Originally published by IHS Markit on June 24, 2020.
Around eight months ago, Benjamin Wolin took over the reins at Covetrus as it continued to combine product distribution with technology and pharmacy assets. In the first instalment of this two-part interview, he spoke to IHS Markit Animal Health editor Joseph Harvey about his background in human health and his start to life as the leader of a multi-billion-dollar start-up.
While Benjamin Wolin was a newcomer to animal health when he joined the Covetrus board, he was immediately able to recognize similarities between the industry and his prior career.
”I came out of the healthcare and technology space,” he explained. “I started and ran a technology company on the human healthcare side of things.
“We scaled that business, took it public in 2014 and then sold it a couple of years later. We had a successful run. That business worked with manufacturers and hospital systems to provide technology and a communication platform for people who wanted to reach consumers and physicians.
”Subsequent to that, I served as an investor and board member for other healthcare technology companies. Some were in the specialty pharmacy space, some in medication compliance and some in the drug development category.
“The common theme was always the intersection between technology and healthcare. It was through that network of individuals and experience that I joined the Covetrus board when it became a new company in February 2019. Then, shortly after joining the board, I became chairman and then chief executive of the company.
“It felt like a familiar set-up – very similar to the human healthcare side. Both have supply chain and distribution, practice management systems, prescription management and online pharmacy businesses. The parts are very similar to human healthcare, it’s just the combination of them is unique for animal health.
“Being in healthcare and technology, I was always cognizant of the animal health industry but I wasn’t working directly in it up until Covetrus. A lot of the manufacturers I had worked with – Pfizer, Eli Lilly, Merck etc – had significant animal health divisions. So, I had a lot of exposure to the manufacturing side of the business and a lot of exposure to the underlying technology that helps a company give better care but in a human healthcare setting.”
He said one major difference between the human and animal health industries is the lack of large institutionalized systems in the latter, such as insurance companies or hospital networks. The human healthcare sector is also notably larger than the animal health market.
This means a variety of extensive technology solutions have been adopted by hospitals and clinics – something that is yet to occur on such a scale in animal health. However, the Covetrus chief executive suggested animal health “is rapidly catching up”. A key example of this is the rapid adoption of telemedicine services in veterinary practices during the COVID-19 pandemic.
”Some of the same features and functionalities that have been applied to human health are starting to be applied to animal health,” Mr Wolin stated. “We are starting to see an acceleration of innovation and technology development in animal health.”
He also said the customers and technological needs in human health are comparable to those in his new domain.
“When you compare a small business in human health and a small business in animal health, which a lot of our customers are, they look and feel quite similar,” Mr Wolin noted. “Obviously, they have a different patient population but the tools they want to use and run their practices on are quite similar.
“In human health, they might plug into a larger system like insurance or have to connect to a lab infrastructure or hospital system that doesn’t exist in animal health. For the most part, the nuts and bolts of the businesses and the underlying technology are similar.”
Revitalizing Covetrus
Mr Wolin took leadership of Covetrus in October 2019 – a time when the company needed to go through many changes. He previously highlighted the missteps taken in the early life of the company.
Mr Wolin told IHS Markit Animal Health a big part of his role has been to bring clarity to the company’s strategy for growth. He confessed many people found it hard to understand the firm’s set-up and how its various businesses are connected.
He described Covetrus as a venture capital-backed technology and pharmacy business (Vets First Choice) that merged with Henry Schein’s animal health division, “which really was a holding company of 30 different companies all over the world under different brands”.
“People were asking: How does it all fit together? Where is the company headed? Why is this better for my business? Admittedly, we struggled with that. We’ve made good progress but it’s still early. It takes a while to make progress – we have nearly 6,000 employees, 22,000 practices using our practice management software and 90% of practices in the US are our customers.
“We are more focused on what we want to do and we’re trying not to bring more complexity on ourselves. It might not be easy to see that from the outside, but I see it on the inside every day in terms of what the team is focused on and what we consider our priorities.
“We’ve made a lot of progress on creating ‘one Covetrus’, where employees and customers identify us as one company. At the same time, I think I would be naïve to claim there wasn’t any residual effects of someone being a member of Henry Schein’s US distribution business for 20 years.
”Just because you have a new brand and start a new company, doesn’t mean they all of a sudden forget that. The same thing goes for Vet’s First Choice. We’re in the middle of a transformation and it doesn’t happen overnight.
