Nicolò Petrone, CEO and Co-founder of 1000Farmacie, the first Italian Pharmacy Marketplace.
Previously Nicolò Co-founded MEDICI Europe, a media and insights platform covering over 15,000 companies in 60+ FinTech sub-segments, acquired by Prove.
Nicolò holds a Masters Degree in International Business – Financial Management from Hult International Business School.
In 2020, you co-founded 1000Farmacie, the first Italian pharmacy marketplace that brings together independent consumer pharmacies. What made you create 1000Farmacie?
Nicolò: After studying in Italy, I moved to the US at the age of 21 to complete my studies in San Francisco. It was 2014, the boom year for startups in Silicon Valley.
After graduating, I started looking for a job. But like all immigrants to the US who don’t have a technical background, finding a job is very difficult, you need a company to sponsor your visa. Many would make missteps to achieve job stability in the US.
I stumbled upon a scam. I was contacted by a company that promised me that after 3 months of studying, I could work in big American companies like Apple and Microsoft. So, I moved to New Jersey and when I arrived at this fictitious university, 40 people were sleeping on the floor. This was a company that forged identities and CVs to find you a job, so they could keep 40% of your salary for the next four years. So, I realised it was a scam and I went back to San Francisco.
A few days before my visa expired, I met the founder of MEDICI, the first company I worked for and later joined as co-founder. The founder suggested that I move to Charlotte, North Carolina, and work with him for the next 2 years. I then returned to Italy to develop the European market. We sold the company in 2019.
At this point, I ask myself: what can I do?
My family are entrepreneurs in the pharmaceutical distribution sector. It was a sector I knew a lot about and I had noticed that the online part was growing a lot.
So, together with Mohamed Younes and Alberto Marchetti, I decided to create 1000Farmacie, believing that I was entering a sector that was going digital, with a model that never touched the warehouse.
1000Farmacie offers a wide range of health and wellness products, including parapharmaceutical, health, veterinary, homeopathic and ayurvedic medicines. Can you tell us more about the company’s business model? What results have you achieved so far?
Nicolò: 1000Farmacie relies virtually on the warehouses of hundreds of decentralised pharmacies. It is a leaner business model in terms of scale as we have no working capital.
In addition, in the pharmaceutical supply chain, physical pharmacies have advantages in the supply structure because they can buy at more advantageous conditions than, for example, a pharmaceutical wholesaler or a large online company.
Our marketplace model therefore combines efficiency at the level of capital allocation, expansion of supply by relying on products already held in stock by pharmacies, and pricing advantages by being best placed in the supply chain.
We have a parapharmacy license, which we acquired later to be able to sell OTC (non-prescription) medicines.
To date, we have around 100 partner pharmacies, spread from the north to the south of Italy, with a higher concentration in the south. We ship around one million parcels and serve around one million customers per year.
The average online spend is slightly higher than in offline pharmacies at around €55, so it is a high average basket for a product category that lends itself well to e-commerce because the weight/volume of medicines is low and the value per kg shipped is much higher than for any other product category, with some exceptions such as small electronics. In addition, pharmaceuticals have a very low return rate.
You have raised €25 million from investors such as GG 1978, P101, HBM Healthcare Investments AG, LIFTT, IAG, Club degli Investitori, Healthware Ventures and Feel Venture. What are 1000Farmacie’s development plans for the near future?
Nicolò: The market has changed a lot, especially for consumer companies. Until 2022/2023, the approach was entirely focused on revenue growth, which was fundamental. Therefore, it was easier to attract investors with a very aggressive growth investment thesis without looking at the bottom line.
Our approach is to take a business that is around € 45 to 50 million GMV today and grow it to a profitable level very quickly. This will be possible by growing the top line, but with more structured unit economics than in the past. In other words, a growth in which the recovery of the CAC must take place in less than a year. In Italy, our goal is to be among the top three players, achieve sales of around € 100 million and generate positive EBITDA within the next two to three years.
Moreover, we have started to select and prioritise countries for international expansion. But in my opinion the effort to expand abroad is largely underestimated. It seems to be a must for a B-series, but I believe that companies should first make sure everything is working perfectly in the country they are in, and then go abroad.
I am much more inclined to bring profitability to Italy and then go abroad.
I think there is still room in Italy. The Italian retail pharmaceutical market is worth €30 billion, of which 50-60% are ethical medicines that cannot be sold online, and €15 billion is the market opportunity. To date, not even €1 billion is sold online. This is a modest online market share compared to Germany, for example, where 25-30% of sales are online.
What are the main challenges in your entrepreneurial experiences? What do you see as your next challenges for 1000Farmacie?
Nicolò: In general, what I have learned from my entrepreneurial experiences is that no matter how tortuous and complex the path, if you stick to a particular line of growth, you will get somewhere.
MEDICI was sold to Prove, a company active in the digital identity sector in the US, during Covid-19. When we least predicted it, an unexpected buyer came along. It was counterintuitive for us. It is surprising to see how much exit potential a company has and the potential buyers.
Regarding 1000Farmacie, we have grown quite rapidly. We are now about 70/80 people and we are spending a lot of time creating a very structured first line of management. Without a well-organised first line, it is almost impossible to make progress because the whole business apparatus would suffer.
So Mohamed and I are 100% focused on how to grow the first line and how to make sure that all the company’s functions work well together.
One last question. What is your vision for the pharmaceutical industry?
Nicolò: What happened in the aftermath of the Covid-19 pandemic is interesting for an industry like pharmaceuticals, which has very little online penetration. At times like this, there is a massive entry of irrational players into the market. Even small pharmacies have started their e-commerce. This led to an almost perfect competitive effect, where all new entrants failed to make a profit because irrational pharmacies continued to engage in price wars to sell, resulting in a zero result.
The pharma industry has shrunk dramatically over the past two years. Now small pharmacies are exiting the market as they realise that the loss of online sales is starting to affect the profitability of the offline business. This is leading to a phenomenon of rising prices. So, I think the industry is moving now in the right direction. Interestingly, this is happening on such a large scale in such a short period.
It is also an opportunity for 1000Farmacie. With us, pharmacies can keep the online margin under control.
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For more info on 1000Farmacie, visit: https://www.1000farmacie.it