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Lloydspharmacy quits Sainsbury’s: What we do (and don't) know so far

You’ve seen the news about Lloydspharmacy withdrawing pharmacy services from its Sainsbury’s branches. Here’s what we do and don’t know about the exit...

C+D exclusively revealed last week (January 19) that Lloydspharmacy intends to withdraw pharmacy services from all Sainsbury’s stores “over the course of 2023”.

The future of 237 Lloydspharmacy branches now hangs in the balance, with union leaders pledging to work "tirelessly" to avoid job losses.

Read more: Lloydspharmacy to ‘withdraw’ pharmacy services from all Sainsbury’s branches

Meanwhile, pharmacy organisations have warned that the news signals further community pharmacy closures, as the sector struggles to maintain service levels in an increasingly hostile funding environment.

Despite the hubbub, there is still a lot that remains unclear about Lloydspharmacy quitting Sainsbury’s: will the branches be sold or close? How many pharmacies does this leave the multiple with? Will more closures or sales follow?

Here is C+D’s comprehensive guide to what we know so far.

 

Where are the affected Sainsbury’s pharmacies located?

 

The 237 branches affected by Lloydspharmacy’s announcement are peppered across the UK.

Read more: Lloydspharmacy exits Sainsbury’s: Locations of all the branches revealed

A map plotted by C+D shows that most are in England. Four are located in Wales, three in Scotland and one in Northern Ireland. There is one also on the Isle of Wight.

 

What prompted the decision?

 

On making the announcement last week, Lloydspharmacy CEO Kevin Birch said "the decision has not been an easy one".

Read more: Lloydspharmacy exits Sainsbury’s: Is this independent pharmacy’s time to shine?

However, it seems likely that challenging funding conditions will have contributed to the move.

The multiple came to the decision after conducting “a strategic review of its operations in response to changing market conditions”, it told C+D.

 

Will the affected branches be sold off or closed?

 

It remains unclear whether the Sainsbury's branches will close or be sold, as the multiple told C+D it is “currently exploring options for each individual branch”.

This “means that timeline and final plans will vary on a branch-by-branch basis”, the multiple said.

 

What will happen to staff working in the affected branches?

 

A Lloydspharmcy spokesperson told C+D that "how colleagues are potentially affected” will “vary on a branch-by-branch basis”.

The multiple is “working with all colleagues potentially affected by the changes” and intends to “support them through the process”, they continued.

Read more: PDA 'working tirelessly' to avoid job losses after Lloyds quits Sainsbury's

However, the Pharmacists' Defence Association (PDA) said it will work “tirelessly to avoid job losses for pharmacists”.

And there are opportunities for any who do lose their jobs, with Boots, Day Lewis and Well offering up job roles to pharmacists affected by “closures”.

 

Could Lloydspharmacy sell off more branches in the future?

 

Although Lloydspharmacy has only confirmed its withdrawal from the 237 Sainsbury’s branches, the PDA last week said it was “aware of intensive speculation in pharmacy circles that further closures may follow”.

However, “the PDA does not act upon rumours and pharmacists’ employment is only directly impacted by actual changes”, it continued.

When asked whether further closures could follow, a Lloydspharmacy spokesperson told C+D that the multiple “regularly reviews its pharmacy estate to ensure it is operating sustainably”.

Read more: 'A wake-up call': All the reaction to the Lloydspharmacy Sainsbury's exit

It continued: “Any decision to sell or close stores is taken in the interests of patients, colleagues and the business.  At all times, patient safety remains our top priority ensuring that we can support our customers and patients to access vital prescriptions, health advice, products and services.”

Pharmacy bodies last week suggested that Lloydspharmacy’s exit from Sainsbury’s heralded further community pharmacy closures across the sector.

 

How many pharmacies does Lloydspharmacy currently own?

 

C+D contacted Lloydspharmacy to ascertain how many branches it still has in its estate.

However, the multiple told C+D that it no longer publishes the number of pharmacies that it owns to avoid “unnecessary speculation”.

Read more: Lloydspharmacy's exit from Sainsbury's could have wider repercussions

A spokesperson said: “Lloydspharmacy regularly reviews its pharmacy estate to ensure it is operating sustainably. To prevent unnecessary speculation, we no longer publish how many branches are in our pharmacy estate.”

