MerryMart acquires *another* large pharmacy chain
The disclosure indicated that MerryMart [MM 3.16 0.63%] has signed an agreement to take a 51% post-investment stake in ZC Ramthel Corporation (“Cecile's Pharmacy”), which is a Mindanao-based pharmacy chain with 21 branches and over 300 employees.
MM noted that Cecile’s Pharmacy has positive EBITDA and net income. The disclosure said that Cecile’s Pharmacy’s current management team would continue to operate the business “in tandem” with MM, much like the arrangement MM used in its acquisition of Carlos Superdrug. No financial terms were revealed.
MB BOTTOM-LINE
I have to admit I did not foresee Injap Sia lurching his way to hitting MM’s “Vision 2030” goal of 1,200 branches by 2030 through the repeated acquisition of family-owned regional pharmacies. Not that the strategy is bad, I think there are great overlaps between MM’s business and the generic footprint of a regional pharmacy, both in terms of customer base, but also in terms of branch location and the behind-the-scenes logistics. If I had to condense Injap’s approach to the convenience store game, and to the distribution game in general, it would be this: the pursuit of stickiness.
Injap wants to create an ecosystem of companies, brands, and services that keep MM and Sia-owned companies entangled with the daily life of Filipinos. It’s not a great stretch of the imagination to think of a “generic MM customer” heading to MM to grab a C2 and a treat, then cruising by the new pharmacy to pick up some Alaxan to deal with the commute home. I mean, this convenience store and pharmacy hybrid is the basic business model of the larger Mercury Drug stores, and it’s something of a proven combo all around the world. Like salt and chocolate, they just go together.
Unlike Fruitas’s [FRUIT 1.27 3.79%] unholy combination of fruit snack food kiosks and medical diagnostic services, the pieces that Injap is stacking on top of his platform/foundation are complementary to the whole, and add a great deal of value both in terms of existing customer flow and revenue, but also in making it harder to replicate and compete with MM’s overall offering.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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