SDM picks McKesson Canada exec to be next CEO

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TORONTO — After an international search that lasted seven months, Shoppers Drug Mart’s board announced that the company’s new president and chief executive officer will be a Canadian and from the pharmaceutical industry, though not himself a pharmacist. Domenic Pilla is to take office November 1. He is currently president of McKesson Canada.

Pilla will take over from David Williams, who has been acting as interim president and CEO since the departure, last February, of Jürgen Schreiber.

Pilla brings to his new responsibilities nearly 30 years of experience in the health care and retailing sectors. In announcing the appointment Holger Kluge, chairman of SDM’s board, said, “We are delighted that Domenic is joining us. His valuable experience in delivering health care services and solutions to a broad range of health care providers, ranging from pharmacies to hospitals, as well as governments and patients, makes him an excellent choice to lead the next phase of growth in our business. He brings a strong vision, experienced leadership, passion and energy to work with our associate owners and employees in delivering continued best-in-class experiences for all our customers.”

Pilla is a professional engineer, having graduated with a bachelor’s degree in chemical engineering from McGill University in 1981. He joined McKesson Canada in 2001 as executive vice president and was appointed to his present position in December 2006.

Prior to joining McKesson he was president of Canadian operations at RNG Group, and before that he spent 18 years with Petro Canada, most recently as vice president, Central Canada, for this national oil production and gasoline distribution company.

Commenting on Pilla’s background, Kluge said, “Mr. Pilla’s experience in the health care sector includes community pharmacy, pharmaceutical distribution and sales management, specialty health networks, chronic disease management and adherence, and health information technology.”

Kluge also noted that during Pilla’s time with Petro Canada he was responsible for sales and distribution when Petro Canada was diversifying into food and associated retail services. That reference relates to Petro Canada’s program to introduce fast food and convenience stores into its larger service stations.

Pilla, unavailable for interview prior to his taking up office, indicated in a written statement that he is “delighted to join Shoppers Drug Mart at this time of challenge and reform in health care and community pharmacy.”

He observed, “A time of change is also a window of opportunity for the company to continue to lead the industry in providing innovative patient services, while driving organizational efficiencies and continued growth in the retail sector.”

Had events transpired differently Pilla might have found himself responsible over two years ago for the future of a different retail chain. In January 2009, during Pilla’s presidency, McKesson Canada made an offer to purchase the central organization of the Montreal-based voluntary chain Uniprix. Though the bid was favored by the Uniprix board, the shareholder owners operating the pharmacies rejected it. McKesson, however, retained its role as distributor for the chain.

Pilla will not find himself short of challenges when he steps aboard. Perhaps the most significant is the pressure on SDM’s bottom line. The company, along with other pharmacies in Canada, is seeking ways to compensate for the reduction in income resulting from the provinces’ moves to rein in expenditures on their publicly funded drug plans. Prescription sales hover around 50% of SDM’s revenues.

Other issues affecting SDM’s pharmacy operations include: the increasing share of prescriptions taken by generics; the degree to which the com­pens­able services that regulators are empowering pharmacists to undertake can make up for reduced prescribing income; the pressure to improve pharmacy productivity; the rollout of SDM’s corporate generic brand Sanis.

These issues present a mix of challenge and opportunity, and adroit strategic and tactical management will be crucial.

Front of store is not free of issues either. In that area Pilla will have to deal with such issues as: the sales/margin conundrum and whether or not to persist with SDM’s high/low pricing model; the recent slowdown in growth; the aptness of the store model; selection issues; the expansion of services; the future of the loyalty program.

Relations between the associates and the central office appeared to deteriorate during Schreiber’s term of office. Another of Pilla’s challenges will be dealing with a lawsuit initiated by some associates claiming the company is not providing them with a fair share of the profits generated from store ­operations.

The reaction to Pilla’s appointment from the financial community has been positive overall. There has been satisfaction that the selected candidate is familiar with the ongoing radical changes in the Canadian pharmacy scene and is familiar with the pressures facing community pharmacists.

Some analysts have expressed disappointment that the new appointee has not had deeper retail experience. They comment that the retail aspects of a gas service station business do not bear much relationship to the complexity of such a major retail operation as SDM. There is, however, general relief that the leadership search is over and that action can be expected on the strategic issues that have been hanging fire.

Although the financial community was expressing increasing concern as the search process dragged on without a conclusion in sight, that concern was not reflected in SDM’s performance on the Toronto Stock Exchange. To the contrary, the stock that was listed around $38 in mid-February closed on October 3 at $40.14, an increase of almost 8%, and this during a period when the TSX index lost 15%.

Much of the credit for the company’s stability throughout what could have been a turbulent period goes to David Williams, a former senior executive with Loblaw Cos. and a seasoned retailer. When Schreiber resigned Williams was asked by his board colleagues to switch from his chair position to assume the interim president and CEO role. It was at this point that Holger Kluge took over as chairman, in Williams’ place.

Kluge gave credit to Williams’ contribution in the statement he released on the Pilla appointment. “On behalf of the company’s associate owner, employees and the board, I would like to take this opportunity to thank board member and interim president and CEO Dave Williams for his excellent leadership during the last few months,” he said.

Williams, who will remain on the board, is to work closely with Pilla during the transition period.


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