Inside This Issue - News
Super-Pharm recognized as best global drug chain
January 4th, 2011
by David Pinto
HERZLIYA, Israel – Super-Pharm, Israel’s largest, and the world’s most internationally focused, drug chain, is Chain Drug Review’s Global Chain Drug Retailer of the Year for 2010.
Many factors justify this selection. For one, Super-Pharm just concluded the most successful year in its 32-year history, a 12-month period during which sales exceeded $1 billion out of 160 drug stores in Israel, while the retailer added another $200 million from drug stores in Poland and China.
2010 CDR GLOBAL RETAILERS OF YEAR:
Leon Koffler & Lior Reitblatt,
For a second, 2010 caps a decade of stunning accomplishment for Super-Pharm, a period that has seen the retailer enter and build a major presence in Poland, where the company now operates 26 drug stores, while at the same time expanding the Chinese drug chain that it purchased four years ago from 34 stores to the 90 that it operates today.
Finally, 2010 was the year in which Super-Pharm improved and consolidated its No. 1 position in its home country. The retailer’s 160 Israeli drug stores blanket the country, extending from the town of Kiryiat Shmona on the northern border between Lebanon and Israel to Eilat in the south; from Tel Aviv, the major urban center of 1 million people on the country’s western edge on the Mediterranean Sea to Jerusalem, Israel’s capital city. Each month some 3.5 million Israelis visit a Super-Pharm drug store.
Additionally, the year that just ended saw the retailer add or expand a range of customer services that combined to solidify its position as Israel’s leading health care retailer. Among them:
• Super-Pharm entered the serviced optical business, opening 14 optical shops within its drug stores and staffing each with an optician licensed to prescribe eyeglasses and contact lenses. These serviced departments, combined with the self-service optical assortments in all remaining Super-Pharm drug stores, have catapulted the company to No. 3 among Israel’s optical retailers.
• Last year Super-Pharm upgraded its 13-year-old Lifestyle Consumer Club loyalty program by offering its “single-purpose” loyalty card customers the opportunity to replace their current card with a Lifestyle/MasterCard credit card, which combines the functions of a loyalty and credit card. To date, the Lifestyle program encompasses 390,000 cards, out of which 230,000 are MasterCard multipurpose cards and 160,000 are single-purpose cards.
“The new card offers some real advantages over the old one,” says Lior Reitblatt, Super-Pharm’s chief executive. “The most obvious one is that Super-Pharm gained income from granting credit to its customers, and that comes on top of the shared income that MasterCard transfers to the chain out of the total purchases of the cardholders in the rest of the market. The customers benefit from a series of special prices with other designated retail chains that gives Lifestyle an exclusive position to benefit from this unique base of customers.
“The loyalty program utilizes Sagramata — a sophisticated data-mining program — that enables Super-Pharm to supply Lifestyle members with monthly personalized coupons. This personalization results in an increased basket for most members and stimulates an increase in monthly visits to the stores.
“The system is capable of identifying customers who are changing or losing their shopping loyalty to the company and can market directly to their needs to enhance the reasons for shopping at Super-Pharm. All offers are based on past reactions of the individual member to the different product offers and to previous coupons.”
Super-Pharm also uses the Sagramata system with all other credit cards in the market. The technology enables the retailer to supply personalized coupons at the checkout for a consumer’s next visit to the chain.
• In 2010 Super-Pharm Poland, which first turned a profit two years ago, became a vital part of the company’s balance sheet. The 26 stores, located throughout Poland, combined to produce $160 million in sales, or an average of $6.5 million per store.
“It took time for Polish shoppers to respond to what we call our three-in-one offer — prescription drugs, beauty products, and the toiletries and baby categories that form the core of our general merchandise offering,” explains Leon Koffler, Super-Pharm’s chairman. “We initially struggled to overturn Poland’s restrictive pharmacy regulations, a process that took three years.
“Now, our Polish customers have learned to embrace our offerings, modern marketing techniques and forward-thinking advertising. We couldn’t be more pleased with our progress. We find Poland an excellent country for business, with a stable economy and many opportunities.”
Super-Pharm’s plans for Poland call for some 70 drug stores to be operational by 2015.
• Perhaps most significant has been the effort to develop and build a range of programs directed toward the communities in which Super-Pharm operates. The most recent example was the excursion that 900 Super-Pharm managers took, on their day off, to the Israeli city of Kiriat Malachy, a low-income community. With the help of local authorities, 95 refurbishment projects were identified and completed.
