Hi FlippinPhil and all. Thanks for the difficult question-lol! Had to try and find the time to respond and try and explain.
Firstly I would like to congratulate the team at Thermalife for this very significant achievement. I presume Strikeforce also will play a big part in increasing their exposure over East and especially with a QLD focus as mentioned in the last quarterly.
I will draw attention to the fact that this is a PRICE SENSITIVE announcement and PNO can not announce things immaterial to the company.
You may or may not be aware of the fact that independant and non-group Pharmacies are the last of a dying breed these days. Buying power is king, especially with the advent of discount chains.
Every buying group will be slightly different and have different structures but nearly all will have planograms(pictures of how stock is arranged on a gondola) filled with core lines. All will differ slightly in their enforcement of core lines also.
Generally there are very experienced retail buyers at the head of buying groups, generally grumpy types, who have a lot of stress from coy's annoying them to make their product core, that make the call on whether a product becomes core or not, well at least I hope so, as sometimes I beg to differ, but nonetheless, DEFINATELY not in the case of Thermalife.
Your core lines are filled with your best sellers like Codral, Nurofen, Panadol, QV etc plus a healthy smattering of up and coming identified growth prospects. To become core the buying group would have identified a growth oppurtunity from a product backed by sound management, good growth prospects,and sufficient expertise and advertising plans.Also it is usually tied in with extra discount if the group, and its associated pharmacies, in general, adhere to commiting to stock it. I have no doubt figures from sales in WA would have been used to show the growth potential.
It will be up to the brokerage coy's now to help enforce the core ranging within individual pharmacies, depending on the structure of the group. Large chains like Chemist Warehouse and Discount Drug Stores (5 in WA), I believe, would get an automatic allocation, eg shelf pack of 12. They operate similar to Woolies where decisions on store stock is made centrally, with very little individuality between stores. This is why I believe this chain was identified in the announcement, however I would have liked to know who the other two larger chains were.
There is nothing more a brokerage company rep likes more than coming into a Pharmacy and telling me this product is core to my banner group. Whether you keep that core item will depend on individual store dynamics, location and size. Not all stores outside the big discounters can keep all core lines sometimes. There are different options on planograms depending on store size and how many gondolas you hav.Some are small dispensaries next to Dr's surgeries. Some are in little strip shopping complexes and some are in retail centres.
I am always keen to support core lines as it enforces your support of the product and ensures an ongoing supportive relationship. The proof will be in the sales and whether you and your staff support it. This is where staff training is imperative with new lines.I will assume Strikeforce has been adequately schooled on traing the Pharmacy staff and Pharmacists.
Once you have the signifcant achievement of becoming a core line the last thing you want is to be erased from core just because a couple of smaller Pharmacies don't take the product. There is generally some leeway as it has to work for both parties.
What I can say is that banner groups are looking to enforce core lines, and planograms, more and more as time goes on and competition becomes fierce. You do not get the buying power and associated discounts from big (and small) drug companies if a majority of Pharmacies don't follow the banners core lines. Usually incorporated into these deals is taking a certain allocation of new lines as they come to market, which can sometimes leave you overstocked with dead lines, and also huge opening orders to maintain ongoing discounts. This wouldn't affect PNO or Thermalife though but just an indication of what the significance of becomig core can mean.
It will be up to the sales team now, and advertising, to ensure the product grows in sales, remains core in exsisting Pharmacies, and begins to incorporate more.
So in all a very positive endorsement for the coy and it's product and certainly not indicative by the current SP. As is the case the only way to enthuse the market is with continued sales growth and this, imo, is one giant step towards that. We have all been guilty of having a dig at the poor performance of the coy(SP) and hence our investments but it may also be appropriate to give credit when its due. This certainly doesn't appear to be the hallmark of a coy about to go belly up, so there is some light at the end of the tunnel hopefully.
Sorry bout the long post, warned you though. Good luck holders.
CAI Price at posting:
0.1¢ Sentiment: Buy Disclosure: Held
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