Canada chains battle superstores, laws

Drug Store News, Feb 2, 1991 by James Frederick

Canada chains battle superstores, laws

VANCOUVER, B.C. -- Any drug store retailer north of the border will tell you that doing business in Canada is no cakewalk.

Chains and independent druggists here are faced with layers of stringent regulations, both federal and provincial, that govern the practice of retail pharmacy, as well as a new Goods and Services Tax that requires most merchants to reconfigure their cash register and accounting systems. What's more, drug chains have to contend with vast distances between cities and towns if they choose to operate in more than one market.

Isolated geographically

Canada's daunting geography tends to isolate east from west, and make it difficult for most retailers to operate effectively on a nationwide scale. There are notable exceptions--Shoppers Drug Mart is the best example--but many of the nation's drug chains have found it difficult to spread much beyond their home province, much less to expand coast-to-coast.

In far-western Canada, all the problems and rewards of Canadian drug store retailing come into sharp focus. Population centers are few and far between, making distribution, advertising and communications a problem. Provincial rules governing sale of OTCs and prescription drugs are considerable; in the words of one executive at London Drugs, "None of the provincial governments are as restrictive as [British Columbia's]."

Druggists here are also battling rock-bottom dispensing fees for the nationwide government-funded prescription program, which one retailer said has "killed the margins in pharmacy."

The biggest challenge, however, is the competition. Big superstore operators like Loblaw's Real Canadian Superstore, Sav-on/Overwaitea and Safeway have come on strong with in-store pharmacies and loss-leadering on some drug items, putting pressure on traditional drug stores. "It's sort of created chaos here," said Greg Harmeson, vp-marketing for Shoppers Drug Mart's western division. "The retail drug market here is totally different than it is back East, because the food industry over the last six years has really come on strong."

Nevertheless, Shoppers and other drug retailers have fought back aggressively in Vancouver and other western cities to retain and expand their market niche. With drug sales in British Columbia nearing $1 billion and new growth coming from the Pacific Basin, the stakes are high. So, too, are the rewards.

This special report examines the three biggest names in western Canada's drug store market: London, Shoppers and Pharmasave. All have redoubled their efforts to market, merchandise and operate more effectively in the face of heavy competition from the food chains.