London Drugs Ltd. Business Information, Profile, and History

Company Perspectives:

Quality products, superior selection, great prices, friendly, knowledgeable staff--plus community commitment. Nobody does it better.

History of London Drugs Ltd.

London Drugs Ltd. is one of the largest operators of drug store chains in Canada. Like mass merchandisers, the stores cover a broad range of product mix. While pharmacy remains the core business, stores also offer computers and accessories, cameras, photo-finishing services and supplies, household appliances, audio-video equipment, and other high-end consumer electronics.

Company Beginnings: 1945-63

In 1945, Sam Bass, a controversial British Columbia pharmacist bought a 1,000-square-foot pharmacy store on Main Street in Vancouver, British Columbia. At that time, the business was bringing in C$25,000 a year. The economic climate was right for opening a new business. With the end of World War II, Canada was entering a period of economic optimism. Sam Bass named his new store London Drugs because he thought that the name sounded patriotic.

At the time that Bass bought the drug store on Main Street in Vancouver, he had no cash and no credit rating. However, the owner of the drug store was eager to sell, so he agreed to sell the store on June 1 and collect payment on July 1. That gave Bass one month to raise the cash. He promptly offered a clearance sale and initiated a policy of low-percentage markup on prescription drugs, instead of a flat fee as was used by other pharmacists. Also, as owner of the pharmacy, Bass found he had lines of credit available to him from manufacturers, thereby allowing the pharmacist to restock the store after the sale.

Business boomed when customers discovered that the low prescription prices were permanent and not loss leaders. By July 1, the cash was available to make the purchase payment. At the end of his first year, Bass's store had brought in C$80,000. Customers were coming from all over Vancouver to take advantage of the economically priced prescription drugs.

Bass understood that his store needed a competitive advantage over other pharmacies. The pharmacist thus implemented what was viewed at the time as an outrageous new idea. He offered extended shopping hours from 9:00 a.m. to midnight, seven days a week. The move initiated a battle with the Pharmaceutical Association and with city hall, the first of many such battles that have occurred throughout the course of London Drugs' history.

By 1953, Canada was in a period of postwar recession. Many competitors were operating with modest business plans, but Sam Bass opted instead to diversify his product mix, another strategy that became standard operating procedure for London Drugs. The corporate Web site reports that the company "sent shockwaves through the pharmaceutical industry by offering discount photographic equipment and supplies." In 1958, Bass once again startled the pharmaceutical industry by price-cutting dispensing fees on prescriptions. He also began advertising on CJOR radio. The ad campaign was effective and sales increased accordingly.

In 1961, Bass implemented the first of London Drug's Optical Departments. Bass had been interested in the concept since 1957, when the income tax appeal board ruled that substantial sums of monies received as kickbacks from optical firms must be taxed as income and not as capital gains, as the doctors had been claiming. (In mid-1959, the British Columbia Supreme Court ruled that the doctors in question had acted ethically.) It took Bass until 1964 to persuade two opticians to utilize the same concept of merchandising that had worked so well for London Drugs--that is, using a low-percentage markup in dispensing a prescription. The idea proved equally successful. Bass supervised the pricing and quality of the merchandise in the Optical Departments, but Western Optical Ltd. manufactured the lenses. Ten years later, nine London Drugs' stores in the Lower Mainland offered Optical Departments.

Expansion and Struggles: 1963-70

In 1963, London Drugs entered a period of expansion when Bass opened a new store in downtown Vancouver at the corner of Georgia and Granville. This store eventually achieved the highest per-square-foot sales of any drugstore in Canada. In 1968, Bass sold his company to a U.S. firm, the Daylin Corporation. Bass himself remained on as president until 1976. Under Daylin's ownership, the company continued to grow. The third store opened in 1969 in New Westminster, British Columbia. At 9,000-square-feet, the store was thought to be among the most spacious drug stores in Canada.

London Drugs wanted to offer its customers good quality at low prices. To defend his right to offer prescription drugs at low costs, Sam Bass fought his way to the Supreme Court of Canada. When a federal government implemented a commission to investigate the cost of drugs, Bass went to Ottawa to appear before the commission. He offered several proposals to reduce drug costs. Of the five subsequent recommendations that the commission made, three were found in Bass's brief. The New Westminster Columbian quoted Bass as saying, "There's a large group of people in the world who think everyone should look after Number One--himself. I want to do that by making a success of my business, but I can't do it without looking after the interests of everyone else who needs anything in a drugstore. I believe drug prices could be lowered a great deal. I try to help by intelligent buying in large quantities and selling at the smallest possible profit margin. And everything we sell is top quality."

