Shoppers Drug Mart

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Shoppers Drug Mart logo

Shoppers Drug Mart Corporation TSX: SC is Canada's largest pharmacy chain with more than 900 stores operating under the names Shoppers Drug Mart across Canada and Pharmaprix in Quebec.

History

At the age of twenty, Murray Koffler inherited two Koffler's Drugs pharmacies in suburban Toronto (one in the Don Mills Centre shopping mall). By 1962, Koffler's had created a chain of 17 pharmacies, which he renamed "Shoppers Drug Mart".

Pharmaprix logo

Koffler revamped the concept of the twentieth century “drug store” in Canada by removing the soda fountain and emphasising the dispensary, requiring his pharmacists to wear starched white coats as a symbol of their professionalism. In the mid-1950s, he began acquiring other drug stores and organized them around a then-novel franchising concept: pharmacist “associates” would own and operate their own stores within the system and share in the profits. When Koffler retired in 1983, he sold the chain to Imasco, formerly Imperial Tobacco, at that time Canada's largest tobacco company.

Old Shoppers Drug Mart logo on the signage of a Toronto store.

In 2000, after Imperial Tobacco had been taken over by BAT Industries (formerly British American Tobacco), Shoppers was sold to a consortium of institutional investors including Kohlberg Kravis Roberts & Co. (KKR), Bain Capital, Inc., DLJ Merchant Banking Partners, Charlesbank Capital Partners LLC, Ontario Teachers' Pension Plan Board, CIBC Capital Partners, and Shoppers Drug Mart's senior management and pharmacist/owners.

Summary of the Business

Shoppers is the licensor of full-service retail drug stores. The Company’s stores are located in prime locations in each province and two territories, making Shoppers stores among the most convenient retail outlets in Canada. Over the past five years, sales of prescription drugs growing at a compound annual growth rate of 11.8%. During fiscal 2004, prescription drugs accounted for approximately 47.7% of Shoppers’ system sales.

The Company has successfully leveraged its position in pharmacy and its convenient store locations to capture a significant share of the market in front store merchandise. Front store sales categories include over-the-counter medications (“OTC medications”), health and beauty aids (“HBA”), cosmetics and fragrances (including prestige brands), everyday household needs and seasonal products. Shoppers also offers a broad range of high quality private label products marketed under the Life Brand® and Quo® trademarks, and value-added services such as the HealthWatch® program, which offers patient counselling on medications and disease management.

Industry Trends

The Canadian retail drug store industry serves a large and growing market. Over the next several years, the retail drug store industry in Canada is expected to benefit significantly from favourable demographics and certain industry trends, including:

• The rising health care and prescription drug needs of an aging population - Favourable demographic trends have had a positive impact on the drug store industry. Currently, 30% of Canadians are age 50 or over. Further, it is expected that by 2011, the median age of the Canadian population will be 41 years and the 65+ age group will be the fastest growing segment of the population. Industry data suggests that prescription drug usage increases dramatically as individuals advance in age.
  

• Heightened focus on health, wellness and vitality by the baby boomer generation - The aging of the baby boomers is expected to have a positive impact on sales of prescription drugs, OTC medications, supplements, natural health products and cosmetics. This segment of Canadian society is placing a greater emphasis on prevention and early diagnosis of medical conditions and on the purchase of self-care products, such as vitamins, analgesics, herbals and smoking-cessation drugs, as well as lifestyle drugs. The beauty category also benefits from the same positive demographic and industry trends that are driving growth in the health category.
  

• The fragmented nature of the Canadian drug retailing marketplace which provides opportunities for consolidation - The Canadian drug retailing industry is highly fragmented as a significant number of pharmacy outlets are independently owned and operated. Given this fragmentation, consolidation opportunities exist, particularly for the larger, well-capitalized drug store operators.
  

Over 90% of Canadians are covered by third party payment programs that provide some form of coverage for prescription drug expenses. Third party payers include governmental authorities (who pay for approximately 45% of all prescriptions in Canada), pay direct insurance plans and reimbursement plans. Since these payment programs transfer most of the costs of prescription drugs to insurers/employers and governments, beneficiaries under these programs are not as sensitive to prescription drug costs as other purchasers. However, the prices of prescription drugs are controlled by legislation where a government is the payer or by agreement with other third party payers.

Financials

Fiscal 2004 system sales: $6.471 billion CDN
Fiscal 2004 EBITDA: $636 million CDN
Drug Store Sales Per Square Foot: $1001 CDN
Number of Shoppers Drug Mart and Pharmaprix stores: 915
Number of Home Health Care stores: 49

Board of Directors

Glenn Murphy, Chairman & Chief Executive Officer, Shoppers Drug Mart Corporation
Shan Atkins, Managing Director, Chetrum Capital, LLC
Joshua Bekenstein, Managing Director, Bain Capital Partners, LLC
Kim Davis, Managing Director, Charlesbank Capital Partners, LLC
James H. Greene, Jr., Member, Kohlberg Kravis Roberts & Co
Eva L. Kwok, Chair & Chief Executive Officer, Amara International Investment Corporation
Dean Metcalf, Vice-President, Teachers' Private Capital, Ontario Teachers' Pension Plan Board
Paul E. Raether, Member, Kohlberg Kravis Roberts & Co.
Derek Ridout, Corporate Director
Leslee J. Thompson, Vice President, Cancer Care Ontario
David M. Williams, Corporate Director

Management

Glenn Murphy, Chairman & Chief Executive Officer
Rennie Bugeja, Executive Vice-President, Retail Development
Andrew Faas, Executive Vice-President, Corporate Development
Bryna Goldberg, Executive Vice-President, Legal Affairs, General Counsel & Secretary
George Halatsis, Executive Vice-President & Chief Financial Officer
Timothy McAleece, Executive Vice-President, Operations
Brian Relph, Executive Vice-President, Peers Relations
John Caplice, Senior Vice-President, Treasurer & Investor Relations
Virginia Cirocco, Senior Vice-President, Pharmacy
Terry Landry, Senior Vice-President, Operations, Pharmaprix
Brad Lukow, Senior Vice-President, Finance
Joseph Magnacca, Senior Vice-President, Merchandising & Category Management
Geoffrey Martin, Senior Vice-President, Business Development
Susanne Priest, Senior Vice-President, Shoppers Health Care Division
Bobbi Reinholdt, Senior Vice-President & Chief Information Officer
Susan Shaw, Senior Vice-President, Human Resources & Organizational Development
Kevin Whibbs, Senior Vice-President, Logistics & Supply Chain

Products

Shoppers markets its own products under the Life Brand. Its logo is white lettering in a red oval.

Advertising slogans

• Everything you Want in a Drugstore 1980s and the early-1990s

• "Take Care of Yourself." 2000 to Present

See also

• List of Canadian pharmacies
• Retail Companies of Canada

External links

• Shoppers Drug Mart
• Pharmaprix