Buying in? The future of veterinary group purchasing

The benefits of being in a buying group have become well established over the past 20 or so years.

According to market research undertaken by Zoetis in 2014, around 80% of all UK veterinary practices are either in a group or gain discounts negotiated as a result of being part of a larger, corporate practice.

As well as making significant savings on medicines and consumables, members can also access an increasing range of services – from business coaching to online conferencing, CPD and performance benchmarking.

The ongoing success and potential for further growth of these buying groups has made them an attractive proposition for some big players in the veterinary sector. Both the St Francis Group and Vetswest were recently acquired by US-based veterinary supplies wholesaler, MWI Animal Health, while CVS Group splashed out more than £11 million to acquire Albavet – a deal that also included the VetShare buying group.

It’s certainly been an interesting 12 months in this dynamic sector, but what do the next few years hold?

St Francis Group

The St Francis Group was founded in 1991 by a practising vet and has 470 member practices across the UK.

Director, Alan White:

“We launched the St Francis Business Academy in 2014. Led by Bobbie Flight, the academy provides members with a training resource based on regional seminars and online learning tools. It covers two main management streams in leadership and communication, and planning for profit and key performance indicators. In addition, it offers training for team members on telephone skills and client handing, and so on.

“In an increasingly competitive market it’s vital independent vet practices maximise their strengths. We support this by ensuring they know exactly what they are paying for the products they use and sell and, therefore, price out appropriately to their clients, and by giving them the time and tools to engage more effectively with clients.

“I think buying groups will continue to evolve into a one-stop shop of support services that includes not only enhanced manufacturer discounts, but also training, client compliance services, health plans, HR support and marketing. Buying groups will allow independent practices to tap in to the support benefits corporate surgeries receive from their head office functions, yet remain an independent practice. St Francis Group started this development five years ago, recognising independent practices need more than enhanced discounts to save on cost, but also support and services that would help them grow sales.”

VetCel group

The Vetcel group was formed in 1984 and focuses on supporting independent veterinary practices. The group consists of 259 member practices across the UK.

IT manager, Jon Baker:

“As well as dealing with all the veterinary wholesalers, we also partner companies providing human medicaments, consumables, utilities, labs, pet cremation services, microchips, telecoms, servicing, dosimetry badges, gas monitoring, fuel cards, health and safety and HR services, pet insurance, practice insurances and financial advice.

“We also provide an online conference centre for members to discuss any topic of interest, or for Vetcel to inform the members of legislative changes, drug alerts and product recalls. Working with our partners, we provide a portal for them to reach out to our members to provide information, offers, CPD or any other support that will benefit the group as a whole.

“I think in the next five years buying groups will become the main way the independent practice purchases its goods and services.

“The corporates will search for even more businesses to be vertically integrated into their systems, owning all aspects of the veterinary industry from manufacturing to the end user. The independent practice, regardless of its size, will inevitably be seen as running second to the bigger corporate business that can deliver on product compliance.”

Vetsure

Vetsure offers a range of network-based services and a choice of buying group options as well as its core pet insurance offering. Founded in 2009, the company did not enter the buying group arena until 2011, but already works with 350 veterinary clinics.

Managing director, Ashley Gray:

“Our buying group achieves the best savings available on the market, but also allows the central business to benefit financially at times when our member practices are undertaking high levels of treatments and, subsequently, processing an increased amount of insurance claims.

“We also offer management CPD, benchmarking, e-commerce solutions and are investing heavily in the development of digital marketing tools and apps like MyPetPortal.

“The continued success of buying groups will depend largely on their ability to evolve.

“In the absence of a willingness to influence member buying behaviour, as we do with Vetsure Platinum, the actual value the buying groups will be offering in terms of price will become negligible. Proof of this is already being seen; many suppliers have, in recent times, already reviewed their approach to buying groups and started to offer variable terms dependent on the purchase levels of their members. In other words, we are back to square one with smaller practices unable to compete fully with larger groups.

“Inevitably, the stragglers are likely to be engulfed in the wave of acquisition by larger businesses and private equity with an interest in the animal health sector – much as we have seen in general practice. Whether this turns into a new model (with the boundaries between wholesalers, laboratories, practice management system providers and groups becoming less clear) remains to be seen.”

Vetswest

Vetswest was started in 1990 by a group of neighbouring vets in the south-west of England. Now under the ownership of MWI, Vetswest has nearly 250 member practices and serves almost 750 individual sites in England, Scotland, Northern Ireland and Wales.

Managing director, Chris Sobey:

“We offer in-house IT business solutions, PMS integration, smart pricing tools, HR, health and safety, preventive pet health plans and client reminder services. Members can also benefit from bespoke CPD, financial services – whether it be insurance, or pensions advice – car leasing, credit options for clients, consumables, cremation and waste management services, laboratory services, locum insurance and a lot more besides.

“In five years time I see more and more practices working with a business-focused group, such as Vetswest, to unlock potential and use all the focused tools that can help practices run their business as a profitable and thriving businesses, which happens to operate within the veterinary market.

“Another area will be providing solutions for practice succession /transition if corporate sale is not desired. This also includes how we encourage young, budding vets in to practice ownership. The opportunities to ‘buy in’ are somewhat difficult with the current valuations that are in place; the joint venture partnership opportunities are now realising lower financial returns than they did a few years ago, and the corporate model perhaps does not suit some entrepreneurial characters who want to achieve more or take a different path, so an independent practice partnered with a like-minded business, such as Vetswest, will be the key.”

VetShare

VetShare began life in 2008 and, since merging with London Vet Forum in 2014, has grown rapidly with 560 branches throughout the UK.

VetShare director, Ruth Gray:

“We offer a full range of support services to members. The aim is to cover everything that is needed to run a veterinary practice, such as pet crematoria, laboratories, equipment, instruments, consumables, website, HR and a whole lot more besides.

“Some might say the success of the corporates has largely been driven by their improved margins over independent practices, but the latter will always survive if they maintain their unique identity and offer great service and value for money. However, being part of a group like VetShare allows them to compete on headline prices and offers to clients if they want to or, alternatively, to increase their margin if they prefer.

“The beauty of looking into the future is there are no real limitations on where we can go. VetShare behaves like a cooperative, taking the advice of its members, and if there is any product or service from which they wish to receive a financial advantage then VetShare is happy to pursue it on their behalf.

“There is only one other area I would like to introduce and that is a comprehensive own-brand range. I think VetShare has the size and volume to do this. Such a range would truly give the members control of supply of the products they are prescribing or promoting. They would retain sales and footfall and not lose clients to the internet pharmacies.”