Reimund Pohl, CEO of PHOENIX Group, the leading traders of pharmaceuticals in Europe, spoke to IESE MBA students and alumni on September 27 on IESE’s Barcelona campus.
He discussed the company’s growth experience, its role in Europe’s healthcare industry and the business trends that will have the most impact on the industry in the near future.
Mr. Pohl has been working for PHOENIX Group for 32 years, serving as CEO since 2005. Founded in 1994 through the merger of four regional drug wholesalers, PHOENIX began with €3 billion in turnover. Since then, the firm has expanded throughout Europe and today achieves a total turnover of €25.3 billion in 25 European countries.
Owned by Germany’s Merckle family, PHOENIX maintains a clear focus on business in Europe. Despite its pan-European reach, the company’s vision and business model is rooted in local markets, facilitating quick decision and short channels of communication. In addition, the PHOENIX Group values mutual learning and transfer of best practices. Profitable organic growth targeted slightly above the market, selected M&A transactions and an increased attention to cost and cost development are other areas of attention. "We work with small margins," says Mr. Pohl, "so the continuous improvement of our cost structure is really important."
With 155 distribution centers throughout Europe, PHOENIX delivers all products available on the market to over 70,000 European pharmacies. On a daily basis, the company delivers 8 million packs, with PHOENIX drivers covering 2.5 million kilometers per day, the equivalent of driving around the globe 50 times. In addition to distribution, PHOENIX Group operates three pharmacy brands – BENU, Apotek 1 and Rowlands - with retail activity in 12 countries.
PHOENIX is the market leader in Germany where it generates 34 percent of its turnover, followed by Western Europe (except Germany) with 34 percent, Northern Europe with 18 percent and Eastern Europe with 14 percent of sales.
Each year, PHOENIX evaluates potential expansion markets in Europe. "We are interested in growth, but profitable growth," says Mr. Pohl. He explained that with their current model of expansion, PHOENIX is able to outbalance negative developments in some countries with positive developments in others, with healthy total income as a result. The company has not considered expanding into Spain, Greece, Portugal and Ireland, citing highly fragmented market structures or unattractive margins and a key hurdle.
Mr. Pohl pointed to the growth of generic drugs as the business trend having the greatest impact on margins and on the wholesale business. "According to IMS Health, by 2019 the global share of generics will be 82 percent, and this is one of the biggest burdens for our business," he says. The growth of generic drugs yields digressive margins, and though PHOENIX has been able to change the margin structure in some of its markets, for example Germany, there are many challenges ahead as patents of blockbuster drugs run out. In addition to generics, Mr. Pohl cited poor economic development and healthcare budget cuts due to the Eurozone’s sovereign debt crisis as recent key challenges.
Mr. Pohl – and the PHOENIX executive board - visited IESE’s Barcelona campus to speak to his top management team which last week successfully completed a multi-module custom-designed executive program at IESE.