In June 1969, the Teamsters' Union organized the employees of London Drugs, a move that proved to be far from problem-free for all concerned. When the company and the union were unable to negotiate a first contract, the Teamsters twice called for a strike vote, and twice London Drugs' employees voted against strike action. The Labour Relations Board (LRB) made use of its power to impose a first contract, one that was not supported by the company's employees. Shortly thereafter, the employees lost a bid in the courts to quash the decision. A bitter struggle continued between the union officials and London Drugs' management. In 1973, the Teamsters and the Retail-Wholesale Union gave London Drugs a "hot" designation. Promptly, London Drugs sued the two unions for damages. According to the Vancouver Sun, the company "asked damages under the Trade Unions Act against the unions for allegedly persuading people not to do business with the store and for inducing breach of contract between the store and its suppliers."

Strike action was declared at London Drug's warehouse in 1973. Five of 17 employees picketed outside while the remaining 12 daily crossed the picket line to report for work. Shortly thereafter, those who crossed the picket line filed a decertification application. LRB vice-chairman Jack Moore threw out the application, saying, "I am not satisfied that the trade union has ceased to represent the majority of the employees in the unit."

When an LRB-imposed contract expired in 1975, the Teamsters argued that the agreement should remain in effect unless terminated by a strike or lockout. London Drugs disagreed, and the dispute was again taken to the LRB for settlement This time, the Board upheld London Drugs' position, leaving the employees without a contract. By this time, the employees had filed for decertification three times, and many had begun refusing to pay union dues to protest the board's reluctance to decertify the Teamsters. An arbitration board subsequently ordered the workers to pay their dues. Labor strife continued for years to come.

The Formative Years: 1970-80

In 1970, Mark Nussbaum had joined London Drugs, an event that London Drugs' newsletter, London Bridge, described as "a significant turning point in London Drugs' history. He brings with him a dynamic American-style of retail merchandising that forever redefines what London Drugs is." Nassbaum's first major project was to mark the company's 25th anniversary by opening the company's largest store to date. Situated on West Broadway, Vancouver, the store introduced another addition to the product mix--consumer electronics.

In 1971, London Drugs' large store in downtown Vancouver closed and relocated to the newly built Pacific Center Mall. The original offices and warehouse in Vancouver also closed and relocated to a new 80,000-square-foot facility in Richmond, British Columbia. In the same year, London Drugs opened a store in North Vancouver, and entered an ongoing period of strife with the North Vancouver City Council. One week following London Drugs' opening, North Vancouver City Council changed its shops regulation bylaw to cut back the store's Sunday and evening operations. The bylaw also barred London Drugs from selling items such as major appliances, electronics, furnishings, automotive supplies, and paint and hardware supplies during hours when other retail stores were closed. Bass promptly launched legal action against the council, claiming the new bylaw to be discriminatory. A period of decisions and appeals followed, with London Drugs ultimately achieving the legal right to operate their stores on Sundays and evenings in North Vancouver.

In the years to follow, the company pursued a strategy of expansion, opening new stores in various locations in the Lower Mainland of British Columbia. In 1976, London Drugs opened its first out-of-province store in Edmonton, Alberta. It opened a second store in that city a few months after.

In 1976, Sam Bass was replaced as president of London Drugs by the senior vice-president, Stanley H. Glazier. Few details are known regarding the reasons for Bass's leaving. Spokespersons from Daylin Inc. reported that Bass had left for "personal reasons," while Glazier reported that Bass's leaving was "the result of a decision by the board of directors." Around the same time as Bass's exit from the company, Daylin Inc. initiated bankruptcy proceedings and offered Pay Less Drug Stores of Oakland, California, the option to purchase London Drugs for C$9 million. The Pay Less deal did not come to fruition, however, and London Drugs was sold to Tong Louie of H.Y. Louie Co. Ltd., a B.C. owned and operated firm. Louie continued to strengthen the company's commitment to providing customers with quality products at the lowest prices.

Expansion and Innovation: 1980-90

During the 1980s, London Drugs continued to expand. Stores were opened in British Columbia on Vancouver Island, the Lower Mainland, and Kamloops, while in Alberta new stores opened in Edmonton, Red Deer, Calgary, and Grande Prairie. In the spring of 1981, London Drugs opened a new distribution center in Richmond, British Columbia. Encompassing 137,000-square-feet, it was automated with a conveyer belt system, replacing the former manual operations. In 1982, the head office relocated to this complex as well.

