Dis-Chem versus Clicks

South Africa’s two largest pharmacy chains, Dis-Chem, and Clicks, are fighting for market share in an increasingly competitive market.

The retailer Jack Goldin opened the first Clicks store on 6 August 1968 on St George’s Street in Cape Town.

Clicks was originally conceived as a drugstore, but due to restrictive legislation in South Africa, Jack’s pharmacy dream was only realized 35 years later.

In 1971, Clicks opened a store on West Street in Durban. Today, Clicks has over 900 stores in southern Africa, including Namibia, Botswana, Eswatini and Lesotho.

This year, Clicks opened its 900th store at Barlow Park Lifestyle Centre, Johannesburg, and expanded service delivery by opening its first omnichannel warehouse.

Dis-Chem was founded in 1978 by husband-and-wife team Ivan and Lynette Saltzman. They established a small pharmacy with a capital investment of only R10,000.

The business expanded rapidly in Johannesburg and Pretoria in the nineties, using the tried-and-tested formula of discounted medicine and non-pharmaceutical offerings.

The Dis-Chem stores were also always bigger than their competitors, further adding to their appeal. 

The business continued to diversify and expand, adding its private-label offerings in 1997 and opening its first franchise in Namibia in 2014.

At the end of the 2024 financial year, Dis-Chem had 327 stores, including 273 Dis-Chem Pharmacies and 54 Dis-Chem Baby City stores.

The company also operates 525 clinics staffed by a dedicated team of 530 registered nursing practitioners.

It raises the question of how Dis-Chem and Clicks compare from a South African investor’s point of view.

Dis-Chem versus Clicks

Clicks operates in 2 main reporting segments: retail and distribution.

• The retail segment includes all its Clicks pharmacy stores, which specialise in health, beauty, and homeware. It also includes Sorbet, a hair and beauty salon, and The Body Shop.

• The distribution segment includes UPD (United Pharmaceuticals Distributors), a wholesale pharmaceuticals distributor.

These two segments correspond to Dis-Chem’s retail and wholesale segments. Both Clicks and Dis-Chem’s pharmacy sales are wrapped in their retail segments.

Comparing Clicks’ and Dis-chem’s retail market share reveals that Clicks has been the market leader in this segment for decades.

In 2016, Clicks owned 51.5% of the combined retail market share, with Dis-Chem having a 48.5% retail pharmacy market share.

Clicks, however, lost its edge in the retail segment market share. Its latest annual reports indicated that Clicks and Dis-Chem had virtually equal retail segment market share, with a marginal lead for Clicks.

In the wholesale pharmacy market, Clicks is still the market leader by a significant margin when considering revenue generated by external sources.

The combined wholesale market share between Clicks and Dis-Chem is owned 68.3% by Clicks and 31.7% by Dis-Chem.

Even though Clicks is the clear market leader in this segment, Dis-Chem has made big strides in closing the gap.

In 2016, Dis-Chem only owned 17.7% of the combined wholesale pharmacy market, but it has since increased that significantly.

Dis-Chem has gained most of its market share by undergoing a significant number of acquisitions.

By acquiring many businesses within its industry, it has been able to expand its market share. However, with many acquisitions comes a lot of debt.

Dis-Chem’s interest-bearing debt, excluding leases, has increased significantly – from R988 million in 2016 to R2.6 billion in 2024.

This has increased the annual net interest rate burden on Dis-Chem – from R225 million to R440 million.

In comparison, Clicks has no interest-bearing debt apart from its leases. Its net interest rate burden was only R139 million in its last annual report – almost all related to leases.

The greater debt burden on Dis-Chem directly impacts its profitability.

Since 2016, Clicks has been generating a greater net profit margin than Dis-Chem and has been able to extend its profitability ever since.

In its latest annual report, Clicks reported a net profit margin of 6.1%, while Dis-Chem generated a net profit of 2.71%.

Maintaining low debt levels certainly played a significant role in Clicks’ favourable profit margins.