Macquarie says Chemist Warehouses shoppers spending up

Chemist Warehouse is dominating the nation’s pharmacy sector, with average monthly spend at its stores more than 50 per cent higher than at other chemist chains, new research has revealed.

Chemist Warehouse is dominating the pharmacy channel, with average spend per month more than 50 per cent higher than competitors, according to Macquarie. Picture: Ian Currie

Chemist Warehouse, the pharmacy and retail juggernaut that merged with pharmaceuticals distributor Sigma Healthcare to create an ASX giant, is dominating pharmacy turnover, with the average monthly spend of shoppers at its stores more than 50 per cent higher than at leading competitors.

The pharmacy giant is also growing its sales relative to the major supermarket chains as it strips shoppers from Woolworths and Coles, who traditionally might have shopped at a supermarket for healthcare, beauty and personal care products but are now cross-shopping to Chemist Warehouse.

This is underlined by the fact that Australia’s supermarket sector is estimated to have lost as much as $500m in sales from the health, beauty and home products categories to a gaggle of retailers led by Chemist Warehouse, as well as non-traditional retailers in this space like Amazon, Bunnings and Chinese online marketplace Temu.

The nation’s No.2 supermarket chain, Coles, has conducted its own research that has pinpointed the health category as being steadily drained by pharmacy chains such as Chemist Warehouse. Coles research has included focus groups with shoppers, to see why they are not shopping as much with the supermarket for category products now heavily sold by pharmacy stores such as cosmetics, skin creams, dishwashing tablets, nappies and cleaning sprays.

The continued dominance of Chemist Warehouse in the pharmacy space – has competitive and earnings implications for leading rivals, Priceline, owned by Perth-based conglomerate Wesfarmers and Terry White, owned by EBOS Group.

Fresh research by analysts at Macquarie using a new data harvesting model called ‘Fonto’, which provides details on market share, average basket and average frequency, has painted a picture of retail dynamics such as consumer-purchasing trends, competitive behaviour and brand interaction as it relates to the Australian retailers.

“Unsurprisingly, Chemist Warehouse dominates the pharmacy channel, with average spend per month more than 50 per cent higher than competitors Priceline and Terry White as it benefits from its broad offering,” the Macquarie note said.

The report found that pharmacy, as well as consumer electronics, captured strong spending momentum in the first quarter with pharmacy spending up 11 per cent, followed by a 10 per cent gain for electronics. This was against much weaker performance by other retail categories such as off-premise alcohol (down 9 per cent), furniture (down 6 per cent) and hardware (down 2 per cent).

Chemist Warehouse is still eyeing off growth in Australia, rolling out more stores nationally, as it also targets an expansion in Ireland and other overseas markets.

In late January, Sigma Healthcare shareholders approved the $34bn-plus merger of Sigma with Chemist Warehouse, which effectively was a reverse takeover with Chemist Warehouse shareholders emerging with around 85.7 per cent of the merged entity. The deal created a powerful vertically-integrated pharmacy wholesaler and retailer with more than 1000 stores across Australia and internationally.

Chemist Warehouse was founded by Jack and Sam Gance as well as Mario Verrocchi. Last year, Chemist Warehouse delivered revenue of more than $3.2bn and a pre-tax profit of $581.5m.

Internal Coles analysis published by The Australian in March revealed that the supermarket giant has lost an estimated $100m annually over the past four years to big box pharmacies, which stack their shelves with toilet paper, skin creams and nappies.

And in 2023, Bunnings boss Mike Schneider entered the $5bn home cleaning market, saying he believed the hardware chain could capture a significant slice of the category, which covers everyday needs from laundry detergent to dishwashing tablets.

Originally published as Macquarie says Chemist Warehouses shoppers spending up