Elephant Pharmacy, Inc

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Elephant Pharmacy, Inc.

1912 Bonita Avenue
Berkeley, California 94704-1014
U.S.A.
Telephone: (510) 486-2616
Fax: (510) 486-2656
Web site: http://www.elephantpharmacy.com

Private Company
Founded: 2002
Employees: 125
Sales: $15 million (2006 est.)
NAIC: 446110 Pharmacies and Drug Stores

Elephant Pharmacy, Inc. is not your average drugstore, as its name might suggest. Though the company's stores, with the original in Berkeley and others in the Bay area around San Francisco, California, are large, the name is more whimsical than descriptive. Elephant Pharmacy was established by Stuart Skorman as an alternative to traditional pharmacies. It has all the merchandise and supplies of a regular drugstore along with a host of holistic and homeopathic remedies and products. In addition to its requisite pharmacists, Elephant staffs its stores with homeopaths, registered nurses, nurse practitioners, nutritionists, herbalists, nutripuncturers, naturopathic doctors, and even makeup artists and aestheticians.

VIDEOS, NATURAL FOODS, AND
ELEPHANTS

The driving force behind the creation of Elephant Pharmacy was Stuart Skorman. Skorman was rarely content to sit still. He attended college but left to begin an illustrious business career on the East Coast. He signed on as a marketing manager at a new health foods grocer in Brookline, Massachusetts, called Bread & Circus, in 1977. While at Bread & Circus, Skorman worked for Anthony Harnett, and learned all about turning a fledgling upscale shop into a multimillion-dollar natural foods powerhouse.

Skorman left Bread & Circus in 1985 and launched two successive ventures in the burgeoning video market. He founded Empire Video in Keene, New Hampshire, and built it into a thriving video rental chain. From six stores in the Northeast, Skorman's enterprise soon lived up to its name; he sold Empire Video to Blockbuster Entertainment in 1994 for a reported $6 million.

Skorman's next venture was Reel.com, an online video catalog where customers could buy from a staggering roster of films. Hollywood Entertainment, Blockbuster's top rival, bought Reel.com from Skorman for just under $100 million in 1998. Skorman's proceeds from the Reel.com sale (about $16 million and change) funded his next dot-com idea, an educational web site called Hungryminds.com. Hungryminds.com did not fare as well as Skorman's other startups, so he turned to something entirely different. At that point, his longtime friend and mentor, Anthony Harnett, reentered the picture.

Harnett was no slouch on the entrepreneurial front either: he had established the Bread & Circus Whole Foods Supermarket chain on the East Coast. Harnett and his wife bought a small shop called Bread & Circus in Brookline, Massachusetts, in 1975. The store sold an eclectic array of goods from old-fashioned toys to organic foods. Harnett increased the store's natural food selections and health-conscious customers flocked to Bread & Circus. Harnett turned one store into the Northeast's largest natural foods grocery chain, which he sold to Whole Foods Market about the same time Skorman was selling Empire Video.

SEEING ELEPHANTS: 2001–02

With Harnett's knowledge of the natural foods industry and Skorman's West Coast business contacts, the partners came up with the concept for Elephant Pharmacy. Perhaps it was mere coincidence there was an Elephant Pharmacy in Bergen, Norway, named for a giant statue in front of the store. Skorman had said he chose an elephant to represent the new business because of its reputation as a gentle, wise creature. Nevertheless, the unconventional endeavor was planned for Berkeley, California, the perfect place for a big-box alternative pharmacy. As Skorman commented to Michael Johnsen of Drug Store News (June 17, 2002), "Elephant Pharmacy will be to Walgreens as Whole Foods Market has been to Safeway."

In June 2002 Skorman and Harnett hired Lisa Clausen away from Nike to run Elephant's daily operations. While Clausen, who had served as Nike's general manager, had no pharmacy or food industry experience, she had managed thousands of Nike employees and was up to the task of running the first Elephant Pharmacy. Opening a newfangled pharmacy in the early 2000s was a risky venture nonetheless. California had been suffering a shortage of pharmacists and pharmacy technicians, and the state's Medicaid benefits, like everywhere else, had been reduced. Nevertheless, Skorman, Harnett, and private investors opened the first Elephant Pharmacy at 1607 Shattuck Avenue at the corner of Shattuck and Cedar in Berkeley in November 2002. Their flagship was 13,000 square feet with unique dual prescription counters, one for traditional medicine and the other for herbal and homeopathic remedies.

Elephant boasted free parking and not only offered competitive prices on traditional drugstore items (food, vitamins, greeting cards, magazines, school supplies, makeup, toys, flowers, and vitamins), but added a huge selection of natural products, a massage station, health consultations, aromatherapy sessions, makeovers, and even a beverage nook serving healthy smoothies and herbal teas.

RIDING HERD: 2003–04

Elephant Pharmacy opened with a workforce of 40, divided evenly between full- and part-timers. This figure did not include the myriad of instructors, healers, and lecturers who visited the store regularly, especially since Elephant had begun offering free health-related classes. Skorman and Harnett also fine-tuned Elephant's operations, overhauling the fresh produce section and increasing its beauty section with a larger selection of products and square footage. Private label vitamins were introduced, as was Elephant's own bottled water.

