What is Chemist Warehouse worth?

A newspaper has shone a light on the investment practices and ownership structure of Chemist Warehouse

In this week’s “How the rich invest” column, Australian Financial Review Rich Editor John Stensholt examined how the My Chemist Retail Group has “shaken up” the community pharmacy sector here in Australia, and Asia, where it is expanding.

He cites documents lodged with ASIC which show the East Yarra Friendly Society Pty Ltd – of which pharmacists Jack Gance and Mario Verrocchi are the directors – made a net profit of $101 million in the 2015-6 financial year.

“Information in the accounts would suggest the numbers could account for roughly half the wider Chemist Warehouse business,” Mr Stensholt writes.

Further information in these documents shows that East Yarra – the main entity through which the My Chemist and Chemist Warehouse brands are controlled – has a total worth, including “entities it owns” and consolidated revenue, of about $1.43 billion.

“The 2016 profit was up from $97 million the previous year, and the business has more than $400 million in retained earnings,” Mr Stensholt writes.

As well as now controlling more than 300 pharmacies in Australia, Chemist Warehouse is set to expand across the Tasman.

Last week it extended its exclusive partnership with Tmall Global, Alibaba Group’s dedicated cross-border e-commerce site.

Alibaba will support Chemist Warehouse during major marketing campaigns such as during the 11.11 Global Shopping Festival in addition to helping it leverage Alibaba’s e-commerce and media properties to better reach Chinese consumers.

Chemist Warehouse reached RMB 100 million ($14.4 million) in gross merchandise volume and finished with a higher GMV than all of the other merchants on Tmall Global during last year’s 11.11 festival. It was the sales leader for the platform’s Black Friday sale, too.

In the AFR, Mr Stensholt writes that the giant’s growth “has not been without controversy and East Yarra has been seen by some in the industry as a way to circumvent laws designed to ensure dozens of pharmacies are not controlled by individuals”.

The two directors bought East Yarra, which was inactive at the time, in 2002; after 2004 it expanded by recruiting franchisees.

“Often these franchisees have a Gance or a Verrocchi as landlord,” Mr Stensholt writes.

This week, Chemist Warehouse partner and co-founder Damien Gance told The Australian that times were tough in retail, particularly due to rising energy bills and unhappy consumer sentiment, and that this was threatening its ability to effectively compete in the marketplace.

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  1. Brettthereluctantpharmacist

    Ok that’s a lot of money. Now, if they could get together with the government and it’s messed up price disclosure policies and give me back the $700k that between the two of them, wiped off the value of my pharmacy … it would be much appreciated.

  2. pagophilus

    So are they a friendly society or is it in name only? Surely that shouldn’t be hard to figure out.

    • PharmOwner

      Real friendly societies are not-for-profit

      • pagophilus

        In that case it shouldn’t be difficult to deal with, if only the will was there. What’s the point of having laws and regulations if they’re not enforced?

  3. Graeme Holloway

    Also I believe there are many pharmacists in the Gance and Verrocchi families

  4. Tony Lee

    They are doing what all the other big players are doing, only they are doing it better. The circumnavigation of law has been forever with high;y paid legals finding or creating loopholes. It is difficult to challenge their business model to this point, and when/in the event of, pharmacy being an open market place they will remain the dominant player with the ‘Packer option’ always open to them. I suspect it is now more about power than money.
    In early years I made large profits with ‘Le Specs’ in my pharmacies & thought at the time whoever came up with the design & retailing model (remember the bikini bottom sitting on them) were entrepreneurs of caliber.
    Live with them and make your pharmacy a truly professional/medical model; similar to the apoteks is some European countries and there is hope. A Pharmacist with a capital P or a retailer?

    • PharmOwner

      Hi Tony, can you elaborate on what you mean by the “Packer option”?

  5. Darren Spina

    I agree with Tony Lee and you to a certain extent Bruce. Yes it is possible to still do ok financially as a pharmacy owner Bruce. If you don’t try and compete with CWH solely on price and improve your professional service offer. It is getting harder and harder though. As in politics we will get the pharmacy industry we deserve. IMO the day is fast approaching where you will either have to line up and wait for an hr to talk to a B.Pharm at a CWH or clone, or pay to talk to your struggling to survive small pharmacy operator.

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