Hardly a town or city in Australia is immune to Chemist Warehouse’s distinctive bright yellow storefronts and now the cheap drugstore brand is spreading internationally to New Zealand.
The brand’s meteoric rise in Australia will be repeated in New Zealand after the pharmaceutical giant recently expanded across Tasmania, opening 35 stores in recent years and independent chemists disappearing as quickly as they did in Australia. It has also opened six stores in Ireland.
The New Zealand Pharmacy Guild said 30 independent chemists have closed in 2022, replaced by larger chain stores.
In January this year, Seema Rambisheswar had to close her Life Pharmacy store in Glenfield, north Auckland, after working there for 22 years and owning it for 14.
A pharmacy warehouse was opened in the same shopping center in 2020, cutting costs for the Kiwis by forgoing the government’s $5 contribution fee, charged with each prescription, by absorbing it at a loss.
‘It is this? Australia’s Cheapest Chemist’ – Cleverly worded slogan appears in many Chemist Warehouse stores
The pharmaceutical giant has spread across Australia, but independent chemists have questioned whether it provides the same personal care and service as a community-owned store.
“The shock (of the opening of Chemist Warehouse) was huge for us, customers started to think that the $5 prescription fee went into our pockets,” Ms Rambisheswar told Radio New Zealand.
‘Those places are just churning out recipes. We try to give advice with each recipe, we’ve had people ask us not to close, but it’s too late.
A survey of pharmacy owners conducted by BDO in 2017, when the first Chemist Warehouse store opened in New Zealand, found that 90 per cent were concerned about its arrival.
Local pharmacists are concerned that they will soon go the way of Australia, with the big box chains effectively driving everyone out of the market.
The vast majority of pharmacies in Australia are run by a few powerful companies.
There’s Terry White Chemart, meanwhile, Sigma Pharmaceuticals owns brands like Amcal, and Wesfarmers owns Priceline.
But the heavyweight is Chemist Warehouse, which dominates the industry’s $25.9 billion market share.
The first of its stores opened in Melbourne in 2000 and since then numbers have skyrocketed, with 491 locations in 370 Australian suburbs, towns and cities.
Its growth has been due in large part to its highly visible ‘lowest price guarantee’ which beats the cheapest price offered by a competitor.
Like hardware giant Bunnings, doing large volumes of trade allows stores to sell products at razor-thin margins that small businesses can’t match, and still turn a profit.
Also similar to Bunnings, the stores employ a basic-looking aesthetic, littered with paper sale price tags, to create the image of a discount store—the name is very deliberate.
“The average pharmacist hates us because we’ve affected the entire margin structure in the pharmacy,” co-founder Jack Gance recently told the Small Business Big Marketing podcast.
“If they compete with us 100 percent, if they match our prices, they’ll go broke… they won’t even cover the rent.
“So we’re not well liked in the industry.”
Chemist Warehouse is a private company co-founded by Jack Gance (left) and Mario Verrocchi (right with his wife Fiona)
Independent Sydney pharmacy owner David Vo sold his Rose Bay pharmacy six months before Chemist Warehouse moved in and “tithed” the new owners.
“If Chemist Warehouse moves next door, their goodwill is halved overnight,” he told the Australian Financial Review.
The privately owned Chemist Warehouse made a massive $1 billion profit in 2021.
While most businesses struggled during the Covid pandemic, pharmacies remained open, and those with a large online presence in particular flourished.
Chemist Warehouse opened stores in Ireland and China in 2022, in addition to New Zealand.
Gance and co-founder Mario Verrocchi are both on Australia’s Rich List: at 77 with $1.6 billion and 82 with $1.5 billion of personal wealth, respectively.
Verrocchi sold his 45-hectare farm jointly owned with other members of his family in 2021 for $60 million, having bought the ‘Morning Star Estate’ in Victoria for $40 million months earlier.
Nicknamed ‘Australia’s Downton Abbey’, the property includes a restored 1860s Victorian mansion, English gardens, a 30-acre vineyard and its own helipad.
The family also owns a similar-looking Toorak mansion in Melbourne, purchased for $19.25 million.
Gance is her neighbor in Toorak and bought two of her own mansions in the suburb for at least $30 million in 2019.
One of them, built in 1925 and remodeled, has six bedrooms, a marble hall, a private library, a heated swimming pool, a tennis court and manicured gardens.
Gance, who became a registered pharmacist in 1967, was already a successful businessman, having invented the Le Tan brand of sunscreen.
Australia’s ‘Downton Abbey’ in country Victoria was bought by the Verrocchi family
The sprawling estate boasts its own 12-hectare vineyard and English gardens.
This immaculate mansion is one of two in Toorak owned by the Gance family.
The house has a marble foyer, tennis court, two swimming pools and a private library
Chemist Warehouse is rumored to be looking to float the ASX or even sell it to an offshore conglomerate, but questions about its business practices appear to have made things difficult.
Under Australian law, there are rules about how many pharmacies a business can have in any state or territory.
Large chains get around this by, among other things, having franchise owners provide a minority stake in a store. Chemist Warehouse does this through its own company called East Yarra Friendly Society Pty Ltd.
But this could make a wholesale float or closeout difficult.
The company’s directors have been talking to state and territory pharmaceutical regulators and made some changes in 2021, but it appears to be at an impasse with the New South Wales authority.
“The Pharmacy Council of NSW (PCNSW) has not approved the changes for that jurisdiction,” the company’s 2022 financial report states.
‘An engagement process with PCNSW is underway and directors hope that a successful outcome will be achieved.’
An ASX float could value the company at $5 billion, while an offshore sale could see another Australian icon owned by a foreign company.
A Chemist Warehouse spokesperson told Daily Mail Australia that the company focused on a high level of personal service.
“Our pharmacists provide excellent service, advice and value to our customers,” the spokesperson said.
‘Chemist Warehouse and its pharmacists are particularly proud of the way we provide professional services that make a significant contribution to public health.
‘Our head office has a professional services team of pharmacists to help the professional staff in our network grow, improve and provide the best possible services to patients.
‘It is true that we have achieved a large market share, we believe that this reflects our commitment to provide value to consumers.
We work strictly within the regulatory and clinical requirements of the markets in which we operate, while offering the best possible prices, and consumers respond with their support.
“For example, while it is still early days for our six stores in Ireland, we are already seeing six to eight times the number of customers registering than a typical pharmacy.”
