The F. Dohmen Co.

views updated

The F. Dohmen Co.

W194 N11381 McCormick Drive
Germantown, Wisconsin 53022
U.S.A.
Telephone: (262) 255-0022
Toll Free: (800) 444-4496
Fax: (262) 255-0041
Web site: http://www.dohmen.com

Private Company
Incorporated: 1858
Employees: 950
Sales: $2.14 billion (2004)
NAIC: 422210 Drug and Druggists' Sundries Wholesaling

The F. Dohmen Co. is a private, family-owned pharmaceutical wholesaler, one of the top ten in its industry in the United States. The company distributes generic and brand-name drugs, medical products, surgical supplies, and other related products. Its subsidiary DDN/Obergfel is a leading specialist in pharmaceutical logistics. Its services include specialized transportation and warehousing of pharmaceuticals, technical services such as data management, planning, and design of reports and forms, and financial services such as invoicing and debit and credit issuance. Another F. Dohmen subsidiary, RESTAT, is the fourth largest prescription benefit manager in the United States. RESTAT serves large employers such as government agencies and schools as well as unions, insurance companies, and other employers, in providing prescription drug discounts and other services that hold down prescription drug costs. Dohmen also participates in two distribution networks. Dohmen Distribution Partners Southeast is a regional drug wholesaler with headquarters in Birmingham, Alabama.

Dohmen Distribution Partners L.L.C. is a regional cooperative of independent pharmacy owners in the Midwest. F. Dohmen's JASCORP division is a maker of pharmacy-related software products. F. Dohmen operates warehousing and distribution facilities in Wisconsin, Minnesota, and Kentucky. The company headquarters were originally in Milwaukee and are now in Germantown, Wisconsin. Its subsidiaries and divisions operate out of Germantown, Kenosha, and West Bend, Wisconsin. F. Dohmen Co. was founded in 1858, and remains in the hands of the Dohmen family.

19TH-CENTURY ROOTS

The founder of F. Dohmen, Frederick Dohmen, trained in pharmacy in his native Germany, and then immigrated to the United States as a young man. He arrived in New York in 1855, visited Chicago and St. Paul, and settled in Milwaukee by 1856. Milwaukee at that time was a midsized town with a total population of roughly 35,000 and a substantial number of German immigrants. Dohmen worked at two drugstores owned by fellow Germans, and then around 1858 he opened his first store. This was a retail drugstore, which probably also sold groceries, hardware, paint, and other things.

By around 1862, Dohmen had apparently tired of the retail end of the business and moved into wholesale pharmaceutical distribution. Around that year, he established a partnership with two others, forming Dohmen, Schmitt & Schulder. This company imported, and then distributed around the Midwest, patent medicines, chemicals, plant extracts and other botanicals, oils, dyes, adhesives, and other goods including snuff and stove polish. This business had its ups and downs, suffering through the so-called Panic of 1873 and ensuing bad years, and later rising to prominence as a founder of a statewide pharmaceutical association. By 1882, Dohmen's partners had left the business, so in 1883 the company reformed under the name F. Dohmen Co. Ltd.

By the early 1890s, F. Dohmen had become a large enterprise, occupying three addresses on Milwaukee's East Water Street. Dohmen's two sons entered the business, and were secretary and treasurer by 1892. That year, a huge fire swept through East Water Street and the surrounding Third Ward district. The heat was so fierce that it exploded trains loaded with oil in the nearby train yard, and by the time the fire had burned out, it had destroyed some 15 city blocks. Dohmen's employees had had some time to move things out of the building before the fire struck, and this later caused a contentious argument with the company's insurer. A private detective claiming to represent several insurance companies demanded that F. Dohmen Co. settle its claims for fire damage at a discount, or else he would reveal evidence that the company committed fraud. The detective said he had proof that goods said to have been destroyed in the fire had actually been safely retrieved. Frederick Dohmen refuted the detective's allegations, and this led to lawsuits and appeals that dragged on for years. The company was finally vindicated in 1898, but the bad publicity and uncertainty had taken a toll on Frederick Dohmen's health. Only two months after the last court case was decided, Dohmen died suddenly while bowling. His wife died two days later. The presidency of the company passed to Dohmen's son William, and other top posts were taken by Dohmen's other son and his nephew.