“Like all good corporate citizens, we believe we have an obligation to give something back to our communities,” says Koffler. “It’s as simple as that.”
To that end, Super-Pharm has organized the company into 10 geographical zones, each committed to the communities in which those zones are located. The management of each Super-Pharm contributes to those communities by getting involved — building playgrounds and renovating community centers; participating in school and hospital programs; and encouraging and participating in health-related events, educational initiatives and other community activities. In addition, Super-Pharm contributes to such organizations as the Juvenile Diabetes Research Foundation, of which Koffler is president, women’s crisis centers and a host of other philanthropic organizations.
Beyond those initiatives is a deep and significant commitment to Super-Pharm’s communities that turns on a simple but important idea — bringing together the diverse elements in the multicultural communities that make up the state of Israel.
“Some 20% of our workforce in Israel, about 1,000 employees [out of 5,800], are Israeli Arabs,” says Reitblatt, “as are 15% of our associates [Super-Pharm utilizes a franchise operating formula that puts individual store ownership in the hands of associates, usually pharmacists, much as Shoppers Drug Mart, the Canadian drug chain founded by Leon’s father, Murray, goes to market.] In other words, 25 of our 160 drug stores in Israel are owned by Israeli Arabs. Today Super-Pharm is one of the country’s largest employers of non-Jewish Israelis.
“In fact, we see no difference between the groups,” says Reitblatt. “We treat them equally as colleagues. Our customers are from all communities across the country.
“During moments of crisis — and they do happen, as this is the Middle East — we encourage an open discussion of events in order to give encouragement to one another in the hope that the personalized warm relations will cross the borders of discontent and be duplicated in other organizations and communities around us.”
For Super-Pharm, its business is all about the customer — to a degree not often encountered in drug store retailing.
“Service is our mantra, and our R&D is directed toward programs to support it,” comments Reitblatt.
That’s why the company has just initiated an upgraded program where customers can scan their prescriptions on entering the store, then go to the pharmacy when a visual indicator announces that their order is ready for pickup. The benefits of the approach include a shorter line at the dispensary, more efficient interaction between the customer and the pharmacist, and allowing the customer to utilize the time between the two events to shop.
That’s why, as well, the company continually experiments with new programs designed to reduce the time customers spend in checkout lines. Currently being tested is a technology-based, scan-as-you-go shopping cart that uses a personalized smartcard. Different than most other self-scanning programs, which take place at the checkstand, the system scans each item as it is selected and deposited into the cart. That enables the system to provide personalized offers based on the product scanned and the specific aisle the customer is in.
“We care about our customers,” says Koffler, “but we also want them to spend money in our stores. To that end, we’re especially sensitive to programs designed to free up customers to spend more time shopping and less time checking out or waiting at the pharmacy counter for their prescriptions. This is especially important today in Israel, when margins on prescription drugs are quickly disappearing and we’re becoming more dependent on front-end sales. While our sales per square foot — $1,200 — is higher than the industry average, our front-store productivity is even higher, with $4 million in non-drug sakes derived from 3,000 square feet.”
To further encourage customers to spend money in their stores, Super-Pharm’s top managers have developed one of the most extensive, sophisticated and intelligent private label programs chain drug retailing has yet seen.
Like the country in which it operates, Super-Pharm is not without its critical issues, even during this period of record productivity and unprecedented results. The China experiment, despite being profitable through its 90 drug stores, has not gone smoothly, punctuated by disputes with the company’s Chinese partner and unanticipated problems in convincing the country’s various regulatory bodies of the need to repeal restrictive and anticompetitive regulations, which block Super-Pharm from opening stores in the rich market of eastern China.
The stores themselves, however, have performed nicely, giving Super-Pharm an annual return of 50% on its investment. Both Koffler and Reitblatt remain optimistic about the company’s future in China, but not without a good deal of concern.
For the moment, there is no more dynamic, more forward-looking and more ambitious drug chain anywhere in the world than the one that makes its home in this suburb of Tel Aviv and has displayed uncommon vision and perspicacity in its ability, unique in chain drug retailing, to understand a concept that, though elusive, is critical to any retailer’s ultimate survival — the marketplace need not end at a nation’s borders.
ALSO HONORED BY CHAIN DRUG REVIEW:
• Retailers of the Year: Joe Magnacca of Duane Reade, Bob Zimmerman and John Spina of Walgreens
• Merchant of the Year: Mark Panzer, Pharmaca Integrative Pharmacy
• Pharmacy Execs of the Year: Kerr Drug Rx management team