Chain Drug Review-November, 2002

Kinray Thrives in Niche Where Others Struggle

NEW YORK – While regional drug wholesalers have been dropping like flies over the past decade, Kinray Inc. has been thriving. A clue to how this particular regional wholesaler has managed to not only survive but flourish in the face of massive consolidation in the industry is offered by Stewart Rahr, Kinray’s President and Chief Executive Officer. “Undoubtedly a key element that sets us apart is that we have no debt to service,” he notes. “With margins so thin, you can’t afford to service debt in this industry, and those who tried to are now gone.”

In addition, in an era when even the coldest of companies with rapid turnover of personnel refer to themselves as “families,” Kinray’s claim actually seems to hold up. Nearly all of the wholesaler’s key executives have been with the company for between 20 and 30 years. Rahr estimates that Kinray will do close to $2.5 billion in sales in 2002. What is especially note-worthy is that this impressive figure is all generated from one 400,000-square-foot facility – in one eight-hour shift per day.
“While our competitors require 24-hour shifts, we start at 6 a.m. and have everyone out by 2 or 3 p.m.,” Rahr notes. “Yes, I consider Kinray a family – an efficient and hard-working family.”
He estimates that 70% of the company’s deliveries are same day, while 78% of its orders are picked automatically. Kinray serves seven states in the Northeast – New York, New Jersey, Connecticut, Pennsylvania, Rhode Island, Massachusetts and Delaware – and 99% of its business is done through independent pharmacies. “Everything we do is aimed to get an order out quickly and accurately,” explains Vice President and General Manager Bill Bodinger. “We have a web-based ordering system with 100% accuracy, which means that whatever a customer orders, he gets. We turn our inventory at a rate of 16.7, while the national average is 7.”

Another key to the company’s growth is its superior customer service, according to Vice President of Purchasing and Marketing Sandy Greco. “Much of what we do is promotionally driven,” he remarks. “We do a substantial amount of advertising, which makes the stores aware of all the programs and services we have in place.” Kinray is launching consumer promotions in April for its Preferred Plus Pharmacy (PPP) private label line, which now includes over 700 items. The campaign will incorporate newspaper, radio and billboard ads. “We’ll have a Preferred Plus Pharmacy web site as well as a toll-free number where consumers can type in their zip code and be informed of the PPP pharmacy nearest to them,” notes Greco. The wholesaler recently expanded its home health care division to more than 8,000 SKUs, offering a complete line of both hard and soft goods. It has also set up a separate home health care customer service division.

“We cater to all requests, most of the time within a 24-hour period,” notes Jean Kappes, Vice President of Special Services and Customer Service. In addition, Kinray has developed a program in which it helps its retailers set up sections in various categories, reports Kappes. The company also plans on continuing to be a major player in generics sales, according to Rahr. Kinray currently offers over 6,000 generics SKUs. “Generic drugs comprise one of our strongest areas,” remarks Rahr. “now accounting for 10% to 15% of our sales, and between $200 million and $300 million in sales – which gives us tremendous buying power.” The wholesaler is very community oriented. Kinray recently presented $100,000 in donations to the families of the victims of the 9/11 terrorist attacks. All of the money was donated by employees and affiliated pharmacies. In addition, Rahr recently inaugurated what will be an annual charity event in remembrance of his late father. The Joseph Rahr First Annual Memorial Golf Invitational was held in September at the Trump National Golf Club. At the event Stewart Rahr donated $100,000 to the Make-A-Wish Foundation of Metro New York.