LASTING THROUGH THE GREAT DEPRESSION

F. Dohmen Co. seemed to hold steady over the early years of the 20th century, operating in much the same manner as it always had. Meanwhile, the drug industry was changing as pharmaceutical production incorporated modern industrial methods. The number of products Dohmen and its competitors sold increased greatly. Brand-name drugs were hugely in demand in the 1910s and 1920s, and such companies as Dohmen had to risk buying popular remedies that might soon go out of fashion. Modern manufacturing methods also allowed suppliers to cut prices, so that the wholesale drug market became much more volatile.

Glenn Sonnedecker's history of the early years of the F. Dohmen Co., Supply Line to Health, characterizes the years between 1900 and the Depression as a period of "consolidation rather than innovation" (p. 35). Company literature exclaimed that F. Dohmen was enlarging its facilities and putting out untold new and better products from its laboratories. Yet the physical plant remained much the same through this period, and the laboratory was principally used for making simple herbal preparations such as essence of peppermint. Other laboratory work involved packing bulk ingredients into smaller packages and bottles, labeling products, and preparing orders for shipping.

Two grandsons of the founder entered the business in 1911 and 1912. In 1916, the company increased the number of members of its board of directors, and the name changed from F. Dohmen Co. Ltd. to The F. Dohmen Co. The company remained profitable through the 1920s, which was a period of general prosperity in the United States. The company got through the Depression of the 1930s by relying on surpluses built up in the good years. The company's president, William Dohmen, died in 1938.

COMPANY PERSPECTIVES

The F. Dohmen Co. has been serving the pharmacy industry for over 140 years and is among the longest, continuously operating wholesale distributors of pharmaceutical and related products in North America. Utilizing a strategy of innovation and diligent market analysis, the F. Dohmen Co. has developed a wide variety of programs and services to assist the independent pharmacist with their day-to-day business needs. The F. Dohmen Co. takes pride in being an industry leader always with the focus of delivering outstanding value to their customers. Because of the innovative programs and services we offer, the F. Dohmen Co. has continued to grow.

ESSENTIAL RENOVATION IN THE 1950S

After William's death, leadership of the firm passed to the brothers Fred W. and Erwin J. Dohmen. The company made few changes, and in fact operated in what seemed a pointedly antiquated manner. Erwin Dohmen wrote the company's advertising copy, which was interspersed with folksy wisdom and politically conservative points of view. Fred W. Dohmen died in 1947, and Erwin died in 1952. That year, Fred W.'s son Fred H. Dohmen became president of the company. Fred H. had studied business and marketing at the University of Wisconsin, and he was adamant that the company make major changes to adapt to postwar conditions. Although sales increased in the booming years after World War II, Dohmen saw its profits fall. Its staff worked overtime, but its outdated facilities could not keep up with demand.

The company had long harbored a plan to use some land owned by the Dohmen family for a new plant. But this plot turned out to be insufficient for the facility Fred Dohmen wanted to build. The company finally settled on land on Milwaukee's South Side, and an entirely new plant opened in 1954. At the same time, the company revamped its financial structure, revised its articles of incorporation, and began to make its order-processing more efficient. The first years of Fred H.'s presidency, the company lost money. But after the new building was finished and employees had adjusted to new ways of doing business, F. Dohmen Co. became profitable again. By 1957, revenue had increased 50 percent compared with before the move. The company became fully computerized in the 1960s, moving with the times now rather than lagging behind.

CHANGES IN THE 1980S AND 1990S

The next big change came in 1980, when F. Dohmen moved again, to even bigger and more technologically advanced quarters in Germantown, Wisconsin. The new facilities were cutting edge, described in a profile of the company in the Business Journal-Milwaukee (May 29, 1993) as "a technological Disney World." The move came at a time when the healthcare industry was encountering new conditions that led to rapid growth at F. Dohmen. During the 1980s, the federal government changed the way it reimbursed hospitals for Medicaid and Medicare, the two big government-funded health programs. As a result, some third-party players in the healthcare market, including wholesale drug companies, were able to offer new services. F. Dohmen began taking over drug inventories for hospitals, and the company's business grew at what was evidently an extraordinary rate. As a private company, F. Dohmen did not release sales figures, but in the aforementioned profile, a company spokesperson claimed that the company had grown "by leaps and bounds," and that revenue at the end of the 1980s stood at $115 million. At that time, F. Dohmen continued to serve a mostly regional market of the Upper Midwest.

