From their high-rise council flat Gary and Carmen Lewis founded their business with less than £3,000. Almost three decades later this profitable short-line healthcare wholesaler is cash-rich and expected to turn over £54m this year
“When you’re from a relatively poor background you either stay there or you go up,” asserts self-made millionaire and managing director of A1 Pharmaceuticals, Gary Lewis.
He is sat with his wife Carmen around the board table at their nondescript warehouse on an industrial estate in Rainham, east London. In the sparse room, furnished with paintings of Sir Winston Churchill and the Cenotaph, there’s little indication of A1 Pharmaceuticals’ wealth.
Outside the ground-floor window, however, a forklift driver is stowing pallets likely containing pregnancy kits, insulin syringes or nutrition drinks into the rear of an articulated trailer for distribution to pharmacies across the UK. Beside it sits the couple’s Rolls-Royce.
The son of a left-wing trade unionist, Lewis grew up in a working-class neighbourhood in Vauxhall, south London, and graduated from university as a pharmacist. “I didn’t enjoy dispensing,” he admits. “I was interested in manufacturing, stock control and business.
In the Eighties there were far more independent pharmacies than now. It was a conscious decision to work for three self-made millionaire owners.”
But it was a 1986 posting to a pharmacy run by someone who was far from a millionaire that would change his life forever.
“I was there to get the pharmacist – a guy called Gordon Mackenzie – to pull his weight. I walked in and saw an assistant struggling with prescriptions while Gordon was engrossed in the Financial Times. When I asked him to help, he said he couldn’t possibly because ‘the stockmarket is going through the roof and I’m making a fortune’. Gordon was 30 and I was 26. I was in awe of this entrepreneurial genius. Later that night in the pub, we conceived the idea for A1 Pharmaceuticals.”
The duo saw a gap in the market for a short-line pharmaceutical wholesaler, selling over-the-counter products and medicines to independent retail pharmacies.
The business was launched from the high-rise council flat that Lewis shared with his teenage sweetheart, Carmen. Mackenzie moved in to save money.
“Gordon and I put £900 in each, and I put in £450 for Carmen. With that amount of capital we couldn’t afford to take on anyone. Gordon and I remained in our full-time jobs and sold at the weekend. For the first three years Carmen was our only full-time sales person, earning £50 a week,” he explains.
And Carmen’s previous sales experience? Working in a delicatessen since leaving school four years earlier, aged 16. “I was thrown in at the deep end,” she says.
“I went out on the road every day. We couldn’t afford a car so I traipsed all over London by bus or walked. At the start we sold pharmacies’ sundries, such as make-up bags. Then we imported a line of cigarette filters from Japan called Super 25, which we still stock to this day and have made more than £1m in profit from. I wasn’t expecting us to be so successful.”
Her husband was more confident. “Carmen made £245 profit on her first day. From that moment I knew we would build a big company,” he says.
By 1989 the business was licensed and acting as agents for foreign manufacturers’ over-the-counter products. With turnover at £200,000 and assets of £75,000, Gary Lewis’s confidence was shaken when Mackenzie announced he was leaving the business to move overseas.
“I was panic-stricken. Gordon had become my mentor. I thought it was all going to fall apart,” he admits. “In those days, people were taking 17 weeks to pay us.
Cashflow was terrible and we had to pay for the bulk of our stock in advance. We couldn’t take any cash out of the business, so we lived on my income as a pharmacist. It was an important lesson in building up the capital in the company in those first three years – make the business rich and keep yourself poor.”
Fortunately his confidence was boosted with a major deal. “I visited UniChem [now part of Alliance Healthcare] and got a breakthrough order of 50 export cartons at £14,000. For the business, which at the time probably had a gross profit of £50,000-60,000, it was more than I earned in a year. On a £200,000 turnover we got a £40,000 profit on one deal.”
Brimming with confidence, Lewis quit his job to concentrate on the business. In 1990, turnover grew to £800,000 and the following year it stood at £1.5m.
The firm rented a warehouse for £50 a week, invested in a van and recruited. Managing people was a learning curve that to this day the Lewises are still addressing.
“It was never difficult for me to delegate work because I was never as hardworking as Carmen. In five years of sales she didn’t have a day without an order. My attitude from day one was you employ people, you build a team and you get them to do the work,” says Gary.
