Sigma Healthcare

Client Overview

Industry: Pharmaceutical Wholesale and Retail Support

Business Size: $3.4B+ annual revenue with extensive pharmacy network operations

Location: Australia-wide, servicing independent pharmacies, hospitals, and healthcare facilities

Client Context: Sigma operates in a low-margin, high-volume sector. Despite scale advantages, pricing remained heavily reliant on outdated cost-plus models, supplier-led promotions, and generic KVI strategies. The business faced EBITDA margin pressure with gross margin sitting at 7%, well below the 12% levels achieved by peers such as EBOS and Symbion. Strategic pricing structures and capability needed urgent overhaul.

Challenge / Problem

Symptoms Observed:

• Cost-plus pricing dominated internal logic, ignoring SKU-level value differentiation
• Promotions were largely supplier-funded and not consumer-led, reducing pricing flexibility
• Existing rebate and wholesale contract structures were exposed to cherry-picking and daily undercutting
• No clear price pack architecture (Budget, Good, Better, Best) across OTC and FOS ranges
• Margin leakage between wholesale pricing and retail shelf pricing with limited pharmacy engagement tools

Strategic Impact:

• Ongoing margin erosion masked by top-line growth
• Weak price governance and lack of price-to-value integrity in channel pricing
• Missed EBIT contribution estimated at $25M–$75M annually

Executive Commentary:
“The internal pricing capability is not aligned to what we need. We're playing defence on pricing when we should be playing offence with data, models, and strategy.”

Objectives of the Engagement

• Quantify and deliver $25M–$75M in EBITDA improvement opportunities
• Build robust pricing strategy, structure, and operational capability within 12 weeks
• Transition from cost-plus pricing to algorithmic value-based pricing at SKU level
• Enhance channel price integrity and Sigma’s value proposition to its pharmacy customers
• Establish internal pricing muscle for long-term margin control and growth

Our Approach

Phase 1: Diagnostic Assessment

• Reviewed historical pricing behaviour and benchmarked against industry best practices
• Evaluated margin structure across FOS & OTC ranges and supplier-driven promotion mechanics
• Conducted internal stakeholder interviews and pricing maturity assessments

Phase 2: Quick Wins & Strategic Design

• Mapped out pricing value logic by SKU, category and pharmacy business model
• Introduced architecture for price packs (Budget, Good, Better, Best) and price point relativity
• Developed shelf-to-channel price logic and pricing models for independent pharmacy margin uplift

Phase 3: Execution Planning

• Created roadmap to rewire override approvals, rebate return on investment (RROI) structures, and margin analytics
• Defined capability roadmap for algorithmic pricing and value-based governance
• Designed initial playbooks for sales, merchandising, and category pricing teams

Key Actions Taken

1. Value-Based Pricing Model
   Replaced cost-plus logic with SKU-level price optimisation tied to value
2. Price Pack Architecture
   Introduced B/G/B/B/U framework to rationalise consumer-facing price points
3. Channel Margin Model
   Built tools to demonstrate how Sigma pharmacies improve GP with aligned pricing
4. RROI-Based Rebate Logic
   Developed rebate model linked to contract loyalty and volume-quality matrix
5. Pharmacy Engagement Strategy
   Created pricing communications model to position Sigma as profit partner

Results Achieved (Within 10–12 Weeks)

1. EBITDA Quick Win Opportunity
   $1.5M–$3.0M identified through reset of rebates, promotions and margin rules
2. Long-Term EBITDA Prize
   $25M–$75M potential identified with price architecture and value pricing rollout
3. Pricing Capability Reset
   Clear roadmap for pricing roles, tools, and authority built and agreed
4. Value-Based Culture Initiated
   Internal shift from compliance mindset to commercial pricing engagement
5. Channel Clarity
   Foundations laid for stable channel price integrity and pharmacy buy-in

Client Feedback

“We needed a pricing engine that matched our size and ambition. The diagnostic gave us a roadmap and the confidence to act. It wasn’t theory—it was a margin blueprint grounded in our data.”
— Head of Merchandise & Marketing, Sigma Healthcare

What This Means for Similar Companies

In regulated, rebate-driven industries like pharma and wholesale, margin recovery requires more than tweaks—it demands a complete pricing architecture. Sigma’s journey shows that even legacy systems and commercial inertia can be overcome with the right model, roadmap, and mindset.