Retail’s serial disrupter won’t stick to the pharmacy script

Chemist Warehouse has opened stores in New Zealand and is now looking further afield to China, Singapore and the US.

My Chemist Retail Group co-founder and chairman Jack Gance. Picture: Aaron Francis.

There wasn’t a spare seat in the main conference room of the high-rise offices of PwC in Melbourne on the evening of November 22 as Jack Gance took to the stage to address a special masterclass of the Young Australia-­Israel Chamber of Commerce.

The deeply private chairman and co-founder of the powerhouse My Chemist Retail Group was there to talk about a topic close to his heart.

“Entrepreneurs don’t take risks, they mitigate them’’ was the title of Gance’s address, and one of his trademark quotes.

On the screen behind him was a banner that read: “Jack Gance — the serial disrupter.”

Gance and his partner, the company’s chief executive, Mario Verrocchi, have turned the My Chemist Retail Group, comprising the Chemist Warehouse and My Chemist chains, into one of Australia’s largest retailers. The average Chemist Warehouse is two or three times bigger than the traditional neighbourhood pharmacy and it has emerged as a category-killer in the $13 billion retail pharmaceutical sector with more than 300 stores nationwide.

Both Gance and Verrocchi made it into the top 100 of this year’s rich list, worth an esti­mated $813 million and $803m ­respectively.

Yet asked at the event whether wealth has changed his world, Gance simply shook his head — he still feels much the same as the day he founded the group with his brother Sam in 1972.

In an interview with The Weekend Australian, he is more colourful on the issue. “I’m suing BRW for flattery,’’ he says of the former publisher of the rich list, before noting that he still flies economy domestically. And the 72-year-old still wonders why he pays to fly further up the plane when he leaves our shores.

“I still find it hard to pay for a business class fare. I just find it hard to justify it to ourselves.”

His wife Evelynne, who also ­attended the PwC function, adds: “We still have the friends we had before. We haven’t changed from what we were.”

And she is clearly no fan of rich lists. “To be honest, I’d rather not be there. I’d rather keep a low profile.”

Today the Gances — Eve­lynne has been with the business for 18 years and is a key player in the company’s international sourcing operations in Asia — are focused on taking the Chemist Warehouse brand to the world.

Stores in China, the US and Singapore are on the agenda after the successful expansion of the group into New Zealand.

Jack Gance says an IPO of Chemist Warehouse off the agenda Picture:Aaron Francis

“I am enjoying what I am doing. I enjoy the cut and thrust of new markets. I do a lot of travel ­internationally looking at opportunities,’’ Jack Gance says.

But he is clear one thing still ­remains off his agenda for the time being: the long-mooted float of the company on the Australian Securities Exchange.

“We have no immediate plans to IPO and are not moving ­towards a float. We have other priorities that are more important. It is not on our horizon.

“To float, we would have to make a lot of changes that we haven’t had the time or bandwidth to do. At the moment we are more focused on growth. And we don’t want to take money off the table. We want to grow the business among our own partners.’’

Gance reveals that Chemist Warehouse has been restructuring its ownership from an individual partnership model to a full franchise model to have “more ­effective and efficient operations”.

He believes that word of the ­restructure in the financial community may have triggered fresh talk of an IPO, admitting he has had numerous meetings with ­investment banks in recent years that he says “keep our ears to the ground and help us enjoy the wide world of business”.

While the East Yarra Friendly Society, the main entity through which the My Chemist and Chemist Warehouse brands are controlled, has not lodged ­accounts with the corporate regulator for more than a year, Gance says the local business now turns over more than $5 billion a year.

“We are experiencing double-digit revenue growth with same-store growth at just under 10 per cent,’’ he says.

The group’s online business, ePharmacy, is growing faster than the bricks-and-mortar operation but it is still less than 5 per cent of the group’s total turnover. The margins are well below those of the physical stores.

Chemist Warehouse now has five stores in New Zealand, each of them doing 5-10 times the volume of the average New Zealand ­pharmacy.

Gance says the trans-Tasman expansion has given the company a “great insight into what you can do if you build it right”.

In addition to Hong Kong and Singapore, mainland China is now firmly on the agenda, leveraging off the group’s exclusive partnership with Tmall Global, Alibaba’s dedicated cross-border e-commerce site.

Alibaba supports Chemist Warehouse during major mar­keting campaigns such as the recent Singles Day, when it sold 100 million renminbi (nearly $20m) worth of products in just seven hours, beating last year’s ­record numbers.

Gance now says Chemist Warehouse will set up its first bricks-and-mortar outlet in China in one of its 12 free trade zones that have been established over the past five years.

The US is also an opportunity.

Gance reveals that Chemist Warehouse examined playing a role in the $US4.4bn purchase this year by the Walgreens retail pharmacy chain of 1900 stores across the US from rival Rite Aid. “We looked at the possibility of getting involved in that. It didn’t come off. But it is a huge market and we are looking at our options. We believe our model would ultimately be successful in any country, and it would be incredible if we could pull it off in America.”

In Australia Chemist Warehouse is looking to expand further into the booming organics sector after backing the October launch of a new vitamin company, The Natural Vitamin Co, co-founded by Melbourne’s Sam Schachna.

Gance says Chemist Warehouse will continue to open about 30 new stores a year, despite ­opposition from the powerful Pharmacy Guild, which represents the interests of independent pharmacies.

The guild has pushed hard for the retention of historic ownership regulations that require pharmacies to be owned by a pharmacist, cap the number of pharmacies a pharmacist can own and prevent a competitor opening within 1.5km of an ­existing outlet.

For years Gance and Verocchi have exploited a loophole in the rules to expand their empire but the two sides continue to butt heads. While the Productivity Commission proposed last year to deregulate the industry by removing the pharmacy ownership and location rules, Health Minister Greg Hunt, whose grandmother was a pharmacist, has supported retaining the present regime.

“I have had discussions with Minister Hunt about that and voiced my views. Not only does it hurt us, it hurts pharmacies generally,’’ Gance says.

“Our growth hasn’t been at the expense of pharmacies generally. Our growth has come from super­markets and specialty stores. I think the health food store business has been decimated by our vitamins business.”

His critics would disagree.

But Gance is not about to let the rules hold back the Chemist Warehouse juggernaut. “We are working within whatever rules the guild throws at us. We have very strong loyalty with consumers. So we are just getting on with it. It is like fighting with one arm tied behind your back but I think we have a pretty powerful punch.”