Shoppers Drug Mart Corp. has plucked an executive from one of its suppliers as its next leader rather than someone with extensive retailing experience in a period when the retailer is racing to regain business lost to new profit-squeezing drug laws.
The country’s largest drug-store chain said late Monday that its next chief executive officer is Dominic Pilla, who headed drug distributor McKesson Canada. The appointment comes after a protracted search for a new CEO following the unexpected announcement in January that Jurgen Schreiber was leaving amid tense relations with the Ontario government over controversial new generic drug rules.
“A time of change is also a window of opportunity for the company to continue to lead the industry,” Mr. Pilla said in a brief statement.
The choice of CEO caught many industry insiders and outsiders off guard because candidates were believed to include high-profile former executives of grocery giant Loblaw Cos. Ltd., Shoppers and even British-based drug-store retailer Boots.
“I’m surprised, perplexed,” said Rick Chad of executive recruiter Chad Management. “It’s a very low-profile appointment.”
The new CEO, who begins the job on Nov. 1, has a lot on his plate. Faced with the new drug rules, which have since been adopted in Quebec and other provinces also, Shoppers has shifted its focus more to its non-pharmacy aisles – everything from cosmetics to food – for future growth. The retailer’s choice of its next CEO suggests that it may be looking to strengthen its pharmaceutical business, choosing someone who has deep experience in the sector and who can help appease health ministries as well as the chain’s own pharmacists. Among other challenges, Shoppers grapples with a lawsuit from its pharmacists, who claim that the company is not giving them their fair share of profits.
At the same time, Shoppers faces rival retailers, ranging from Loblaw and discounter Wal-Mart Canada Corp., that are stepping up their own pharmacy businesses as an aging population continues to pump up demand for medications.
“It confirms their [Shoppers’]shift in priorities towards pharmacy and home health care to drive earning growth now that their retail network expansion is slowing down,” said Alex Arifuzzaman of retail specialist InterStratics Consultants. “He [the incoming CEO]really knows the pharmacy industry, its key issues and regulations, which is a critical area for Shoppers.”
The decision by Shoppers will also provide some relief to investors, who don’t like the uncertainty of a company without a captain to steer the ship, Kenric Tyghe, retail analyst at Raymond James, said. Mr. Pilla is familiar with Shoppers’ key challenges and will be able to tackle them quickly, he added.
Mr. Pilla brings to the job a decade of experience at McKesson, including the past five as president of one of Canada’s major drug distributors. Before that, he spent 18 years at Petro Canada , with, responsibility , among other things, for sales and distribution when the company was diversifying into food and other retailing.
Still, Mr. Chad questioned the decision to hire someone with so little retailing experience to head one of Canada's largest merchants.
He said Shoppers needs someone with merchandising know-how to help fix its problems. He would have preferred to see an ex-Loblaw executive, for example, take the top job at the drug-store retailer.
Former chairman David Williams, also an ex-Loblaw executive,. has been acting as CEO since Mr. Schreiber left in February.