Perrigo Growing UK Market Share

December 19, 2003
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ALLEGAN — The Perrigo Co. has acquired privately held Peter Black Pharmaceuticals for approximately $13 million in cash.

Peter Black Pharmaceuticals, headquartered in Swadlincote, U.K., is a large manufacturer of store brand vitamin and nutritional products for grocery stores, pharmacies and contract customers.

The company has 250 employees and annual sales of $38 million.

The acquisition moves Perrigo closer toward its goal of becoming one of the United Kingdom’s largest manufacturers of over-the-counter (OTC) pharmaceuticals and nutritional supplement products sold by supermarket, drug and mass retailers under their store brand labels, said Ernest Schenk, Perrigo’s manager of investor relations and communication.

Peter Black Pharmaceuticals will be renamed Perrigo U.K., he said.

In June 2001, Perrigo paid $44 million to acquire Wrafton Laboratories Ltd., a U.K. store brand supplier to grocery and pharmacy retailers and a contract manufacturer of pharmaceuticals.

At the time, Wrafton employed 500 people and had annual sales of $37 million.

“The logic of the Peter Black acquisition is to give us a broader product line in the U.K., both OTC — which is Wrafton— and nutritional, which is the Peter Black side,” Schenk explained.

The United Kingdom is a good store brand market, which is why Perrigo has a strong interest in it, Schenk said.

“The big store brand markets worldwide are North America and U.K. and they are somewhat mirrors of where the large chain stores have had the most success. So the store brand concept really has to be understood and adopted before it’s a good market for Perrigo.”

Wal-Mart has a large presence in the United Kingdom via its 1999 acquisition of Asda Group PLC, the country’s third-largest supermarket chain.

The $10.7 billion purchase of Asda, according to analysts, automatically more than doubled Wal-Mart’s global sales.

“Wal-Mart has done very well with the stores,” Schenk said. “Part of what we want to do is broaden our product line to be a more important supplier in the U.K.”

Perrigo also has a subsidiary in Mexico known as Quimica y Farmacia, S.A. de C.V., a pharmaceutical manufacturer and distributor based in Monterrey, Mexico.

Quimica y Farmacia was posting $15 million in annual sales upon its acquisition in October 1997.

It constituted Perrigo’s first manufacturing operation outside the United States, Schenk said.

“We’re pleased with the business. We are actually restructuring it a bit,” he noted.

About 18 months ago, Perrigo eliminated from its portfolio some of the products being manufactured there that were not part of the core business, he said.

“We’re trying to reposition the business toward store brands, like in the U.S. Some of their business goes to very small retailers. We’re moving more of our business toward the larger chains in Mexico.”     

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