Retail pharmacy chains have become a familiar feature of Irish high streets. Some of the best-known are foreign-owned, but by no means all. Dublin-based Meagher's Pharmacy employs 65 people in six outlets and its owner, Oonagh O'Hagan, wants to double that number within five years.
But even the best-laid plans can be unsettled by random events. Meagher’s lost its entire stock of seasonal giftware in a recent warehouse fire in the Ballymount industrial complex.
“We buy forward to get the best possible value and our stock has literally gone up in smoke. It will have to be replaced with more expensive locally sourced items, so we’ve lost the cost advantage,” O’Hagan says.
“The pharmacy sector in Ireland has undergone radical changes in the past number of years,” she adds. “Pharmacies have seen big reductions in profitability due to significant cuts to mark-ups, fees and in the cost price of medicines. This coupled with the recession has meant that our sector has been in turmoil and our business model had to change radically.
“At one time the business mix was 80 per cent dispensary and 20 per cent retail. Now it’s probably 60:40, although it varies between our stores.”
O'Hagan was in her late 20s when she bought the landmark Meagher' Pharmacy on Dublin's Baggot Street from Pierce Meagher in 2001. His mother set up the pharmacy in the 1920s and O'Hagan served her internship there.
“I loved the shop and the traditional family ethos of the business and told Pierce to contact me if he ever decided to sell,” she says.
Business plan
When the call came she didn’t have the money to buy the business but her uncle put her in touch with a bank manager who agreed to see her at 7am on a Monday morning with her business plan in hand.
“I knew all about the pharmacy side of things but I’d never written a business plan. I bought a book on how to do it and spent the whole weekend writing one,” she says.
When O’Hagan bought Meagher’s, its main revenue stream was its dispensary. “I could see that a few small changes could make a big difference to the turnover and set about modernising the shop and introducing products that suited our clientele such as make-up,” she says. “Sales jumped and we started getting better deals as a result.”
However, O’Hagan knew she needed real scale in order to compete against the big players on their “three for two” and “buy one, get one free” cosmetics and toiletries offers.
Between 2003 and 2007 she expanded her business from one to six outlets, starting in Ranelagh where again she tweaked the product range to suit the customer base. In this case it meant stocking more baby products to suit young families in the area.
Two years later she opened in Tallaght where she now has two shops. In 2007 Meagher’s opened in Barrow Street in the heart of the tech hub near the Grand Canal Dock. An outlet in a primary care centre in Ranelagh followed in 2008.
The expansion has been funded from bank borrowings and retained earnings and is split equally between acquisitions and greenfield sites.
“We are a community pharmacy and do our utmost to ensure that our store environment is warm and personal. We don’t want the typical big chain supermarket feel to our stores,” O’Hagan says. “Our focus is personal service because customers want to deal with someone they know when it comes to their health. Our very low staff turnover is a big advantage in this respect.”
Fee cuts
O’Hagan’s world changed forever in 2008 when the recession hit and another round of fee cuts followed.
“We all took a pay cut to retain jobs,” she says. “We haven’t cut any staff or closed any outlets. In fact, staff numbers have been growing since the end of 2014 as we’ve recruited experts in new categories such as nutrition and wellbeing.”
In 2014 Meagher’s opened a gift shop in Terenure and its latest venture is an online store.
“With dispensary margins completely eroded, we had little choice but to diversify,” O’Hagan says. “Our customer numbers are growing and the volume of business is up, but values are down.”
The upside of the downturn was that it gave O’Hagan time to reappraise her business. “We streamlined our processes and worked hard on developing our procurement negotiating skills,” she says. “We built a very strong backroom team and invested a lot of time in really improving our buying to offer customers competitive pricing. One of our biggest challenges is making consumers aware that we are not more expensive than the chains.
“Between 2008 and 2010, our net profits reduced significantly and we felt the key to improving performance was sorting out the cost base. The dispensing side of the business was effectively out of our control but we could manage the retail and have done so.
“At this point the business is fit and we have a team in place that would allow us to double in size quite easily,” she says.
