Wesfarmers warns Pharmacy Guild of Australia against supermarket ownership of API

Wesfarmers boss Rob Scott has written to the Pharmacy Guild of Australia in a bid to assert the company’s offer for Australian Pharmaceutical Industries as a safer bet than Woolworths.

In a letter to guild president Trent Twomey, Mr Scott also reiterated Wesfarmers’ commitment to the community pharmacy model and its intention to vote its 19.3 per cent stake in API — owner of the Priceline chain — against any scheme of arrangement by Woolworths

“We also do not intend to accept a Woolworths takeover offer, if a formal offer is eventually made,” Mr Scott said in the letter.

The supermarket giant crashed Wesfarmers’ agreed $1.55-a-share offer for API by lobbing a significantly better $1.75-a-share proposal at the start of the month, valuing the Sydney-based group at $862 million.

The letter, obtained by WestBusiness on Sunday, suggests Mr Scott is seeking to play to the concerns of pharmacists worried about the growing power of supermarkets.

Mr Scott said Wesfarmers — the owner of the Bunnings, Kmart, Officeworks and Target retail chains — had “heard direct concerns about the competition issues associated with supermarket ownership of API”.

“Supermarkets are already the largest competitors to pharmacies across diverse “front of store” categories including non-prescription medicine like pain relief, vitamins and dietary supplements, and personal health and beauty,” he added.

Mr Scott highlighted that Wesfarmers had spun off its supermarket chain Coles from the business in 2018. Wesfarmers’ talks with pharmacies had revealed that many mistakenly believed the group still owned Coles.

“With this historic experience, we understand the strategic value to supermarkets of health, wellbeing and beauty categories – and why these products occupy so many supermarket aisles,” Mr Scott wrote.

“Importantly, Wesfarmers now has a very limited market presence in these categories, allowing us to approach the API acquisition without any material competitive or channel conflict.”

Woolworths has publicly stated it has no intention to operate pharmacies in its grocery stores, and that it is also committed to the community-based model.

However, pharmacists and the Guild are concerned that a Woolworths-owned API could cause competition issues given it is already a substantial buyer of non-prescription drugs, wellness treatments and other products typically sold by chemists.

Mr Scott also said Wesfarmers would keep any loyalty program data from API “separate from Coles, our joint venture partner in Flybuys”.

“Supermarket ownership of API is not in community pharmacists’ best interests,” Mr Scott wrote.

The API board has allowed Woolworths to undertake due diligence to facilitate a binding offer.