Pet owners to ‘pay price’ for vet industry shake-up
HE turned a $330,000 investment into the biggest corporate and vet company in Australia. But today former Greencross founder Glen Richards blows the lid on why he believes bean counters and retailers now hold the power in the $12b industry.
Greencross founder and shark tank judge Glen Richards told The Daily Telegraph the bosses he accuses of dismantling the vet-centric structure he built at the company need to "get off your high horse and out of your bloody office".
Dr Richard's explosive claims are the first instalment of a five-part investigation by The Daily Telegraph on all you need to know about owning a pet - from how much owners are willing to spend saving their pet's life to what's really in pet food to how much we are spending on pet insurance.
A veterinarian, Dr Richard's began Greencross 25 years ago after the $330,000 purchase of a suburban vet practice.
He's proof there is money in pets, growing a booming business from the humanisation of pets and their improved status from backyard to bedroom.
In the past few years he's pocketed $38 million in two massive deals - first merging with the Bunnings of pet retail, Petbarn, and then selling out earlier this year to the United States' "king of buyouts", TPG private equity in a deal worth $1 billion.
Now Dr Richards has lashed the structure at Greencross, saying he believes accountants and retailers have too much power.
But the new boss has hit back, saying in the three months since taking over, the previous single management structure has been replaced with two divisions, one for retail and one for vets. He said this was done in order to better support the clinical side of operations, which at 160 vet practices is the biggest vet network in Australia.
Dr Richards said he is disappointed his system of ownership incentives for vets is being dismantled.
"They (vets) bought the right to manage the practice by putting some money on the table and they got a share of the growth in profit. If they really engaged their community, had a great team and the practice grew _ top line and bottom line they shared as a business associate," he said.
It created an "owner-like" mentality in vets, who would be more likely to open the doors for an out-of-hours consultation, he said.
"I think the recent management team has pretty much dismantled that program - very sad because it worked and it delivered good numbers.
"This is the trouble when you've got accountants taking over a business and they don't understand the value of these things. I still remember bringing the program in and having a massive fight with my CFO (chief financial officer in 2009) … At the time being an accountant he was questioning the value of allowing people to be a part-owner of the business."
Private equity firms like new Greencross owner TPG are well versed in taking over distressed or struggling companies, stripping out the costs and driving up profit. When TPG took over, profit at Greencross had plunged by half and the takeover price per share was half of what the shares had traded at their peak.
TPG's new executive chairman at Greencross is Canadian Paul Mirabelle, former CEO of controversial National Home Doctor Service and a former partner at Boston Consulting Group, which specialises in advising companies on how to ruthlessly cut costs.
TPG swooped on Greencross when the company was "underperforming quite significantly", particularly on the vet and clinical side, Mr Mirabelle said.
He said "there was a whole array of different structures" under which vets were paid and many of these systems were being replaced.
With what exactly he couldn't yet say, but he emphasised the importance of giving vets the best professional development support and training available.
"We are taking a fresh look at all these things," Mr Mirabelle said.
He says under his new structure that separates the management of retail and clinical operations, vets will be better supported and customers will be much better informed about preventive health options for their pets.
"Twenty years ago your pet was your friend, today they are part of the family," Mr Mirabelle said.
Former Greencross CEO Simon Hickey revealed in the company's 2018 annual report the push to sell vet services and products in a bundle and give vets short-term incentives to turnover more.
"We have developed a new short-term incentive plan for our vets which we believe will result in better alignment and increased productivity," Mr Hickey, who was paid just shy of $1 million that year and was recruited for making a booming success from Qantas's loyalty program, said.
He also revealed a big push for retail staff in Petbarn to sell Greencross vet services and flagged an aggressive push for vets to boost referrals and come to the vet more.
Respected vet from Sydney University's vet school Dr Richard Malik said what this means for pet owners is higher bills.
"The best thing that can happen if you're a vet is for Greencross to take over one of the vets (practices) in your suburb because you get so many people unhappy with Greencross that it improves your business," Dr Malik said.
"It's not the quality of the service, the bills are too high. The thing that drives the propensity to over-service are the corporate practices or any practice that uses an algorithm (to determine the services vets recommend).
"There has to be some wiggle room according to what people can afford to pay and if you are instructed and advised to always make people take the most expensive option … people get bill shock," Dr Malik said.
Mr Mirabelle said there is no conflict of interest in having vets recommend products.
"They are not pushing any particular products at all," Mr Mirabelle said.
Dr Richards kept a seat on the Greencross board after the 2013 Petbarn merger but stepped away from an executive role, which Dr Malik said meant vets no longer had as much power in the organisation.
"All of the people that make all the decisions and have the authority are non-veterinarians," Dr Malik said.
"Are we a highly principled profession that has to guard the human animal bond and think about the best welfare for people's companion animals? Or are we a business that has to make a lot of money. Juggling those two priorities is very difficult."