About to complete his first year in command of Pay Less, Jonas Marques His mind is already set on 2031, the year in which the second largest pharmacy chain in the country will celebrate half a century. “Only 7% of companies manage to survive for more than 50 years and, for us, perpetuity is the strategy”, says Marques. “We want to get the company ready for its centenary in 2081.”
The executive’s arrival at the business in December last year was a bet by Pague Menos’ controllers to ensure the company’s longevity. Jonas Marques is the first CEO outside the family commanding the network created by Francisco Deusmar Queirós 43 years ago. With an established career in the pharmaceutical industry, with his 12-year stint at Bayer being his last, Marques skipped the counter to work in retail.
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Jonas Marques’ first challenge this year was sprint final integration of the largest acquisition in the history of Pague Menos: the Extrafarma, deal worth R$737.8 million carried out in August 2022 with the Ultra Group. The purchase brought 400 stores to the Pague Menos portfolio, which today consists of around 1,650 pharmacies. “It was such a significant amount that it was equivalent to five years of organic openings”, recalls the CEO.
At the end of the third quarter of this year, the company managed to achieve 90% of the expected synergy capture with the M&A, reaching R$234 million in efficiency gains per year. The conversions of Extrafarma stores to Pague Menos – 111 to date – generated 30% growth in revenue from one year to the next.
Extrafarma still has its brand present in Pará, Maranhão, Amapá and Ceará, states where the brand is strong among consumers. “We are evaluating whether it would be feasible to convert the banner of these stores”, adds Jonas Marques.
The capture of synergies accelerated this year also because Pague Menos decided to hold back on opening stores. No new stores will be opened in the second half of the year: organic growth is expected until next year. “Our plan is to resume expansion in 2025, opening more stores than the sum of openings in 2023 and 2024”, adds Marques – from 2023 until the first half of this year, the chain opened 50 stores in the country.
To resume the expansion cycle, Pague Menos plans to continue consolidating its leadership in the Northeast, the region where it was created and which currently holds more than 20% of the market share. But it will also look at the South and Southeast, especially São Paulo, where Pague Menos has already converted 30 Extrafarma stores in the last two months. São Paulo is the largest consumer state in the country, but it is also where the competition is fiercest: RD Saúde (owner of Raia and Drogasil), the national leader, and the DPSP Group (of the Drogaria São Paulo and Pacheco brands), have strong presence in São Paulo lands.
Less leverage
Until 2025 arrives, Pague Menos’ management has the challenge of closing the year with leverage – the ratio of net debt to operating profit (Ebitda) – at 2 times, an indicator that ended the third quarter at 2.2 times. Jonas Marques held a few rounds of conversations with investors, who pointed out leverage as one of their concerns with Pague Menos.
With a tip from the market, the CEO implemented a strategy to improve inventory management, which resulted in savings of R$330 million in the third quarter compared to the same period in 2023.
Another initiative that bore fruit was liability management, with the extension of debts at more competitive interest rates, which allowed a 31.4% reduction in interest payments. The measures contributed to Pague Menos generating R$130 million in cash during the period, even disbursing R$221.5 million for the last installment of the acquisition of Extrafarma.
From January to September this year, Pague Menos had revenues of R$3.5 billion, a growth of 13.9% compared to the same period in 2023. In the first nine months of 2023, the second largest pharmacy chain in the country reversed the loss and recorded a net profit of R$74.9 million.