The company acquired some new divisions and subsidiaries over the late 1970s and 1980s. Its Aim-Rite division developed software for pharmacies and serviced and maintained computer software and hardware used by pharmacies. F. Dohmen also formed a division called RxESTAT in the mid-1980s. This was a prescription drug benefit management business, later renamed RESTAT. As F. Dohmen grew, it made organizational changes as well. The company developed an employee stock ownership plan in the mid-1980s, allowing its workers to buy into the private company. Then in 1988, the company appointed a new president, the first in its history without the surname Dohmen. This was Robert Wendland.

KEY DATES

1858:: Frederick Dohmen opens his first pharmacy.
1883:: F. Dohmen Co. Ltd. is founded in Milwaukee.
1892:: A huge fire wipes out much of the company's neighborhood.
1916:: The company name is changed to The F. Dohmen Co.
1954:: The company moves to a new plant in Milwaukee.
1980:: F. Dohmen leaves Milwaukee for new quarters in Germantown, Wisconsin.
1988:: Robert Wendland becomes the first non-Dohmen to run the company.
1992:: F. Dohmen buys Northwestern Drug Co., doubling its size.
1995:: John Dohmen, fifth generation of the founder's family, becomes CEO.
1999:: The company opens a new distribution center in Anoka, Minnesota.
2004:: Revenue surpasses $2 billion.

Wendland oversaw a merger that doubled the size of the company in 1992. Competition had drastically thinned the field of wholesale pharmaceutical companies. Whereas there were more than 150 wholesalers in 1980, by 1992 there were only about 75. Minneapolis-based Northwestern Drug Co. was nearly identical in size to F. Dohmen, and its president was interested in combining the two firms. After several years of talks, F. Dohmen acquired Northwest Drug, taking over its name and management. The new company was now the 12th larg-est in the wholesale pharmaceutical industry. Even without taking on Northwest, F. Dohmen's revenues were growing at close to 10 percent annually. Within a few years, revenue was close to $500 million, and the company predicted that it would pass $1 billion by 2000.

CONTINUED GROWTH IN THE LATE 1990S AND 2000S

In September 1995, Robert Wendland stepped down from the presidency and John Dohmen became the fifth generation of Dohmens to lead the company. F. Dohmen was still expanding, with its new divisions now reaching millions of individual customers and serving hundreds of pharmacies. The company's warehouse, storage, and order fulfillment facilities were state-of-the-art, operating with a completely paperless computerized system for maximum efficiency. Although the company had been in the hands of the same family for more than 130 years by the mid-1990s, F. Dohmen was at this point completely geared toward the future, investing in new technology and finding new service niches to fill. It combined a longstanding Dohmen logistical division called DDN with a California company called Obergfel Brothers to create a new subsidiary, DDN/Obergfel, with expertise in distribution and logistics for the pharmaceutical and biotech industries. As pharmacy and biotech continued to grow in the 1990s, outsourcing logistics, including storage, warehousing, shipping, and regulatory compliance, became an attractive option, creating a ready market for DDN/Obergfel. RESTAT, the drug benefit plan management subsidiary, housed only 70 employees in a made-over Indiana schoolhouse in the mid-1990s. A decade later, it had grown to be the fourth largest such firm in the nation.

F. Dohmen moved up the ranks into the top ten firms in the wholesale pharmaceutical industry in the late 1990s. The company continued to form innovative new businesses, responding to needs it discovered through its long and thorough acquaintance with the pharmacy market. It opened a new distribution center in Anoka, Minnesota, in 1999, and formed a new division serving the specific medical-surgical market, called Dohmen Medical L.L.C. F. Dohmen expanded into southeastern markets in 2002, forming Dohmen Distribution Partners Southeast, based in Birmingham, Alabama. The company also increased its market penetration into Michigan with another distribution network of independent pharmacies, Dohmen Distribution Partners. F. Dohmen passed its revenue goals, hitting the $2 billion mark by 2004. The company had been tradition-bound and backward looking early in the 20th century, when it was already a venerable firm. Changes since World War II had kept the company up-to-date, growing and changing with a rapidly evolving industry. From a small regional player, F. Dohmen in the mid-2000s had become one of the largest companies in a consolidating marketplace.