His wife, who has performed most roles in the firm and is now director of purchasing, finds it harder to delegate. “By the time I’ve shown somebody I might as well do it myself. I like to be heavily involved and see things through.” Her husband interrupts: “Carmen’s problem as a manager was that she was good at whatever she did… It took until I was 46 to dawn on me that I shouldn’t be expecting people to be as motivated as me.”
The business has continued to grow, despite the market contracting by 67 per cent since the turn of the millennium. But it wasn’t all plain sailing.
“We’ve made some horrendous mistakes. The biggest is over-purchasing. We’ve had employees buy £1m-worth of stock when they should have bought tens of thousands-worth,” says Gary.
“As the company got bigger it has become less dependent on us, but in the past the controls weren’t in place. When you’re an owner-driven business like ours, people want you to lead. They become dependent on you. And that’s the dilemma.
“In 2008, we employed a managing director, but it was too soon. The economy crashed and projected turnover dropped from over £30m to £17m. We spent too long on the tennis court getting fitter, but the business missed our leadership,” says Gary.
The business was lacking in capital, he explains. For almost two decades A1 Pharmaceuticals had used invoice discounting.
“It was necessary early on to fuel our growth from £250,000 turnover, because cashflow was so bad, but it fuelled mistakes of overstocking. We’ve put more controls in place. In the past we neglected the development of our accounts department. We were looking for the best [employees] we could get in our warehouse, in sales, in purchasing… but as we’ve got bigger, not having an accounts department as strong as maybe it should have been cost us money. I’ve spent two years focusing on building a better accounts department. I recruited a financial controller two months ago. He’s made a big difference.”
A1 Pharmaceuticals buys from manufacturers and other wholesalers in the UK, and imports directly from European manufacturers. Twenty per cent of the business is export.
The 41 staff at the company’s purpose-built (and owned outright) headquarters speak 12 languages between them. The current debate over UK membership of the European Union concerns the Lewises.
“I go to bed very fearful of Ukip,” Gary admits. “If Nigel Farage got in, it would be a nightmare for me. I have nightmares about a referendum and if we leave the EU. A1 Pharmaceuticals is an example of a business that’s been a big success story in the European Union.
“Leaving would be economic madness – all that hard work down the drain. Every time another country joined the EU we recruited a new member of staff from that country. The best thing that has happened to A1 Pharmaceuticals in the last decade is the addition of eastern European countries through the opportunities for trade in a larger market and the source of employees. We would struggle to run our warehouse distribution without eastern European immigrants.”
Leaving the referendum question to one side, for now the business is in good shape, with net profit expected to grow from 2014’s £3.7m. The pair are again looking towards their future within the business. Gary talks of eventually taking a “back-seat” chairman’s role, while Carmen hopes to cut her 40-hour week to 15 within two years.
“The biggest obstacle to our success is finding the right people and the best team you possibly can. In the past we built this team as Carmen and Gary leading it, now we have to build a team which can hopefully grow the business and manage it without our daily input.”
As part of that expansion, A1 is investing in an online pharmacy in collaboration with several healthcare professionals. The focus will be on guaranteeing quality medicines while still saving the customer money.
The couple now live in a mansion in leafy Beckenham, south-east London, but there is the question of excess capital in the business.
“A1 is like a savings bank. One of our keys to success was putting profit back into the company. We are self-financing. There are no bank overdrafts. We’re more liquid than any other short-line pharmaceutical wholesaler in the UK because we’ve ploughed our profits back in and taken out far less.”
The couple’s eldest son, Harry, 25, has joined the company to set up an online pharmacy and Gary is keen to invest in other businesses, particularly with younger entrepreneurs in the healthcare sector who remind him of themselves.
“The next step is finding other Carmen and Gary Lewises – who started like we did, with only a couple of thousand in capital – and saying to them ‘we’ll invest in your business’ so we become the Gordon Mackenzie to them,” he says. He’s unlikely to be short of prospective partners asking for help.
To find out more about A1 Pharmaceuticals, visit a1plc.co.uk
HQ Rainham, east London
High point Generating large profits and ploughing them back into the company
Low point A £13m drop in turnover in 2008, partly as a result of overstocking
Did you know? A1 has its own Lawn Tennis Association club, in Orpington, south-east London. It sponsors tennis pro Marcus Willis, 24, ranked 348 in the world by the ATP