Dis-Chem Pharmacies

DIS-CHEM

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DIS-CHEM PHARMACIES

Healthy Performance

for Dis-Chem PRODUCTION: Manelesi Dumasi

Driven by award-winning entrepreneurs, operating a wide reaching store network, and successfully growing year-on-year, Dis-Chem is a force to be reckoned with in Southern Africa’s healthcare retail industry. Following its listing in 2016, the company continues to achieve fantastic results.

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The current picture at South Africa’s Dis-Chem, a leading pharmaceutical chain, is one of health. Formed in 1978 by pharmacists Ivan and Lynette Saltzman, the company has grown from a single store in Johannesburg to become a JSElisted, Southern African market leading organisation, with large exposure to a growing industry sector.

In May, the company will present

its full 2018 financial year results, and it is expected to display much positivity, following on from success in 2017.

For the financial year ending 28 February 2017, Dis-Chem reported that turnover increased by 14.7% to R17.3 billion and operating profit was up 24.3% to R1.1 billion. For the six months ending 31 August 2017, the good news continued with turnover up 13.3% and operating profit up 21.4%. A trading

update for the 22 weeks ending 02 February 2018 confirmed that success looks set to continue this year, with group turnover up 13.1% to R8.5 billion.

Today, the business is home to more than 13,000 employees and operates more than 100 stores, with plans to open more in the future.

“We are comfortable that the industry fundamentals and the Dis-Chem brand positioning, the focus of which

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INDUSTRY FOCUS: RETAIL

remains on an unrivalled pharmacy offering, dedicated front shop service and a differentiated stock range, continues to allow us to trade well through challenging market conditions,” said CEO Ivan Saltzman.

“Supported by our store roll out strategy, we remain focussed on ensuring we continue to grow our market shares in the categories that we serve.”

The pharmacy-retail industry has seen something of a change in the past decade, with the emergence of superchains like Clicks and instore pharmacies like MediRite (at Shoprite and Checkers), Spar and Pick n Pay taking control of significant market share. Their ability to offer fitness, health and beauty, and related products alongside medical and prescription items has ensured success.

In Europe and the USA, big name chains dominate the pharmacy space (names

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like CVS, Walgreens, Boots, Rossmann) and South Africa is heading the same way with the industry set to reach $4 billion in value by 2020. Product range and digital presence is key as shoppers look for the convenience and speed of completing their purchasing in one store or through one website visit.

Dis-Chem’s growth story started six years after the opening of its first store when, in 1984, its opened a second branch at the Randburg Mall. Following the opening of this store, the company began introducing non-pharmaceutical products to entice more customers before expanding further with another new location. Through the early 90s, the company further extended its reach before, in 97, releasing its own brand of pharmaceutical products.

The 2000s saw a ramp up in activity with the launch of Dis-Chem’s loyalty

scheme in 2003 and the opening of the first Western Cape store in Cape Town in 2004. Four years later, Dis-Chem developed an acquisitive strategy, taking majority stakes in independent pharmacies and installing the Dis-Chem brand. In 2013, the company’s online offering was launched, and a major growth strategy was achieved as DisChem entered the wholesale market by acquiring a controlling stake in CJ Distribution and non-controlling stakes in Pharmacy Development Academy and Evening Star. Accolades came in the following year when the business was named as best pharmacy brand in the country by Reader’s Digest South Africa before expanding outside of SA into Namibia. In April 2016, Dis-Chem reached a centenary of store openings before listing on the JSE’s main board in November as the second largest IPO on the exchange.

Today, the focus remains on new store openings and the further acquisition of market share. Post listing in 2016, Ivan Saltzman said the company hoped to double in size in the subsequent five-year period following a doubling in size since 2010. Last year, the company said it would double its store base to 200 in the next five to eight years and plans to open 21 new stores (covering 26,900 m2 of additional space) in the 2018 financial year.

“This new space, together with maturing space within the existing store footprint, is expected to drive strong retail and comparable store growth in the years ahead, both of which are supported by the resilient health and beauty markets that we operate in,” Saltzman said.

In May 2017, Financial Director Rui Morais said that company market share was on an upward trajectory.

The dispensary business, which made up more than a third of total revenue, increased market share from 19.6% to 21.4%. Personal care and beauty improved market share from 12.4% to 15%. The biggest gain by Dis-Chem was in the healthcare and nutrition niche,

DIS-CHEM PHARMACIES

where market share was estimated to have grown from 38% to 43%.

These levels of exceptional growth are boosting the company forwards and fuelling the appetite for further expansion. Saltzman has indicated that 20 new stores will open in 2019 and the company is on track to achieve its 200 stores by 2022-23 target.

In August, Saltzman said that the company’s strong performance was down to its growing footprint and effective financial management. “The strong performance is principally due to a maturing store base, good margin management,” he commented.

He also paid tribute to Dis-Chem’s growing employee base, which he described as ‘qualified and motivated’.

“As a family owned and managed business for decades, we have nurtured a family and service orientated internal culture that engenders a real sense of

belonging throughout our workforce,” he said. “As a result, staff turnover in DisChem is exceptionally low.

“Although Dis-Chem is now a public company, we are determined to maintain our internal culture of respect, professionalism and belonging. That attitude is intrinsic to Dis-Chem’s future prospects.”

In December, Ivan and Lynette Saltzman were honoured at an awards ceremony in Sandton as the 2017 Entrepreneurs of the Year. The 2017 All Africa Business Leaders Awards hosted

by ABM Productions, in partnership with CNBC Africa, has been celebrating the success of African businesses for the past seven years. Ivan Saltzman said: “The business will grow through new space that we are opening but we have to keep our eye on the ball and still pay as much attention to our old stores and we give to the new stores.”

It is the ‘pharmacy first’ mantra, installed by the founders, that is helping to drive the reputation of Dis-Chem. Its ongoing store roll-out means that its products are available in more locations than ever before, its employees have more opportunities to interact with the customer base, and its successful distribution operation backs the whole process.

Now a powerful organisation with significant market share, Dis-Chem’s story is one of success. It’s digital service, loyalty programme, and fantastic store network continue to ensure the company remains true to its reputation as ‘pharmacists that care’.

WWW.DISCHEM.CO.ZA

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