CASE Study $1$: IVAN SALTZMAN, DIS$-$CHEM

Ian Saltzman and his wife Lynette, both pharmacists, started the first Dis$-$Chem with R$10000$ capital investment in $1978,$ when retail pharmacy was an expensive and risky industry. The first Dis$-$Chem was opened in Mondeor, southern Johannesburg, and the couple had just recently qualified as pharmacists at the Johannesburg School of Pharmacy in $1974.$ They met during their studies, married and became partners in the business. His wife has often been Saltzman$$s source of inspiration in difficult times.

Although pharmacy is an expensive industry, they realised that there were untapped opportunities that could be developed into large business. However, it was not easy, and they only started to break even in the Mondeor pharmacy one year in$,$ after achieving revenue of R$84000.$ The cost of running the single pharmacy was very high.

In $1982,$ they opened a second pharmacy in Randridge Mall in northern Johannesburg. They introduced the concept of a discount pharmacy with product categories not previously offered in pharmacies in South Africa, and due to their competitive pricing other chemists in the area soon relocated or closed down. They started discounting and expanding their front shops towards the end of the $1980$s$.$ In addition, they started their own private$-$label line of non$-$pharmaceutical products.

Ian Saltzman ascribes the primary reason for their success to their strategy of keeping prices low, offering service excellence but never compromising on quality. Through this strategy they were able to build their customer base. This is not always easy in the retail trade, as suppliers are quick to raise the prices of their products but are slow to lower them.

From a base of three stores in the $1980$s$,$ Dis$-$Chem expanded aggressively during the $1990$s and through the period in which pharmacies were deregulated, which meant that non$-$pharmacists could run pharmacies. Large supermarket chains and other stores such as Clicks could also open pharmacies in their shops. This created additional challenges and competition. Against all odds, the deregulation period was also a growth period for Dis$-$Chem as they were well established as a chain of pharmacists by this time.

By $2009,$ Dis$-$Chem$$s turnover exceeded R$4$ billion over $37$ stores, $252$ pharmacists and more than $4000$ employees. Saltzman indicated that the growth was through natural evolution, that it remained a family$-$owned and $-$run business and that their pharmacist partners were important contributors to the success of Dis$-$Chem.

Expansion continued from $2009$ when Saltzman raised an additional R$5$ billion over the next two years to expand in joint$-$business franchise arrangements and corporate investments. At that stage, listing on the Johannesburg Stock Exchange $($JSE$)$ was not a priority, although it was an option.

When asked what his single biggest mistake was, Saltzman$$s answer is expanding earlier, Dis$-$Chem keep their employees motivated by ensuring that they have the security of a career with Dis$-$Chem. It is also important to teach employees skills and train them. Regarding family businesses, he observes that these tend to flourish in the second generation but to be more challenging in the third generation.

In $2013,$ Dis$-$Chem introduced an online shopping platform and ventured into the wholesale business by acquiring a controlling share in the CJ Group and an interest in Pharmacy Development Academy and Evening Star. They increases their shareholding in these businesses in $2016.$ In $2014,$ they opened their first store in Windhoek, Namibia.

In $2016,$ Dis$-$Chem revealed plans to sell shares to institutional investors and selected individuals $($minimum R$1$ million$)$ to repay debt and double the number of outlets over the next eight years. For this, Ivan Saltzman, who owned $67$ per cent of Dis$-$Chem, and other investors would sell part of their shareholdings. Dis$-$Chem was subsequently listed on the JSE in $2017,$ and by this time it had tripled the number of its stores since $2008$ to $103$ in South Africa and Namibia, with revenue of R$15,5$ billion. Its earnings before interest, tax, depreciation and amortisation $($EBITDA$)$ were R$1,1$ billion as at year end $28$ February $2017.$

In $2021,$ Ivan and Lynette owned more than $50\%$ of the business but planned to sell $7,5$ per cent to $$invited investors$,3,5$ per cent to senior executives and $10,05$ per cent to BEE investors. Rue Morais is the incoming CEO who replaces Ivan Saltzman.

Answer the following questions basing your answers on the article as well as the book $$Entrepreneurship$,$Entrepreneurship $-$ a South African Perspective$$ by Nieuwenhuizen, C$.,$ & Nieman, G$.$ Please include citations and a bibliography.

Questions: $1.$ Identify and describe the primary reasons for Ivan Saltzman$$s success. $2.$ What are the most important lessons that can be learnt from the Dis$-$Chem story? $3.$ Is Ivan Saltzman an entrepreneur or a business owner? Motivate your answer by discussing the process he followed in developing the business. $4.$ Discuss the most important benefits of expansion of Dis$-$Chem.