We believe great companies can make great investments. At Lazard Asset Management, what defines great is a business that generates persistently high financial productivity combined with an ability and appetite to reinvest its cash flows back into the business to drive profitable growth. We call this the compounding cycle. Financially productive companies typically generate a lot of cash.
When a company's managers reinvest a significant portion of that cash back into the business wisely, the company can potentially generate even higher cash flow, and the cycle continues. The combination of high financial productivity and reinvestment produces a compounding effect on cash flows, earnings, and shareholder value. What makes these great companies great investments is the tendency of the market to underappreciate them by assuming that the compounding effect will not last.
Many investors anticipate that competitive pressures will erode a company's financial productivity over time, and this trajectory of expected returns is reflected in the share price. We believe that some companies can resist competition, beat the fade, and in doing so potentially beat the market. In other words, our opportunity is driven by investing in companies that generate high financial productivity for longer than the market expects.
Our latest research confirms that over the past twenty five years, a period that covered a wide range of market environments, including growth booms and busts, commodity super cycles, three significant equity market corrections, a global pandemic and war. Companies with persistently high financial productivity outperformed consistently returning on average five hundred basis points above the broad equity market per year.
The key to finding companies that are positioned to beat the fade lies in identifying the competitive advantages that underpin these businesses. It's these economic moats that may insulate them from competitive pressures. For a quality investing strategy, the hallmark of a great company is having one or more clear and competitive advantages. A competitive advantage can provide companies with pricing power. One source of pricing power stems from the desirability of a company's brand.
Another could be control of a scarce resource, which more and more in today's digital world is ownership of the data. It could even simply be the result of providing a critical product or service to customers that represents a small part of the customer's cost base. What does a quality company look like?
There's a pharmacy chain in South Africa that in addition to filling prescriptions, sells customers a range of health, beauty, and wellness products, that generate incremental profits over what it makes from the prescription business. The pharmacy also operates a wholesale distributor of medicines which is a smaller component of profits. This pharmacy business enjoys several competitive advantages, which we believe will endure regulation, scale, and brand.
First, the pharmacy market in South Africa is heavily regulated. A new pharmacy cannot be opened within five hundred meters of an existing pharmacy, providing a strong barrier to potential competition as this makes it challenging for new businesses not only to start, but also to chip away at those which are already established. Regulated prescription drug pricing also makes it challenging for pharmacies to compete on price, further limiting new entrants to the market.
The second competitive advantage, scale. The company is one of two large chains that account for roughly fifty percent of the market which brings efficiencies in operations, purchasing of non-prescription products and distribution. Additionally, higher margin private label products make up around a quarter of the company's revenue and scale allows it to acquire more and enhances its power in marketing them.
Finally, the company has a strong brand reputation and is known for its quality of service. It stocks high quality brands in each location and has approximately ten million loyalty card customers or repeat shoppers who account for eighty percent of sales. We believe that quality stands the test of time. Quality investing at Lazard Asset Management creates the potential for above-market returns over the long term across both business and economic cycles.