How the Rich Invest: Jack Gance and Mario Verrocchi

John Stensholt 
September 20, 2017
AFR

The Australian Financial Review looks at how the wealthy are making money for our column, How the rich invest.

Rich Listers Jack Gance and Mario Verrocchi control the Chemist Warehouse chain.

While Financial Review Rich Listers Jack Gance and Mario Verrocchi are little-known and relatively recluse compared with most of the country’s wealthy elite, the chemist chain they head is most certainly not. 

The My Chemist Retail Group, comprising the Chemist Warehouse and My Chemist chains, has been expanding relentlessly. The pair have shaken up what has traditionally been a fragmented industry and head a business that has at least 300 stores nationally and is expanding into Asia.

Documents recently lodged with the corporate regulator give an insight into just how profitable the chemist business is for Gance and Verrocchi.

Accounts for the 2016 financial year for a company called East Yarra Friendly Society Pty Ltd show the business making a cool $101 million net profit in the year to June 30, 2016, the most recent period for which East Yarra has lodged a financial report. Gance and Verrocchi are the company’s only directors.

Information in the accounts would suggest the numbers could account for roughly half the wider Chemist Warehouse business.

The documents reveal the consolidated revenue of the company and entities it controls to be about $1.43 billion. Media reports have suggested the entire chain has annual revenue nearing $3 billion. 

The 2016 profit was up from $97 million the previous year, and the business has more than $400 million in retained earnings.

East Yarra is the main company through which Gance and Verrocchi control their overarching chemist business, which has grown from one that had five Chemist Warehouse outlets in 1995, about 195 six year ago and more than 300 today.

That growth has not been without controversy and East Yarra has been seen by some in the industry as been a way the duo have circumvented laws designed to ensure dozens of pharmacies are not controlled by individuals. 

Until 2004, friendly societies were able to own as many chemists as they wanted in Victoria. A group led by the Gance and Verrocchi families bought East Yarra when it was an inactive concern in 2002 and proceeded to buy pharmacy businesses.

Changes to the law in 2004 stymied plans to repeat the move with another friendly society purchase but the Chemist Warehouse has continued to expand by recruiting franchisees. Often these franchisees have a Gance or a Verrocchi as landlord. 

The duo have been expanding their business around Australia ever since, the pace of which will accelerate with the opening of new malls by the Home Consortium, which last year acquired the former Masters store portfolio from Woolworths in a $725 million deal. Gance and Verrochi are shareholders in the consortium.

Gance and Verocchi are also directors and shareholders of online business ePharmacy. Its latest accounts, lodged with the corporate regulator last year for the 2014 financial year, show a business with $48 million revenue and a small profit. 

Prior to establishing Chemist Warehouse, the duo bought the Le Specs, Le Tan and Australis brands to Australia in the 1970s and 80s. They sold the business and then entered the pharmacy sector.