Elephant began publishing a monthly newsletter in 2003 as well, carrying product pricing information, specials, listing classes and author visits, and any information relevant to the particular monthly period covered. The newsletter was mailed to over 35,000 area residents, while other circulars were handed out at the store.

COMPANY PERSPECTIVES

elephant pharm, the leading complementary pharmacy and one-stop wellness store, is a vibrant alternative to typical chain drug stores. elephant offers a vast range of over-the-counter pharmaceuticals, herbal remedies and supplements from both Western and Eastern traditions. A wide selection of natural foods, natural body care and cosmetics, yoga and meditation gear, home and travel accessories is also available. elephant's carefully-selected team of wellness practitioners, instructors and visiting experts offers hundreds of free classes, lectures, clinics and health testing programs every month.

It was soon clear Elephant Pharmacy's élan, amid serious competition from several Walgreens and Longs pharmacies nearby, was its concentration of organic products, including homeopathic remedies and a wide range of herbal supplements, beverages, foods, bath products, and cosmetics. Elephant's fostering of both Western and Eastern-styled medicine found much community support. The drugstore became a neighborhood hangout, where residents came to attend classes on stress reduction, Chinese medicine, or yoga, to get a beauty makeover, or to get a protein smoothie, a massage, or acupuncture. Elephant also provided film development services, in addition to a growing book section, and numerous seasonal items.

By late 2003 Elephant was filling an average of 100 prescriptions a day and offering 120 different classes on the premises. For the year, Elephant had brought in sales of $6.3 million, above the national average of per-store pharmacy revenues. Skorman told Drug Store News (October 6, 2003), "We're making a whole new retail concept, and it's really working." While the concept was indeed working, Skorman and Harnett did temper their future plans. Skorman had originally wanted to have 200 stores within about five years, but by 2004 these ambitions proved improbable with a struggling economy and ramped up competition from other pharmacy chains.

In an unusual twist of fate, the Woonsocket, Rhode Island-based CVS Corporation, which had built up its business outside California for more than a decade, returned to the Los Angeles area and opened a dozen new freestanding stores, complete with drive-up pharmacy windows. CVS had also acquired the 1,200-store Eckerd drugstore chain during the year. Ironically, CVS did not put stores in Elephant's vicinity and chose to invest in the holistic pharmacy instead. Figures were not released, but CVS's capital infusion helped pave the way for Skorman and Harnett's second Elephant Pharmacy in San Rafael.

Despite the financial support from giant CVS, which had more locations and filled more prescriptions than its rivals, Elephant was feeling the heat from the Deerfield, Illinois-based Walgreen Company. Walgreen had rolled out a massive expansion plan, opening hundreds of stores across the country, including the West Coast. Walgreen already had a strong presence in Berkeley and throughout California, making it Elephant's toughest competitor. To keep its edge, Elephant Pharmacy began stocking DVDs and boosted its national recognition by opening "wellness boutiques," featuring health and beauty aids, within a dozen Saks Fifth Avenue stores. Elephant's revenues had reached a reported $11 million for 2004.

WIDER HORIZONS, 2005 AND
BEYOND

In the middle of 2005 Kathi Lentzsch, formerly of the Cost Plus World Market retail chain, was hired as Elephant's new chief executive, replacing Skorman, who wanted to explore life outside of Elephant's daily operations. As Skorman had commented to Ed Welles of FSB in September 2004, "I need the stimulation [of a new business venture], but I don't really want the responsibility. I can do it for up to three years, but not forever." Elephant Pharmacy had reached the three-year mark and Skorman was on the lookout for new opportunities. At the time of Skorman's resignation as CEO, Jack Murphy, a venture capitalist, came on board as Elephant's executive vice-chairman.

The second Elephant Pharmacy, located near San Francisco, in San Rafael, had its grand opening in January 2006. The new store was smaller than its predecessor, at 10,000 square feet, but ready to cater to the area's eccentric clientele. Rivals were nearby, including both Rite Aid and Walgreens, with the latter still dominating the industry. Not only had the enormous chain raked in more than $42 billion for 2005, but it changed its marketing strategy by buying the 75-unit Happy Harry's, Inc., an East Coast drugstore chain. CVS was also on the move, acquiring Albertson's, which included the Jewel grocery chain and Osco drugstores.

KEY DATES

1977:: Stuart Skorman begins working with Anthony Harnett at Bread & Circus natural foods store.
1985:: Skorman leaves Bread & Circus to launch a video rental company.
2001:: Skorman and Harnett make plans to open an alternatively-styled pharmacy in California.
2002:: The first Elephant Pharmacy opens in Berkeley, California.
2004:: CVS Corporation invests in Elephant's expansion.
2006:: The second Elephant Pharmacy, in San Rafael, has its grand opening; three new Elephant locations are planned for the Bay area of California the following year.

Despite its rivals and their deep pockets, Elephant Pharmacy played up the differences between itself and the drugstore chains, including its homey feel and hands-on approach to healthcare as a whole. Elephant customers came to its stores for more than products: they came for information, classes, and the camaraderie of like-minded individuals who wanted to explore alternatives to Western medicine. Whether Elephant Pharmacy had the staying power to battle Walgreen, CVS, Rite Aid, and regional chain Longs Drug Stores, was a question few could answer. Elephant's management remained optimistic and embarked on its long-awaited expansion plans, opening a third location in Los Altos in 2006 and three additional stores planned for the following year.

Nelson Rhodes