Wall Street Journal  Feb 26  Comment 
Loblaw Cos. said its fourth-quarter profit more than doubled and revenue climbed nearly 50%, outpacing analyst expectations as it continued to benefit from its acquisition of Shoppers Drug Mart Corp.
Wall Street Journal  Apr 30  Comment 
Grocery giant Loblaw Cos. reported slightly stronger first-quarter revenue and same-store sales, but its earnings slumped nearly 40% in part due to costs related to its purchase of drugstore giant Shoppers Drug Mart Corp.
Canada.com  Mar 21  Comment 
Loblaw Cos Ltd.’s $12.4-billion acquisition of Shoppers Drug Mart Corp. will close next week under a deal with the country's Competition Bureau after agreeing to sell 18 stores and nine in-store pharmacies
CANOE.ca  Nov 12  Comment 
Shoppers Drug Mart Corp, Canada's largest pharmacy chain, on Tuesday reported slightly lower quarterly net income due in part to charges from its pending acquisition by Loblaw Co Ltd.
Canada.com  Nov 12  Comment 
Shoppers Drug Mart Corp. posted a 2.5% rise in earnings Tuesday and saw its customers’ basket size grow at the cash register as the big pharmacy chain geared up for a merger with top food retailer Loblaw Cos. Ltd
Canada.com  Oct 23  Comment 
Canada’s convenience stores are worried the pending mega-merger of Loblaw Cos. and Shoppers Drug Mart Corp. will further deplete the $40-billion sector, which lost money last year amid heightened competitive pressure
Reuters  Sep 12  Comment 
Shoppers Drug Mart Corp shareholders on Thursday voted overwhelmingly in favor of Loblaw Co Ltd's C$12.4 billion ($12.02 billion) bid to buy Canada's largest pharmacy chain.
Reuters  Aug 28  Comment 
Loblaw Co Ltd, which last month announced a C$12.4 billion ($11.9 billion) deal to buy Shoppers Drug Mart Corp, will submit its application to the competition bureau after...
Canada.com  Jul 18  Comment 
Shoppers Drug Mart Corp, which has agreed to bought by grocer Loblaw Co Ltd, reported a slight increase in second quarter profit, helped by stronger pharmacy sales
Canada.com  Jul 15  Comment 
The Toronto stock market closed higher Monday, led by strength in the consumer staples sector after grocery giant Loblaw Cos. Ltd. (TSX:L) announced plans to buy Shoppers Drug Mart Corp. (TSX:SC) for $12.4-billion in cash and stock


Shoppers Drug Mart Corporation (TSE:CS) is a pharmacy products and services provider based in Canada. Shoppers Drug Mart Corporation (SDM) operates Canada's largest and only nationwide drugstore chain by gross income and branch locations under the brands Shoppers Drug Mart and Pharmaprix stores (within Quebec). The company earned $10 billion in revenue and $585 million in net income in 2009.[1]

SDM generates income primarily through the sales of merchandise from its front stores (about half of total sales). Front store merchandise categories include over-the-counter medications, health and beauty aids, cosmetics and fragrances, everyday household needs, and seasonal products.

Similar to the acquisition strategy implemented by U.S. pharmacy services provider CVS Caremark Corporation, Shoppers Drug Mart Corporation expands its geographical presence through the partial or full purchase of independent pharmacies. Furthermore, the demand of the drugstore industry in Canada is driven by the graying of the nation's population.[2] As Canada's only nationwide drugstore chain, Shoppers Drug Mart Corporation gains an edge over individual companies by using economies of scale to purchase drugs from large wholesalers and to access large groups of customers (e.g. governments, insurers, and corporate employers).

Company Overview

Shoppers Drug Mart Corporation owns 1,170 full-service retail-drug chain stores. By full-service, Shoppers Drug Mart/Pharmaprix stores primarily sell over-the-counter medications, health and beauty aids, cosmetics and fragrances, seasonal products and everyday household essentials.

The management structure that comprises SDM's store network are individual "associate-owned stores" (variable interest entities, or VIEs), with the company as the primary beneficiary. Associate-owned stores remain separate legal entities and consolidation of these stores has no impact on the underlying risks facing SDM.