In 1981, London Drugs added a new product to its marketing mix--a one-hour photo-finishing service. The service was piloted at the West Broadway store in Vancouver, but in time labs were installed in every existing outlet. The company soon dominated the photo-finishing market in Western Canada. Two years later, in 1983, the company entered the home computer business, offering computer departments in four locations in the Lower Mainland. In 1985, London Drugs celebrated its 40th anniversary. At year's end, it had a total of 25 stores. Expo 86 provided London Drugs with a new opportunity to promote itself by sponsoring a first-aid station on the fairgrounds. Also in 1986, London Drugs responded to consumer complaints and banned "adult sophisticated" magazines from its shelves. The move followed a similar decision by 7-Eleven stores when they pulled adult magazines a month earlier, instigating a flurry of media discussion regarding the role of private industry in censorship.

In the spring of 1987, London Drugs' store in North Vancouver became British Columbia's first drug store to sell wine, wine-based coolers, and alcoholic cider. This innovation, which occurred after ongoing negotiations with the Liquor Control Board (LCB), was intended as a four-month pilot project, with an expansion into wine outlets to follow if deemed feasible. As expected, the move generated considerable controversy: competing merchants, government officials, elected representatives, and groups against alcoholically impaired drivers engaged in a heated debate. At the end of the trial period, executive vice-president Mark Nassbaum was quoted as saying that the project was overwhelmingly successful, as indicated by mounting sales volume and a poll conducted in the community. However, a governmental liquor-policy review committee recommended that the service be discontinued, claiming that the public did not want wines sold in private stores.

A Challenging Decade: 1990-2000

The London Bridge newsletter describes the 1990s as being economically more challenging than the 1980s. Nevertheless, expansion continued, and by the end of the 1980s London Drugs was operating 34 stores. This figure grew to 54 stores by the end of the 1990s. New stores opened in British Columbia in Chilliwack, White Rock, West Vancouver, Colwood, Maple Ridge, and Kelowna, and in Alberta in Edmonton and Calgary. Other stores were renovated. Never far from controversy, London Drugs generated publicity in 1992 when breast-feeding groups in British Columbia organized a boycott against the company to protest the sale of formula products. Later, in 1999, local residents failed in an attempt to block the building of a new complex in the Kerrisdale community of Vancouver.

In 1995, the company's 50th anniversary, London Drugs launched London Drugs Insurance Services. In the latter part of the decade, more innovations were introduced at selected stores, including a temporary Ticketmaster outlet, a full service Royal Bank, Internet cafes, Sound Rooms in the Audio Visual Departments and a Photo Station where customers could view and edit their photos online.

2000 and Beyond

As the new century commenced, London Drugs appeared poised for continued success. In 2000, the chain opened a new store at the site of its roots in the 1960s. Located at the corner of Georgia and Granville in downtown Vancouver, this new store is a two level, 22,000-square-foot retail outlet. President Wyneth Powell remarked in an interview with the Vancouver Sun that more than one million cruise ships pass through Vancouver annually, and that comprises an excellent market for photo finishing and cosmetics. Also in 2000, London Drugs launched LDHealth.com, a Web site that allows consumers to order prescription refills by email. According to an article published in the Vancouver Sun, the company plans to become a health provider and will dispense information on a wide series of medical topics.

Like previous London Drugs executives before him, Powell declined to provide annual sales figures but did report that the company achieved one of the highest sales-per-square-foot figures of any retailer in Canada. The company planned to operate 100 stores across Canada by the end of the decade.

Principal Competitors: Finlandia Consultants Ltd.; Pharmasave; Shoppers Drug Mart.

Chronology

• Key Dates:
• 1945: Pharmacist Sam Bass opens the first London Drugs.
• 1953: Bass diversifies product mix by offering discount photographic supplies.
• 1958: Bass cuts dispensing fees on prescriptions.
• 1963: London Drugs opens a second store in downtown Vancouver.
• 1968: Sam Bass sells London Drugs to Daylin Corporation.
• 1969: Daylin opens third London Drugs situated in New Westminster.
• 1970: Mark Nussbaum takes over management of London Drugs; London Drugs 25th Anniversary marked by opening of large new store in Vancouver.
• 1971: London Drugs begins opening new stores in western Canada, including sites in North Vancouver, Burnaby, and Edmondton.
• 1976: Tong Louis buys London Drugs from Daylin Corporation.
• 1982: London Drugs opens new stores, one each in Alberta and British Columbia, and moves its head office moved to Richmond, B.C.
• 1985: The company celebrates its 40th anniversary and opens three new stores.
• 2000: LDHealth.com is launched.