growth, pressurised margins and competitors including major retail chains, independents and Australia’s two largest retailers, Woolworths and Coles all vying for market share. The merging of Terry White Group and Ebos’ Chemmart pharmacy brand brings together significant brands. Speaking to Inside Retail Weekly, Anthony White, CEO of Terry White Group, said the proposed group merger represents an approximate combined market share of 14 per cent. Within the next five years, White has a target to increase that number to 25 per cent. “We now have the scale to really leverage the opportunity for the benefit of our pharmacy owners, shareholders and really deliver a better job for customers in pharmacy as well,” said White. The nitty gritty of the deal sees Ebos Group Limited, parent company of Chemmart and one of the largest Australasian wholesalers and distributors of healthcare, medical and pharmaceutical products, selling the business assets of Chemmart to Terry White Group Limited in exchange for equity. Ebos will invest additional capital to achieve a 50 per cent equity stake in the merged entity. Patrick Davies, Ebos Group CEO The management entity for the three networks – Terry White Chemists, Chemplus (acquired by Terry White Group in mid-2015), and Chemmart – is to be renamed. Corporate head office will be located in Brisbane, with major regional offices in Melbourne and Adelaide. The management team will be led by Anthony White as CEO, while Chemmart executive director, Duncan Phillips, will join the executive team as chief operating officer. Patrick Davies, Ebos Group CEO, will join the existing Terry White Group directors on the board of the merged entity. “Bringing these groups together is really sensible and pragmatic to do in a marketplace that needs whoever is running a retail pharmacy brand to be well resourced and focused on having the best format and best possible offer for store owners and consumers’ benefit,” Davies told Inside Retail Weekly. The deal has been in the pipeline for approximately 12 months with both companies using that duration to conduct due diligence in covering all the details of how both organisations operate. Christchurch-based Ebos brings a network of 270 stores to the table, with the Terry White Group accounting for 230 stores. “They’re [brand identities] quite complementary in terms of their focus on frontline health services delivery and having really strong value for money and good price messages to customers,” said White. “The merchandise and ranging is very similar as well, so it’s really good in terms of the cultural and merchandising synergies – the opportunities in marketing are massive, as we will bring together a combined marketing budget that’ll be very substantial.” Timing right Davies said the timing is right for the merger, saying that economic factors and a saturated market have necessitated operating a larger organisation to compete with rivals. “It’s very important when any consumer in Australia is thinking about where to buy products that we sell, that we’re aware there are alternatives everywhere,” he said. “This is a really competitive world. We are up against the biggest retailers in our country as well as well organised and obviously impactful local industry competitors in Chemist Warehouse, Priceline, independent pharmacies and many other groups in the pharmacy landscape. We need to be strong enough to be prosperous in that market.” Pricing of common medicines that are sold in the major pharmacy groups and the two major supermarkets exemplifies the extreme competitiveness in the pharmacy industry. A box of Nurofen 24s at a retail pharmacist has an average price of around $5, while Coles and Woolies price it at approximately $6. Betadine sore throat gargle solution will set punters back around $11 at a pharmacist and $13-14 at a supermarket. “It’s a super aggressive game,” explained White. “And pharmacy is so aggressive it’s taken share away from grocery in the health and beauty space. “Margins are under pressure and the industry growth is only forecast to grow at pretty benign rates of one to two per cent. So the criticality of scale is very important – that’s why we are doing this deal.” Anthony White, Terry White Group CEO White said the deal addresses the slow growth in the industry and pressurised margin environment due to costs being duplicated. “We’re leveraging the capability of the two combined organisations to deliver a more competitive solution to customers.” The PBS reform challenge Ongoing PBS reforms by the federal government have also impacted the industry, impacting on profitability for retail pharmacies through the distribution costs of medicine. Government pressure to reduce the costs of medicine, while perfectly logical for consumers, has had harsh consequences for pharmacy retailers’ operating costs. “Pharmacists are pursuing how prosperous they can be with their front of shop, how well positioned they are in the market and how they fight to stay relevant,” said Davies. Rather than radically change the product mixes of the involved entities, the group merger will look to build on supplier relationships and the strong platform already in place for both brands. “The format and locations of the store are perpetually under review, so have we got the right pharmacy format to make the shopping experience as good as it can be? That’s going to be a big focus for the group,” said Davies. White ruled out any plans to establish Terry White Group retail stores in New Zealand, with the merger primarily aimed at the substantial growth opportunity in Australia. “With a base of 500 stores, we are very, very strong in Queensland, Western Australia and South Australia,” he said. “We would certainly like to grow in those states, but there’s a very big opportunity for this group in NSW and Victoria – it’s absolutely massive.”