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The Elephant gets bigger Pharmacy opening branch in Walnut Creek

27-Jul-2007: Elephant Pharm is a drug store, but it is frequently compared to Whole Foods, a grocery chain.
Both focus on natural, organic and holistic products. Both are called innovators in their retail segments. Both were founded by people who wanted to make money and improve consumers' lives.

The big difference is that Whole Foods is national and Elephant Pharm is scheduled today to open its fourth store in Walnut Creek.

The store will serve as prototype for the Berkeley-based chain, whose leaders plan to be national in five years.

"Elephant Pharm has great return potential and it's also an opportunity to redefine the whole pharmacy segment," said Nancy Pfund, managing director andco-head of the Bay Area Equity Fund, a venture capital fund managed by JPMorgan Chase that is an investor. "It answers the need of many consumers who want both western and non-western approaches to health care needs. ... It is able to turn into what is normally a chore into a positive experience."

Elephant Pharmacy opened its first store in Berkeley in 2002 with the vision of becoming a drugstore chain that would not only sell medicine, but also promote alternatives to health and remedies.

The company has since changed its name to Elephant Pharm.

"In stores like CVS and Walgreens, the only focus is on western medicine," said Stuart Skorman, the founder of Elephant Pharmacy who is no longer affiliated with the company. "They sell cigarettes, Coca-Cola — food that

makes you sick. I saw that there was an opportunity to make a pharmacy that was the opposite of all that. One that would point you in the direction you are supposed to go in."
The new Walnut Creek store, at 1388 S. California Blvd., next door to a Trader Joe's, will serve as prototype for Elephant Pharm, which plans to become a national chain in five years. Its other three stores are in Berkeley, Los Altos and San Rafael.

The company has put growth plans on hold in the past, but President and Chief Executive Kathi Lentzsch said the company now has the technology and infrastructure for widespread expansion.

"We've been in the process of implementing in the past year some pretty powerful systems that will allows to expand without a hitch," Lentzsch said.

Elephant Pharm has attracted investment from Tudor Investment Corp., the Bay Area Equity Fund and competitor CVS.

Lentzsch said the company expects its sales to grow by more than 50 percent this year to about $28 million from an estimated $18 million last year. Overall, the chain is not profitable yet, but some stores are in the black.

Eye on area, state, nation

Lentzsch said she expects Elephant Pharm to perhaps double its stores in the Bay Area to about eight, then cover California before branching out to other states.

In the United States, the number of pharmacy outlets grew about 8 percent to 56,000 in 2005, from about 52,000 in 1995, according to the National Association of Chain Drug Stores, based in Alexandria, Va.

Those figures include drugstore chains, big-box retailers, grocery stores and independent pharmacies.

"Because independents have a small number of stores, they tend to be more innovative," said Edith Rosato, senior vice president of pharmacy affairs for the National Association of Chain Drug Stores. "The smaller chains, have to find ways to differentiate what they offer."

At 12,000 square feet, the Walnut Creek location features two adjacent pharmacies: prescription and herbal. Its products include environmentally friendly cleaning supplies, a baby section, an all natural and chemical-free cosmetics counter, a section for books and DVDs on health and exercise topics, and food aisles containing frozen vegetarian entrees and organic cereals.

Changing the market

Elephant Pharm is not alone in changing the way pharmacies target customers.

"We're going after niche market, a market that has not been served in the past," said Ben Singer, co-founder of another pharmacy startup, Farmacia Remedios, that has three stores in the Bay Area. "Farmacia Remedios has found a niche: the Hispanic segment in the United States. For Elephant Pharm, it is the affluent customer who is looking for the Whole Foods experience in pharmacy. We are both seeking the customer the big players are not catering to."

Elephant Pharm appeals to shoppers like Simeon Farwell-Miller of Berkeley who once walked into the store with a headache that had lasted a week despite many doses of pain relievers.

He consulted with an acupuncturist, who looked at his tongue, told him he had too much heat in his liver and then made him a special tea blend. The headache was gone in two days.

Farwell-Miller stops by about once a week for soy milk, organic bread and $1 per day DVD rentals.

"Elephant is more interested in their specific customers," said Neil Thall, chief executive of Aldata, an Atlanta-based maker of software for retailers that provides inventory-tracking software to Elephant Pharm. "There's always going to be market for the big-box retailer because of their ability to discount, but it's getting boring."

When shoppers walk into the Walnut Creek store, the aisles fan out at an angle — clearing a path to the pharmacies in the back.

The store's skylights; the color scheme of neutral greens, teals and browns; and the wood and glazed concrete floors give the store an earthly feel.

"It's a fun place to shop when you want to buy something fun that you don't really need," said Nicole Drake, who shops at the Berkeley location about three times a week. "I bring my husband and say, 'Let's stop at Elephant and see what we can buy.'"

Source: San Mateo County Times

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