Strong leadership remains an SDM hallmark

Chain Drug Review, August 13, 2001 by Jeffrey Woldt

With the appointment of Glenn Murphy to succeed David Bloom as chairman and chief executive officer of Shoppers Drug Mart (SDM), the company has embarked on a period of transition unprecedented in its 39-year history.

Murphy -- who most recently served as president and chief executive officer of the retail division of the bookseller Chapters Inc., after spending 14 years in high-level executive posts at Loblaw Cos. -- is the first person from outside SDM to run the company. Moreover, Bloom and his predecessor, SDM founder Murray Koffler, have set a very high standard for leadership at the drug chain, the largest and most successful in Canada. Strength at the top has always been one of SDM's hallmarks, and, by all accounts, Murphy, who took the reins in mid-June, is already on course to uphold that tradition.

Koffler was the visionary who developed the associate concept, which remains the foundation of the company. By melding the strengths of chain and independent pharmacy it is designed to support pharmacist/owners and their ability to deliver personalized service within the framework of a national retail entity.

"The whole idea is that we have people at store level who are running their own businesses," Koffler, who is now SDM's honorary chairman, told associates at their annual meeting in Toronto in February. "They can compete in their own arena. They can hire their own people. They run their own finances, and yet they have the resources of our central office, which coordinates all of the background activities so that they can really maximize their potential at store level."

The power of that philosophy enabled the company to flourish and grow from a single pharmacy in Toronto in 1962 to a 553-store chain generating annual sales of $1.58 billion (Canadian) by the time Koffler retired as chairman in 1986.

At that time he handed the reins to Bloom, who had joined SDM as a pharmacist in 1967. Bloom became a store owner in 1968 and made the move to headquarters three years later. With Koffler serving as his mentor, Bloom quickly advanced through the executive ranks to become president and chief executive officer in 1983 at the age of 39. (Interestingly, Murphy is now that age.)

While adhering to Koffler's approach, which survived intact after SDM became a wholly owned subsidiary of Imasco Ltd. in 1978, the new management team under Bloom started a process of continuous improvement that honed the operations of the central organization in an effort to better serve the stores and, ultimately, Canadian consumers.

Bloom-together with former president and chief operating officer Herb Binder, senior executive vice president of marketing Stan Thomas (who succeeded Binder in July 2000), and other top executives -- enhanced the company's role as a health care provider through the implementation of such programs as HealthWatch, which provides patients with printed information on prescription drugs, including instructions on proper usage and possible side effects. SDM also became a leader in the private label business, launching a succession of successful lines (among them Life Brand over-the-counter remedies, Rialto bath and body products, and Quo cosmetics) and introducing Shoppers Optimum (Pharmaprix Optimum in Quebec), making the company the first major drug chain in North America to establish a loyalty card program.

Perhaps more important, the senior management team orchestrated a reengineering of the drug chain's operations. Beginning in 1993 and proceeding at various stages under such themes as Project Eagle, Vision 97 and Star Trek, it persuaded SDM's diverse constituencies to alter many of the practices that had made the chain the dominant pharmacy operator in the nation. (SDM's 35% market share is roughly equivalent to that of Walgreen Co. and CVS Corp. combined in the United States.) As a result of those efforts, distribution, purchasing and merchandising systems were remade, positioning the company to continue to compete effectively in the 21st century.

Through all the changes SDM seldom missed a beat. During Bloom's 18 years as chief executive officer the retailer's store count grew from 400 to 837, sales quadrupled to more than $4 billion, and profits increased tenfold.

The most remarkable thing about Bloom and Koffler before him is that they were able to build a first-tier retail entity while operating by consensus. Unlike most drug chains in the U.S., where it is assumed that a decision made at headquarters will be implemented throughout the organization, the SDM concept of individual entrepreneurs pooling their resources requires particularly skillful leadership. As one SDM executive recently put it, "We're a sell, not a tell, company."

By all indications, Murphy has the talent and temperament to make the SDM formula work. During his career he has had experience in a broad range of retail disciplines, including marketing, operations, procurement and category management. In addition to bringing about improvements in market share and profitability when he oversaw Loblaws' operations in the Atlantic provinces during the early and mid-1990s, Murphy was responsible for the assimilation of Provigo Inc., the 300-store, Quebec-based supermarket chain, after Loblaws acquired it in 1999.