Additionally, Shoppers Drug Mart/Pharmaprix stores rely heavily on private label brands in its merchandise offering. For example, the private label and exclusive brand penetration rate is 16.9% of total sold merchandise. Within its retail store network, SDM licenses or owns more than 30 medical clinic pharmacies under the name Shoppers Simply Pharmacy (Pharmaprix Simplement Sant  in Quebec), two luxury beauty destinations operating as Murale, and 66 Shoppers Home Health Care stores which sells medical equipment to institutional and retail customers.

The company also owns Shoppers Drug Mart Specialty Health Network Inc., a provider of specialty drug distribution, pharmacy, and patient support services. The company also owns MediSystem Technologies Inc., a provider of pharmaceutical products and services to long-term care facilities in Ontario and Alberta provinces.

Business Segments

Like most drug stores, Shoppers Drug Mart Corporation consists of two segments: "front store sales" and "prescription sales". Note that functions in SDM's business segments overlap between the "retail-drug formats" and "specialty services" seen in the overall structure of the company above.

Front Store Sales (52.4% of total sales)

"Front store sales" primary consist of revenues generated from the merchandise of SDM's drug-retail stores (Shoppers Drug Mart/Pharmaprix). Merchandise includes over-the-counter medications, health and beauty aids, cosmetics and fragrances, seasonal products and everyday household essentials.

Increasing revenue in "front store sales" are driven by three factors: selling space, promotional activities such as SDM's retail loyalty card Shoppers Optimum program, and private label brands. As for promotional activities, SDM's retail loyalty card Shoppers Optimum program continues to be one of the largest retail loyalty card program in Canada with 9.3 million active cardholders. Finally, private label brands allow SDM to sell merchandise at lower prices at higher profit margins. SDM's private label and exclusive brand penetration rate iss 16.9%.

Prescription Sales (47.6% of total sales)

"Prescription sales" primarily consist of revenue generated from specialty medical supplies (equipment, drugs, etc.).

Overall pharmacy sales growth in SDM has consistently been driven by strong growth in the number of prescriptions filled, while increased generic utilization continue to have a deflationary impact on sales growth in this business segment. For example, generic drugs represent 51.2% of prescriptions dispensed.

Business Growth

FY 2009 (ended January 3, 2009)[1]

  • Net sales increased 6% to CAD 10 billion.
  • Net income increased 5.5% to $585 million.

Trends and Forces

SDM Extends Geographic Expansion Primarily through the Acquisition of Competitors' Stores

Shoppers Drug Mart Corporation increases its number of locations in Canada’s fragmented retail-drug store marketplaces mainly through acquisitions. Shoppers Drug Mart Corporation's CEO J rgen Schreiber estimates SDM to spend approximately $575 million CAD to capital expenditures in fiscal 2010, with approximately 75% invested in the store network, including acquisitions of drug stores and prescription files, thereby increasing selling square footage by 10% (or adding 120 to 130 new drug stores to the network).

The Sale of Prescription Drugs are Susceptible to Canadian Federal and Provincial Laws

To operate legally in Canada, SDM adjusts its pharmacy reimbursement policies based on public drug plans that regulate the allowable drug cost of a prescription drug, the permitted mark-up on a prescription drug, and the professional or dispensing fees that are charged on prescription drug sales to patients under the public drug plan. This impacts SDM's sales because besides those without insurance, prescription drug sales are reimbursed or paid by third-party payers, such as governments, insurers, or corporate employers. Moreover, in Canada, federal, provincial, territorial, and local laws and regulations oversee the approval, packaging, labeling, sale, marketing, advertising, handling, storage, distribution, dispensing and disposal of prescription drugs, which often increase compliance costs.

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SDM Drug Store Network by Province[3]


A competitive bid process was implemented by the government through a call for applications for three popular "multi-source" prescription drugs. A "multi-source drug" is a prescription drug that has one or more generic equivalents. Under the call for applications, both brand and generic manufacturers were provided the opportunity to compete for preferential listings ("Preferential listing" of a single drug is a strategy for controlling costs within a drug class) for reimbursement under Ontario’s public drug programs, thereby decreasing the amount of funding available in the public drug plan for public sector sales.


Quebec requires that drug manufacturers provide the provincial government the lowest available price given to any other province.[4] This regulatory change was a response to allow prices of prescription drug products in Quebec to match Ontario's public drug program price.

British Columbia

Under an interim agreement effective from January 1, 2009 to January 1, 2010 between the British Columbia province and the British Columbia Pharmacy Association, the province’s PharmaCare program reimburses pharmacists for new generic versions of brand-name drugs at 50% of the brand price.[4]

Newfoundland and Labrador

In response to the reduction of the maximum allowable cost (the highest unit price at which a drug will be paid) for prescription drug products in Ontario's public drug program, the Newfoundland and Labrador province implemented a similar policy on July 1, 2009.