However, a page on the multiple’s website indicates that there are currently 1,233 Lloydspharmacies in the UK and Channel Islands, including its branches in Sainsbury’s.

 

What does this mean for the market?

 

Lloydspharmacy's exit from Sainsbury's has caused shockwaves across the sector. 

Pharmacy leaders shared their reactions to the news – with deputy managing director of Phoenix UK Nigel Swift calling it “a wake-up call for [the] government”.

Read more: Multiples offloading branches is ‘positive’, pharmacy broker says 

And Christie & Co’s head of pharmacy Tony Evans – who spoke to C+D immediately following Lloydspharmacy’s announcement – suggested that corporate disposals of pharmacies were “something positive from [his] point of view” as it means “more pharmacies coming back into the independent sector”.

Meanwhile, C+D's editor Beth Kennedy also suggested that the news offers independent pharmacies the chance dominate the community pharmacy network.

And GP Toni Hazell questioned what the move could mean for hard-to-reach patients currently using the Lloydspharmacy branches located in their local Sainsbury's.

 

How did we get here?

 

Lloydspharmacy’s then-parent company, Celesio, bought 281 Sainsbury’s pharmacies – consisting of 277 in-store branches and four hospital pharmacies – for £125 million in July 2015.

Sainsbury’s pharmacies employed "up to 2,500" pharmacy staff at the time, all of whom transferred over to Lloydspharmacy.

C+D reported at the time that the deal would increase the multiple’s existing network of more than 1,500 branches by around 18%.

Read more: Lloyds buys every Sainsbury's pharmacy for £125m

However, the sale caught the Competition and Markets Authority’s (CMA) eye, and was stalled while the watchdog looked into whether it might cause “substantial lessening of competition within any UK market”.

The CMA finally greenlit the acquisition in July 2016, but with conditions - it ruled that Lloydspharmacy needed to sell 12 of its pharmacies in areas of concern.

Two more pharmacies “in specified areas” were also put up for sale.

 

What happened next?

 

As early as January 2018, Lloydspharmacy earmarked two of its Sainsbury’s pharmacies for closure.

Celesio UK had announced its intention to cease trading in 190 “commercially unviable” Lloydspharmacy branches across England in October the previous year.

Read more: Lloydspharmacy ‘temporarily’ cuts trading hours in 100-hour Sainsbury's branches

C+D went on to reveal in September 2018 that 10 of the Lloydspharmacies in Sainsbury's stores had closed within two years of the multiple acquiring them, including the two announced that January.

In a letter shared on Twitter in November 2021 – which appears to have been sent by the multiple to branch retail managers – Lloydspharmacy said it would reduce the trading hours of its 100-hour Sainsbury’s branches until January 2022 due to “workforce challenges”.

The move was designed to “reduce the number of part/full closures which have been prevalent of late”, managers wrote.

 

When did the sale rumours start?

 

Although US healthcare giant McKesson bought Lloydspharmacy and AAH’s parent company Celesio for £5.1 billion in 2014, the company did not officially change its name to McKesson UK until 2018.

McKesson was dogged by rumours that it planned to sell its UK pharmacies and wholesaling business throughout 2021.

It finally announced in November that year that private equity firm Aurelius had snapped up the company’s 1,325 pharmacies, its wholesaling arm AAH, the app LloydsDirect, Lloydspharmacy Online Doctor, travel health service MASTA and its John Bell & Croyden branch in London for £477 million.

Read more: Aurelius Group takeover: the latest chapter in the Lloydspharmacy saga

However, sale rumours followed Lloydspharmacy’s new owner into 2022.

In April, Lloydspharmacy revealed in its financial report for 2020/21 that it had decided to close, merge, or sell 76 branches in 2020/21 as part of a “rationalisation programme” it started as a consequence of the “challenging” government funding model.

The following month, C+D revealed it had been told by several sources that the multiple planned to sell a substantial number of its branches.

In November, the PDA assured members employed by Lloydspharmacy that “existing employees “should not see any major changes to their working arrangements” due to changes of ownership.

Finally, Lloydspharmacy confirmed last week that it planned to withdraw pharmacy services for 237 Sainsbury’s branches “over the course of 2023”.

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