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Advantage Pharmacy mulls entry into Singapore, UAE, New Zealand through JVs, CEO says

Advantage Pharmacy Group, a privately owned Australian pharmacy franchisor, is looking to expand into Singapore, United Arab Emirates (UAE) and New Zealand in the next two to three years via joint venture (JV) partnerships, said Chief Executive Officer and co-founder Steven Kastrinakis.

The Hallam, Victoria-based company, which operates a franchise model with 180 pharmacies across Australia, sees the overseas expansion, particularly into Asia, as part of its medium-term strategy and is receptive to approaches from parties that can bring in JV opportunities, Kastrinakis told this news service.

The company would not embark on such overseas expansion without a proper partner as it needs local expertise and connections, he explained.

South East Asia, through Singapore, is Advantage Pharmacy’s priority as English is “well-spoken as a second language” in that market, he said. He also points to Unite Arab Emirates and New Zealand as other potential markets to break into, as those markets may need the skill sets, data and customer loyalty programs developed by Advantage Pharmacy.

Local pharmacy groups or investors interested in the pharmacy industry can potentially make ideal partners, according to Kastrinakis.

The exact terms and size of the JVs are up to negotiation, but Advantage Pharmacy will be looking at an equal 50:50 JV partnership, he continued.

The company just announced today (13 March) that it has appointed Lynne Galucci, former General Manager of Retail Operations for Priceline Pharmacy, owned by Australian Pharmaceutical Industries [ASX: API], as a non-executive chairperson to assist with its strategic growth plan for the next three to five years.

Apart from the overseas expansion strategy, the company is aiming to get to 250 stores in Australia under its franchise portfolio by 2020, Kastrinakis said. “I don’t think we have reached anywhere close to the saturation level,” he added.

The CEO declined to disclose the group’s own revenue number but said the member pharmacies generate more than AUD 450m (USD 354m) in annual revenue.

Future capital plan

Advantage Pharmacy was founded in 2004 by Kastrinakis and two other pharmacists.

The company now has seven co-owners who are all pharmacists and sit on the board, Kastrinakis said, noting the seven have different levels of shareholdings.

Currently the company does not need to raise capital for its growth initiative, and if it does in two to three years, it will first consider investments from its pharmacy members, the CEO said, noting he is seeing “a real desire” from those members to take some equity in the group.

However, the company does not rule out engaging with potential external investors in future if opportunities arise, especially if the potential parties can assist the group’s expansion strategy, he said.

Pharmacy members associated with Advantage Pharmacy are all owned independently and operate under three different models, with 62 stores under the “Advantage Pharmacy” brand, 15 under the “Chemist Discount” category, and 103 stores that retain their own independent names but use Advantage Pharmacy’s services, the CEO explained.

The company charges the first two types of members AUD 150 per month and the third AUD 45 per month, he noted.

The group is one of the 10 largest pharmacy groups in Australia by store number, Kastrinakis said, noting the competition in the space is increasingly tough. There are more than 20 pharmacy groups in Australia that have more than 50 stores, he said, naming Chemist Warehouse, Priceline Pharmacy and Amcal, owned by Sigma Pharmaceuticals [ASX: SIG], as the key players in the market.

Published on 13 March 2018 on Mergermarket