Mr Wolin said by the end of 2020 or early next year, Covetrus will have exited all of the transition service agreements with Henry Schein and its collection of assets “will be more tightly coordinated into a broader value proposition to customers and suppliers”.
Since Mr Wolin’s introduction, Covetrus has divested scil animal care and ended fiscal 2019 with robust fourth-quarter sales growth. The new chief executive has also installed a three-year plan for the firm and has overseen notable top-level appointments.
He added: “Driving engagement on our platforms is a big focus. We’ve focused on making our existing customers work better. That is paying off in the numbers. I know it’s early. Every quarter we’re getting better but it’s a long path to travel down.”
Putting Covetrus’ position in the veterinary medicines sector in concise terms, Mr Wolin described the business as “the leading technology-enabled services company in the animal health industry”.
Competitors across multiple segments
Despite its global presence, Mr Wolin called Covetrus a “$4 billion start-up” due to its recent creation.
He explained: “On one hand, the company has tremendous scale and a massive footprint – it services a lot of customers and works with every manufacturer. At the same time, it’s a brand-new company. So, some of the things you would expect of a company of this size just don’t exist and have yet to be built.
”It’s a blank slate, which is an interesting challenge. You can make it what you want, instead of trying to change something that has existed for 20 years, which is often a lot harder to do.”
While Covetrus is a unique beast in the animal health world, Mr Wolin believes this might not be the case in the future.
He said: “To stay competitive in this world, the companies that service manufacturers, veterinarians and consumers are going to need to continue to evolve. It really wouldn’t surprise me if other companies start to exist that try to bring together a suite of different solutions to serve one of those constituents.
“Is there going to be someone at our scale or our breadth or global footprint? I’m not so sure. That might be harder to see. It also wouldn’t surprise me if companies try to evolve in how they think about servicing the different constituents in the landscape. What a veterinarian needs today and what a veterinarian needs tomorrow is going to continue to evolve, and the job of running a business is to be as useful as you can to your customers.
“We have different lines of business and, as a result, we have different competitors. Generally, there is no other Covetrus – there is no-one that brings together practice management software, supply chain and pharmacy at the same time. On the distribution side we’re competing with Patterson, MWI and a handful of other smaller distributors across the world. We’re the only distributor with a really global footprint of our size. Those other companies have some international presence but not to the level we do.”
Covetrus is currently neck-and-neck with MWI in terms of the biggest animal health distributors, with Patterson in third position.
Mr Wolin noted online distributors such as Chewy and Amazon are “not number one competitors in today’s world”.
However, he added: “Consumers have choice and are transacting with Amazon, Chewy and others. They will continue to look to them to provide other services. So, we are indirectly competing with them and I expect to continue to do so in the future.”
Mr Wolin also stated: “In practice management software, there are smaller players out there and some homegrown solutions we compete with. In pharmacy, there’s competition in the US. I would say in each market, we’re a leader.”
Broader thoughts on animal health
Mr Wolin – an owner of a goldendoodle and a hamster – told IHS Markit Animal Health: “Animal health is a great industry for two main reasons. One, it’s growing. Two, it’s filled with passionate people who are genuinely trying to do good and provide a great service to help vets, pet owners and farmers. It combines a great business opportunity with doing good by society. You don’t often get a chance to do well by doing good.
”What’s consistent across our company is a passion for doing good. When I meet with other companies in our category, I see a very similar phenomenon. That makes it a compelling industry to be in.”
On the distribution side of animal health, Mr Wolin suggested the big players will continue to mark their dominance.
He said: “It is hard to justify working with small local distributors unless they have really unique access to a customer that from some reason the big distributors don’t have. Maybe 10 or 15 years ago that might be the case – there was a cottage industry with regionalization. That has gone away as distributors have gained scale and access to more customers
”The smaller distributors are more and more challenged going forward and I would expect larger distributors to gain more power. They already represent, at least in the US, about 80% of the market. This will inevitably grow over the next five years.”
Covetrus is well established in the US, western Europe, Australia and New Zealand. Mr Wolin said the company will look to secure a stronger presence in growth areas such as eastern Europe, China and Brazil in the future.
Part one of this article is provided in full, courtesy of IHS Markit Animal Health. Part two, “COVID-19 has catalyzed our business,” can be read here.