Major drugstore chain Cocokara Fine Inc. said Wednesday it will enter merger negotiations with industry peer Matsumotokiyoshi Holdings Co.

If the two giants merge, they would create an industry leader with sales of some ¥1 trillion.

Amid intensifying competition, further realignment moves are likely to follow, industry sources said.

In June, Cocokara started merger talks with Sugi Holdings Co., which runs the Sugi Pharmacy drugstore chain. But a special committee of outside corporate managers set up by Cocokara supported an integration proposal from Matsumotokiyoshi instead.

At a board meeting Wednesday, Cocokara concluded it would be better for the company to join hands with Matsumotokiyoshi for the synergistic effects it would have on sales networks and product development.

Cocokara will shortly grant exclusive negotiating rights to Matsumotokiyoshi.

While the industry is enjoying growing demand for medical products amid Japan’s rapidly graying population, drugstores are facing fierce price competition with supermarkets and other retailers that handle daily necessities and processed food.

Drugstores are also facing surging labor costs amid a shortage of pharmacists.

The focal point is now on realignment moves among the major drugstore chains following a series of acquisitions of smaller industry peers, sources familiar with the situation said.

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