Pharma Plus is Katz' springboard to aggressive expansion

Drug Store News, Nov 17, 1997 by Sandra M. Sutton

TORONTO -- Daryl Katz, the 36-year-old lawyer and entrepreneur who burst on the Canadian drug chain scene in 1991 with the Canadian franchise rights to the Medicine Shoppe operations, is roiling things once again with his purchase of the 132-store Pharma Plus chain.

The $100-million buyout, which closed last month, has parlayed Katz's 30-store franchise operation and 65-store Pharmx Rexall chain Operating in five Canadian provinces into a 240-store retail powerhouse, with system sales that have tripled to $600 million.

Drug Store News sat down with Katz at last month's Canadian Association of Chain Drug Stores meeting to find out more about his plans for Pharma Plus and the rest of his operation.

Katz is clearly bullish about the opportunity to grow aggressively in the market. "The three format's [Medicine Shoppe, Pharmx Rexall and Pharma Plus] offer us a unique opportunity to acquire market share in Canada," Katz said.

"The Medicine Shoppe format allows us to convert independents. Cardinal Health has agreed to finance franchises who want to open in Canada, and we plan to grow Medicine Shoppe as aggressively as we can.

"With the Rexall chain we can pursue the high-volume independent, filling 40,000-plus scripts a year."

As far as Pharma Plus is concerned, "We are getting the top line that we want from Pharma Plus. We should be recording a 15 percent to 20 percent increase in sales. That gives us something to work with as we focus on the bottom line. Our goal: In the next 18 months we want to double earnings before interest, depreciation, taxes and amortization. Currently headquarters expenses are running 4.3 percent of gross sales; we feel we can quickly reach the industry average of 2.5 percent."

As far as Pharma Plus' vacant chief executive position, Katz said he is in the midst of a North American search for a new chief executive, a position vacated by Rochelle Stenzler when she resigned to become president of Revlon Canada. He expects the search to take at least six months. He is looking for a person capable of taking the chain public, should he make that decision in the future.

Katz said Pharma Plus' technology was a big part of the chain's allure. "The front-end technology and the chain's consumer data were a big part of our appetite for the chain," he said. "Right now, we're showing that transactions are up 11 percent and market baskets are up 24 percent," he added, commenting on a beneficial use of the chain's systems.

In regard to Health Sense, Pharma Plus' wellness center concept, Katz said, "We have learned a lot from Health Sense. There are modules that make sense in a drug store context, and there are those that don't. Pharma Plus' newest store will incorporate some of what we have learned through Health Sense."