Shoppers-Loblaw behemoth eyes buying up more pharmacies

With combined annual sales topping a colossal $42 billion, the merger of Loblaw Cos. Ltd. and Shoppers Drug Mart Corp. will create a company that generates more revenue than the country’s wireless giants combined.

The merged entity’s newly formed scale has drawn the attention of critics concerned about the effect on prices for consumers – and more importantly competition regulators reviewing the mega-deal currently.

Those concerns however don’t appear to be deterrents to a combined Loblaw-Shoppers from attempting to get even bigger, with Shoppers looking to tuck in smaller, independent pharmacies if the price is right.

“We’ll continue to do acquisitions where it makes sense,” Domenic Pilla, chief executive of Shoppers, said on an earnings call on Tuesday.

“But we’re being very patient, and we would continue to advocate doing that, and consolidating the market when it makes sense,” the executive said.

Pilla said conditions continue to “worsen” for independent pharmacies, who find their costs climbing because of regulatory changes in drug reimbursement programs from provinces as well as a tough competitive environment – in no small part related to increasing pressure from Loblaw and Shoppers themselves.

Overall, Shoppers hopes to continue expanding its “square footage” or the amount of shelf space it has to sell products through by about 3 per cent a year, Pilla said.

“You should expect to see that, we continue to see markets that we’re under represented and as well relocations and expansions,” the longtime head of the country’s largest pharmacy chain said.

Read more: Scrutiny urged over supermarket megamerger

Academics, consumer groups and industry bodies representing smaller competitors have called for close scrutiny of the $12.4-billion deal, which is expected to close some time in the next few months.

Groups like the Canadian Federation of Independent Grocers have warned the merger will see 90 per cent of the country’s retail pharmacy and food business consolidated under a handful of players, up from its current 80 per cent.

Shoppers has just over 1,300 drug stores, 62 Shoppers Home Health Care stores and half a dozen Murale beauty shops – a fledging cosmetic business it hopes to ramp up.

Analysts suggest Loblaw may be forced to sell off some locations similar to divestures the Competition Bureau forced Sobeys to make in order to have its smaller but nonetheless sizable $5.8-billion purchase of Safeway Canada approved.