.
So, we are channel agnostic, but the lifetime value are very different between a web and a mobile customer, especially if the customer is an app customer. And we're very happy to be growing where it matters, which is in the app. So this is also very important. Click and Collect, 61%, this is great economically. Deliveries for us account 2% or less than our digital revenues. This is unheard of, and this is what makes this channel very profitable for us. The marketplace is also growing a lot. It's starting to ramp up. We'll provide more details about that in the Investor Day. And same with healthcare. We don't talk much about what we're doing in healthcare, about store services.
Some of our competitors are way more vocal than us, but I think we are second to none in what we're doing here in terms of the marketplace, digital, and also in the healthcare side. And we'll be happy to talk more about that on the Investor Day. We're very happy in terms of the advances in sustainability, and the ratings show that. We're not a fan of the ratings. We don't work for the rating. We work to do what we believe. I think there are a lot of problems with ratings, even ethical problems. Some of these companies, they give more disclosure to who pays for their service than who doesn't, like us. But still, they are seeing what we're doing, and the ratings are improving. And finally, we keep very optimistic about the future.
I mean, there's so much more to happen on the digital side. We have a lot of projects and initiatives, and we'll be sharing those in the upcoming Investor Day. So we know it's a long trip, as Flávio mentioned. Whoever can come, we'll be very, very happy about. Otherwise, I mean, we'll be happy to talk about some of these things in the upcoming conferences. I'm, I'm going to New York on February 15 and 16. We're, Flávio and I, are going to San Francisco in January. At some point in March, we'll be in Europe, so we'll also be able to discuss some of these things in further detail with you. So thank you all for attending the call, and especially thank you all for support as long-term shareholders.
Thank you.