‘Adapt or perish’ as CWH expands in NZ

The New Zealand media warns of a “bloodbath” in the pharmacy sector, as Chemist Warehouse advertises for staff in two new locations

Stuff reports that the Australian discount giant is seeking staff in its first ever locations outside Auckland: The Base shopping centre in Hamilton, and Bethlehem, Tauranga.

Both locations are in the North Island, south of Auckland.

Chemist Warehouse’s advertisement on Seek.co.nz is calling for “all qualified pharmacists looking to be a part of something big, new and exciting”.

“Chemist Warehouse is a genuine retail success story,” reads an ad for pharmacists in Bethlehem, New Zealand.

“Over the past 40 years the group has grown from a single humble pharmacy to becoming one of Australia’s top 10 retailers, with over 370 stores throughout Australia and still going strong! 

“The secret to our success is the combination of the finest possible customer service paired with competitively priced, quality products. We take great pride in being innovative, competitive and responsive to the changing needs and challenges of our market place. 

“We are thrilled to announce that we have come to New Zealand! Chemist Warehouse will be opening a brand new store in Bethlehem, Tauranga and we are inviting qualified pharmacy professionals to come on board with us and be a part of something BIG!

 “As part of our expansion into NZ, we are now on the lookout for highly motivated, aspiring and customer focused Pharmacists to join our ever growing and well-loved family business.”

But Stuff reports that existing pharmacies are having trouble competing with the discounter – particularly given its stance on offering free scripts – and is warning that “the spread of Australian giant Chemist Warehouse risks a bloodbath that will force the local chemist to adapt or perish”.

When Chemist Warehouse entered the New Zealand market in 2017, it began to offer free scripts, rather than charging the usual NZ$5 (AUD$4.67) for people aged over 13 and for people who have filled less than 20 scripts a year.

In June 2019 Countdown – the Kiwi version of Woolworths – followed with a trial of free scripts, which it then rolled out to more locations. Other pharmacies have also begun to offer scripts for free.

According to a 2017 survey by financial advisory company BDO, 90% of pharmacy owners across the Tasman were worried about the entry of Chemist Warehouse to their market.

BDO partner Gina Cook has now told Stuff that “We are still in the watch and see mode but what we are seeing in the Auckland market, those that are located close to the stores have felt an impact”.

Edi Jayetileke​, dispensary manager at the St Luke’s Medical Pharmacy near Chemist Warehouse’s inaugural Kiwi location in Auckland, said that without the association with the medical centre, the pharmacy would not survive.

“It’s hard to compete against big companies like that because we just can’t match their retail prices,” she said, saying that convenience continued to be more important than price to patients.

But more customers are beginning to believe that pharmacies are “ripping customers off” when they charge the NZ$5 script fee, she warned.

“People don’t seem to understand it is a government fee, it’s not a price we set.

“People don’t understand that if we don’t charge it then we can’t pay wages, we can’t pay for the business to run.”

Pharmacy Guild New Zealand chief executive Andrew Gaudin called on the Government to get rid of the $5 charge altogether.

“Unfortunately, independently owned community pharmacies cannot afford to waive this charge without dropping the level of service they provide to their patients,” he told Stuff.

“The guild believes the bigger concern is that the $5 charge creates barriers to accessing medicines for our most vulnerable patients, with approximately 257,000 New Zealanders unable to afford their prescription medicines.

“This is worse for Maori, Pacific people, and low-income earners.”

In September, Chemist Warehouse chief operating officer Mario Tascone told Australian media that if the sector was deregulated, the discounter could consider offering free scripts here.

“We probably couldn’t do it for everything but we could do it for select drugs here in Australia,” he told News Corp health reporter Sue Dunlevy.

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  1. Tim Hewitt

    The only reason CWH can consider offering ‘FREE’ scripts, (ie no copay), is because the Government is still picking up the tab on the rest of the cost.. .. CWH are NOT offering to return any Government payments are they?? Why not if they are so generous and big hearted?? It’s a con…scripts in the special basket on the footpath..

    Pension/Concession scripts were FREE ‘back in the day’ (ie no copay) but our (Hawke) Government didn’t like that!!, they thought it resulted in hoarding and wastage.. so they slapped on a $2.50 charge, and reimbursed pensioner $2.50/week in their pension.. I wonder if Government still remembers that? I do!

  2. Bruce ANNABEL

    I have met with some NZ community pharmacy owners wondering what to do and how they can survive against the Chemist Warehouse onslaught. Their bottom line had until CWH arrived been supported by a strong retail offer offer characterised by high margin cosmetic and sundries sales. That income offset the low dispensing remuneration that at between $4 and $5 / script is only one third of what Australian pharmacists receive. CWH are very strong in the range and price of beauty and health sundries departments that are seriously impacting NZ community pharmacies have they have done here. The issue is further exacerbated in NZ by CWH offering fee free scripts so not surprisingly many customers have defected to the CWH offer plus there is a significant impact on margins. In response many owners in the CWH markets have sold out and others are considering it.
    There will inevitably be fewer traditional community pharmacies but those who do offering value firstly via convenience to customers who don’t wish to move and embracing their ‘patients’ seeking health solutions through pharmacist professional service while technicians operate the dispensary.
    There are valuable lessons here for Australian pharmacists who by comparison find themselves with regulatory foundations and remuneration that are the envy of NZ pharmacy owners.
    Australian pharmacies enjoy highly profitable dispensaries through high fees (and supplier trade discounts that in NZ the government keeps) that account for 90%, or more in some cases, of the overall pharmacy bottom line and the patient co-pay has not been deregulated. These two key facts have insulated pharmacies from the financial ravages of CWH sophisticated retailer competition. And the smarter pharmacies have moved out of the ranges where CWH are strong replacing the space with high margin lines ranges driven by pharmacist professional health solution recommendations.
    NZ community pharmacies, like those in Australia, need reinvention that begins with a good hard look at leadership in each and every pharmacy who wants to succeed now and in the future.

    • Paul Sapardanis

      Bruce thank-you for your continued insights into current pharmacy trends. What you fail to recognize though is that pharmacies ARE adapting and providing more services both professional and not. Unfortunately nearly all these services are provided below cost as a marketing means to get people in store in the hope that they buy other things eg fluvax services. The other issue with this misguided philosophy is that bulk retailers also do this eg free BP tests at DDS pharmacies. Unless general retail is removed professional services in my belief will not be the saviour that everyone thinks. Further independent pharmacies cannot compete with corporate structures as has been the case in other industries

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