The Alberta province pays for generic drugs at 70% to 75% of the brand.[4] In response to the pricing and purchasing models in other provinces, executive director of pharmaceuticals for Alberta Health and Wellness Steve Long states the province is considering several policy options such as reducing the price Alberta pays for generic drugs to 50% or less of the brand-name price within the next few years.[4]

As Canadian Post-WWII Baby Boomers Increasingly Enter Elderly Age (65), Demand for Pharmaceutical Products Rises

The Canadian Post-WWII Baby Boom is defined between the years 1947 to 1966; consequently, the passage of these baby boomers pushes the percentage of senior citizens 65 and older from 13% of the total population in 2006 to 18% in 2020.[5] The effects of a graying population impacts the pharmaceutical industry.[6]

On the positive side, the large influx of Canadians entering elderly age increases demand for pharmaceutical products. As Canada's largest and only nationwide drugstore chain as of fiscal year-end 2008, Shoppers Drug Mart Corporation controls the largest market share by sales ($9.4 billion CAD) of the Canadian drug store market. But on the negative side, the effects of a graying population coupled with the effects of a decreasing workforce presents stress on the funding of public drug programs. Besides prescription sales that are individually paid, SDM's prescription drug sales are reimbursed or paid by third-party payers, such as governments, insurers, or corporate employers. As funding for public drug programs are strained, governments continue to increase regulation for drug costs, making SDM's sales less profitable. Also, in response to the increase in demand, a vacuum in supply creates opportunities for SDM's competing chains, such as Medicine Shoppe Canada owned by The Katz Group, to expand the market (See Competition)


Shoppers Drug Mart Corporation's competitors are not simply restricted to individual Canadian drugstores or chains. Since the largest drug manufacturers cater to a small number of international clients, SDM competes with other large drugstores chains such as Walgreens, even if those chains do not have business within Canada.

  • Katz Group Canada Ltd. is a subsidiary under the Katz Group, and is a holding company of drugstore chains in Canada with more than 1,800 pharmacies across the country.[7] The company's drugstore chains include Medicine Shoppe Canada Inc., Pharma Plus Drugmarts Ltd., Rexall Drug Stores Ltd., Meditrust Pharmacy, and Propharm Limited. The Katz Group is not a publicly traded company.
  • Jean Coutu Group Inc (PJC.A) operates franchised drugstore chains under the names PJC Jean Coutu, PJC Sant  Beaut , and PJC Clinique in Canada with 353 stores in Quebec, Ontario and New Brunswick (Eastern Canada).
  • The Familiprix Group is a Canadian group of independent pharmacists in Quebec and New Brunswick, specializing in the distribution and retailing of pharmaceutical products. Together, the subsidiary Familiprix Inc. groups about 270 owner/pharmacists of small (Familiprix succursale sant ) or medium-sized (Familiprix) pharmacies. By creating a single organization, Familiprix Inc. is the only group of independent-owner pharmacists in Canada to have its own distribution center, thereby allowing the group to compete with drugstore chains such as SDM. The Familiprix Group is not a publicly traded company.
  • CVS Caremark Corporation (CVS) is a U.S. provider of prescriptions and pharmacy services. CVS/pharmacy is the nation's largest retail pharmacy chain by store locations, with approximately 6,900 CVS/pharmacy and Longs Drug stores. The company operates in two business segments: Pharmacy Services and Retail Pharmacy.
  • Walgreen Company (WAG) is a U.S. drug-retail chain that sells prescription drugs and general merchandise. Walgreens operates 6,934 locations in 49 states, the District of Columbia, Guam and Puerto Rico.
  • Rite Aid (RAD) is the third largest U.S. retail drugstore chain by revenues and number of stores.


  1. 1.0 1.1 SC 2009 Annual Report pg. 53
  2. Minister of Public Works and Government Services Canada, "Canada’s Aging Population", 2002
  3. Number of SDM Drug Stores by Province
  4. 4.0 4.1 4.2 4.3 Canadian Medical Association
  5. IN DEPTH: CANADA 2020 The baby boomers' tab
  6. Immigration Policy and Its Impact on Demographic Transition
  7. The Katz Group
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