Survival of the fittest

Some people believe independent pharmaceutical wholesalers have a gloomy future. Malcolm Goldie argues that they have a firm foundation for survivalAre independent pharmaceutical wholesalers a dying breed? At face value the outlook is not good - let's look at the figures. There are 13 independent wholesalers and two national. Phoenix Pharmahandel, the German wholesaler whose UK subsidiaries are Philip Harris Medical, Fosters Healthcare, L Rowlands and Border Chemists Alliance, claims to have at least a 10 per cent share of the UK wholesale market. It must now be regarded as a major player and it clearly wants to buy more wholesalers.Competitive pressures would seem to suggest that the remaining independent wholesalers should, like so many of their predecessors, be either taken over or simply driven out of business. But new names are appearing and established names continue to thrive. For example, Norchem, based in Ferryhill, Co Durham, is more than doubling its warehouse area.Many independent wholesalers are Numark suppliers. This relationship provides them, their customers and the public with a nationally known and advertised brand. Not all Numark pharmacies have their shops fitted by Numark, and so these shops fail to become fully integrated members of the symbol group. However, the range of own-label stock provides the community pharmacist with value for money merchandise that enables him or her to compete with all comers in the High Street.The fact that independent wholesalers flourish must mean they are doing at least as well, if not better, than their competitors. That is because they have the following strengths:* Staff usually know the customers personally, very often on first name terms. Any problems, which can develop quickly if you are delivering up to three times a day, can be solved quickly and effectively.* The wholesalers have a certain intangible bond with independent pharmacists. While this goodwill counts for nothing if the wholesaler fails to supply the right goods at the right price, all other things being equal, it does have some influence on their relationship.* Most regional wholesalers do not have to produce profits to keep public shareholders and the City happy.* Being regionally based, the wholesalers can respond to particular stock demands on a local basis.* At least one wholesaler trades as a co-operative, with the profits returned to its customers every month. These can amount to a tidy sum and can more than equal the discounts offered by wholesale competitors.* Some community pharmacists object to trading with a wholesaler which runs a retail operation that competes with them. But they must get their supplies somewhere else - an independent wholesaler may be more to their taste.Ian Brownlee, managing director of Mawdsley-Brooks, says: "Many of our clients are unhappy at the prospect of trading in a market dominated by multinational organisations whose first commitments, quite rightly, are to the efficient running of their own retail organisations."Such companies are forced to maintain this commitment, he adds, because they are under pressure from institutions and shareholders to increase their profits.Some people still doubt whether independent wholesalers have a future. Mr Brownlee says that nearly all wholesalers have invested heavily in new facilities and equipment - Mawdsley's has spent millions on a new head office and warehouse, which suggests it is clearly confident about its long- term future.But he admits independent wholesalers must offer more services, as UniChem and AAH Pharmaceuticals already do, to help pharmacies.Smaller wholesale companies may lack the resources to deliver such programmes and these would "... certainly [be] beyond the capabilities of their short-line competitors. This may well lead to further consolidation in both sectors".Provided all UK pharmacies are not eventually swallowed up by multiple chains, who self-supply their branches, or are owned by national wholesalers, independent wholesalers will survive to meet the needs of these outlets.Their future is also assured if one assumes that pharmacists continue to seek dispensing contracts. There are many successful community pharmacies that provide a good living for their owner managers, but that would not be viable under managers.Many independent pharmacists would be paying far more for their stock today if independent wholesalers did not exist.Malcolm Goldie has been a community pharmacist for 37 years. He is now the secretary of two local pharmacy committees and a non-executive director of Norchem, an independent pharmaceutical wholesaler in Co Durham.