Royal Dutch/Shell Group - Company Profile, Information, Business Description, History, Background Information on Royal Dutch/Shell Group

Royal Dutch Petroleum Company), controlled about 50 percent of the Canadian tobacco market, and it had a stable of leading cigarette brands including Players and Du Maurier. With the possibility of a decline in tobacco consumption as health warnings began to appear, the company decided to diversify into several different industries. By the time it bought Koffler Stores, Imasco owned a chain of cigar stores, the Hardees restaurant chain in the United States, and a chain of 63 Top Drug Marts. With the merger, the Top Drug Marts were converted to Shoppers Drug Marts, giving the whole chain close to 400 retail outlets.

History of Royal Dutch/Shell Group

David Bloom started his career as a pharmacist at a Shoppers Drug Mart in 1967. He later ran his store as an Associate, but by 1971 he had been recruited for management training. He was only 39 when he became president and CEO in 1983, and he was apparently on a par with Murray Koffler in terms of energy and retail vision. The company had grown rapidly through the 1960s and 1970s, starting as a public company with slightly more than 50 stores and entering the 1980s with about 400. Now with the secure financial backing of Imasco, Bloom planned to double the number of stores. The chain continued to grow by acquisition. In 1986 Shoppers Drug Mart bought up the Super X Drugstores, an Ontario-area chain of 72 stores. Shoppers Drug Mart moved further into the U.S. market in the early 1980s as well, opening about a dozen new locations in Florida. Elsewhere, independent pharmacists became Shoppers Drug Mart associates, giving the chain about a quarter of the Canadian drugstore market by 1980. Sales that year had grown to $700 million, doubling from $350 million two years earlier. Bloom laid out a long-term plan for growing the chain, aiming to triple sales by 1995.

The company continued to advertise heavily, taking advantage of its position as the only Canada-wide drugstore chain. It introduced several in-house brands and positioned itself as a convenience store, with many special promotions, late hours, and the introduction of more food and snack items. In 1993 the company bought up a chain of ten drugstores called Pinder Stores, and followed this in 1995 with a chain of 24 Bi-Rite Drug Stores based in western Canada. Its largest acquisition was the 135-store Big V Drugstores chain it bought in 1996. Bloom initiated a major reorganization of the company in the mid-1990s to enable it to take better advantage of its nationwide reach. Because each store was run by an individual associate who had lots of independence, the corporate structure was not as tight as that of some other comparable chains. Shoppers Drug Mart overhauled its distribution system in the mid-1990s to give it just three distribution centers, one in the East, one in the West, and another in central Canada. The company also revamped its information technology for handling inventory and accounting, and moved toward a more centralized management, doubling the number of workers in its Toronto office. The chain also moved toward a new store format, with a bigger floor plan. By the late 1990s, the Shoppers chain had more than 800 stores and revenue of C$4 billion.

Public Company Again in the 2000s

Shoppers Drug Mart continued to open new stores in 1999, moving out model stores with redesigned shelving and lighting, a new color scheme, and other features. The company developed new prototype stores for each of its five typical locations--urban, rural, suburban, regional mall, and its so-called "superstore." The chain was still going strong, with plans for more than 20 new stores that year, and renovations and revampings for many older stores. But that year its parent, Imasco, announced that the drugstore chain was for sale. Imasco had been 40 percent owned by BAT, and BAT wanted to buy up the rest of the company, provided it shed its nontobacco businesses. Shoppers received many offers, but finally sold for $1.74 billion to a group of Shoppers managers and outside investors led by the U.S. leveraged buyout firm Kohlberg Kravis Roberts & Co. (KKR). KKR had recently bought out other retail firms, including the grocery chain Safeway, Stop & Shop Companies, and Randall's Food Markets.

David Bloom stayed on as CEO for one year after the buyout, while the chain continued to roll out new stores in new formats. He retired in 2001 and was replaced by Glenn Murphy. Murphy took the company public, hoping to raise money to pay down the company's debt and finance a redoubled expansion effort. The company began selling stock again in November 2001. Shoppers Drug Mart planned to open as many as 30 to 40 stores a year, noting that as the country aged, there was growing demand for drugstores. The number of prescriptions written in Canada was rising, as was the average price of a prescription. About half of Shoppers' sales came from prescription drug sales. The company also seemed well insulated from the business cycles that shook other parts of the economy. One analyst quoted in Canadian Business (November 26, 2001) noted, "Regardless of what the economy is like, people are going to continue to get sick and need toilet paper." The chain remained committed to growth, believing that there were still opportunities to consolidate the Canadian pharmacy business.

Principal Competitors: The Jean Coutu Group (PJC) Inc.; Katz Group; London Drugs Ltd.

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