Drug Store News-November 2002

"Kinray Closes in on $2.5 Billion in Sales"

By Mark Tosh
New York — Kinray president and chief executive officer Stewart Rahr doesn’t sit still very long. And his family-owned company, which is the largest privately held pharmacy distributor in the nation, also has been making big moves over the past several months. Kinray, boosted by the acquisition of a local competitor’s assets and some of its customers, is on track to achieve sales volume of between $2.4 billion and $2.5 billion this year, according to company estimates. The company ranked No. 130 on last year’s Forbes list of the largest privately held companies (with sales of $1.7 billion) and should vault easily into the top 100 this year with the volume added from the former Remo Drug distribution business. The Remo deal, completed last year March, provided Kinray with almost $400 million of additional sales this year from former Remo customers. The distributor also added 250 new customers and now supplies approximately 2,000 independent drug stores. About 90 percent of these customers count on Kinray as their primary wholesaler.

At the same time, Kinray’s core, or existing, business is growing in the 20 percent range on an annual basis, with about 87 percent sales generated through prescription drugs and the balance through prescription drugs and the balance through an expanding assortment of front-end products.
Rahr said Kinray also is the nation’s largest privately held buyer and distributor of generic drugs.
“We pick, pack and ship better than anyone in the country,” Rahr said, noting that the Kinray warehouse operation can pick 2,000 orders per hour, moving roughly $1.25 million in customers product per hour. Almost amazingly, Rahr said Kinray moves all this product over an eight-hour warehouse shift. “Everyone goes home at 3 p.m.,” he noted. The distributor, operating out of a 400,000-square-foot warehouse in the Whitestone area of Queens, derives the majority of its business from independent pharmacies spread across a seven-state area in the Northeast. The company doesn’t service hospitals, mail order facilities or major drug chains. “Delivering to chains has too low of a profit margin,” he said. “Chain customers also would force us to deviate from our service schedule. We try to do same-day service to between 60 percent and 70 percent of our customers.” The company has managed to ride out the downturn that independent drug stores experienced in the late 1990s and now is benefiting by building its relationships with stronger independents that remain. To help these companies grow, Kinray is open to lending capital to the operators willing to invest in their business. As a result, Rahr said Kinray has helped independents open “100 to 200 stores” over the past few years. “We’re lending out more capital now than ever,” he added. “Some of our independent customers are opening second and third stores,” said Robert Rahr, executive vice president and Stewart’s son. “We’ll also help existing store owners identify a new site and help with the opening,” the executive explained.

In addition to pharmacy items, Kinray offers its customers more than 20,000 SKUs of other health care products, consumables and general merchandise items. The distributor also is expanding its own Preferred Plus label. “We’re introducing a lot of new programs,” said Sandy Greco vice president of purchasing and marketing. Among the new promotional pieces are enhanced circulars, new window signage and direct-to-consumer ads tailored for the pharmacy. “A lot of Kinray employees have worked in a pharmacy, so they have an idea of what consumers want,” said Greco who also oversees Kinray’s generic drug purchasing. Rahr, who took over the company from his father more than 30 years ago, also has made a name for himself in New York through his generous contributions to charities, especially to the families of victims of last year’s 9-11 terrorist attacks at the World Trade Center. Indeed, earlier this year Rahr bid $90,000 to buy the original photograph of the three New York City firefighters raising a flag in the rubble at the World Trade Center. (The print also is signed by all three of the firefighters.) The proceeds from that auction went to a fund for those injured or killed on 9-11. Speaking of the photo and his bid, Rahr said, “It means something to me that this should never be forgotten. It’s going to be in our lobby prominently displayed.”