MONTREAL — Target is looking for independent pharmacists to own and operate franchises within its Canadian stores, which open next year in dozens of former Zellers locations as the U.S. discount retailer expands outside its home market.
“We have worked hard to understand the Canadian health-care landscape and believe our unique pharmacy franchise model will greatly appeal to pharmacists while best serving the needs of patients in Canada,” Target Canada president Tony Fisher said Monday.
He said the model provides pharmacists with an opportunity to grow a business “with no entry fees and the support of a national retailer.”
The Minnesota-based will be competing with Canadian pharmacy chains such as Jean Coutu (TSX:PJC.A) and Shopper’s Drug Mart (TSX:SC), which are also trying to lure independent pharmacists.
Another Canadian pharmacy giant, the Edmonton-based company that operates under Rexall, PharmaPlus and several other brands, is taking a different tact — sellings its franchise operation to a California company.
McKesson Corp. will pay $920 million for the Guardian, I.D.A. and other independent stores in the Katz Group of pharmacies. The deal won’t affect Katz’s corporate-owned drug chains such as Rexall and Pharma Plus.
Target, which is preparing to make its first move outside the U.S., said its new franchise model for the Canadian market is differerebt from its approach in the United States, where it has a long history of operating pharmacies.
Target will begin its search for pharmacist franchise owners in March.
Jean Coutu couldn’t be reached for comment but CEO Francois Coutu has said the chain — which operates largely in Quebec — sees growing opportunities to attract independent pharmacists because of pressure from government fee changes.
Several provinces, including the huge markets of Ontario, Quebec and British Columbia, have reduced generic drug prices to 25 per cent of the price of patented drugs — down from 50 per cent — and cut professional allowances that drug companies pay to pharmacies for stocking their pills.
Coutu has said previously the Quebec-based chain is looking forward to a good year in 2012 ahead of the arrival of Target in 2013.
“In 2012, we’re not going to see a major competitor coming into the market but in 2013 we’ll get prepared for that,” he said.
TD Securities analyst Michael Van Aelst said he didn’t see “anything materially new or surprising” in Target’s release.
The franchise model will allow Target to open as many stores in Canada as possible.
Target said Monday the current Zellers customer prescription files will remain in the possession of Zellers.
Shoppers, Canada’s largest drugstore chain, said in November that it would look into acquiring the files if they are put on the market. Jean Coutu and the Katz Group could also bid for the Zellers pharmacy customer portfolio.
Shoppers said it remains focused on pursuing its strategic priorities and initiatives to serve the needs of its customers.
“Shoppers Drug Mart is very well positioned in terms of real estate and our overall value proposition to serve these patients and customers and will assess any opportunities stemming from the Zellers/Target transaction,” spokeswoman Tammy Smitham said in an email.
Target reached a deal with Zellers owner Hudson’s Bay Co. last year to take over the leases of 189 Zellers locations for $1.83 billion. The company has since sold 39 Zellers locations to Wal-Mart and is still deciding on what to do with the others it does not plan to convert to Target stores.
Earlier this month, Target (NYSE:TGT) announced the location of the first 24 of the 125 to 135 stores it plans to open in Canada beginning next year.
Target, a 109-year old American retailer that was part of Dayton-Hudson Corp. before changing its name in 2000, is one of the biggest U.S. department store chains, with revenues of more than US$67 billion in its last fiscal year.
The company has more than 355,000 employees and 1,763 stores and is the second-biggest discount retailer in the U.S. after Wal-Mart Stores Inc.