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David and Goliath: Small chains now run more pharmacies than large multiples

C+D analysis reveals that the numbers of pharmacies owned by small chains overtook those owned by large multiples in June - and the trend looks set to continue.

Independents and small chains now run more pharmacies than large multiples, according to NHS England (NHSE) pharmacy data released on September 13.

So-called “small” chains of between one and five pharmacies together owned 4,612 pharmacies in England at the end of August 2023, compared to 3,978 pharmacies owned by so-called “large” multiples, defined as groups that own 100 or more pharmacies. 

Meanwhile, “medium” chains, which run between six and 99 pharmacies, owned 1,790 stores at the same date, according to the NHSE data. 

 

 

Last month, C+D revealed that the recent mass sales and closures in the Lloydspharmacy estate meant that the large multiple had dropped to third-largest chain in England, after Well Pharmacy.

The multiple, which owned 1,427 UK pharmacies in March 2020, owned just 512 branches in England as of June 30.

Read more: Lloydspharmacy branch numbers dropped almost 50% in nine months

Lloydspharmacy’s decline has been driven by the closures of all its branches in Sainsbury’s stores by June 13, exclusively revealed by C+D. But the large multiple has also been “selectively selling” its branches throughout the year.

And in June, large multiple Boots announced that it would also close 300 branches this year.

 

Rise and fall

 

At the end of January 2021, the first date recorded by NHSE’s pharmacy openings and closures dataset, large multiples accounted for 5,220 pharmacies in England - 1,196 more than the 4,024 pharmacies owned by small chains.

But over the two and a half years captured by NHSE data, large chains consistently owned fewer pharmacies, while small chains steadily owned more and more.

Read more: Pharmacy group set to double in size after acquiring 12 Lloydspharmacy branches

By the end of June 2023, small chains overtook large multiples, owning 4,413 pharmacies to the 4,317 owned by large chains.

The total number of community pharmacies in England, excluding distance sellers, declined by a total of 457 between the end of January 2021 (10,837) and the end of August 2023 (10,380), a 4% decline in the total stock of the sector.

Read more: Do corporate disposals offer an opportunity for independents?

Many of these closures have taken place in 2023.

In July, a written answer to a parliamentary question showed there were 222 fewer community pharmacies in England since the start of the year. According to NHSE data, that figure now stands at 296 fewer community pharmacies.

But NHSE data also shows how the decline of the community pharmacy sector is not evenly spread across types of businesses.

 

Thriving smalls

 

By the end of August 2023, the number of pharmacies owned by large multiples had declined by almost a quarter (24%) since the end of January 2021. Small chains, however, owned 15% more of the total stock of community pharmacies and medium chains owned 12% more.

In NHSE’s monthly pharmacy openings and closures list, a branch shutting permanently or change in ownership is listed as a closure. In the case of a change in owner, a new pharmacy is listed as opening on the next day.

 

 

The August release showed that small pharmacies opened 142 branches in total last month and closed 12. Large multiples meanwhile closed 183 branches and opened just three.

On average, since the start of 2023, 58 pharmacies owned by small chains have opened each month and eight have closed. Large multiples averaged 103 closures per month since the start of the year and just two openings.

 

The broker’s view

 

A spokesperson for Hutchings Consultants told C+D last month (August 30) that the broker was seeing “a remarkable surge in activity” around sales this year, noting it had seen “a large number of first-time buyers”.

The firm predicted that the trend in acquisitions would carry on throughout 2023 and into 2024.

Managing director Anne Hutchings said that the “appetite for acquisition” was most noticeable among independent and small groups that were seeking to expand.

Read more: 'Pharmacy wastelands’: Over 200 net closures in 2023 so far, DH admits

She added that the acquisitions “echo an industry proactively shaping its future rather than being dictated by external forces”.

Scott Hayton, director of Hutchings, said that branches dispensing up to 10,000 items were particularly popular, as well as being “within the financial reach” of first-time buyers.

He said that these small- to medium-sized pharmacies were also being pursued by existing pharmacy owners and “developing group operators” who were seizing an opportunity to “expand services provision”.

 

Government “monitoring the market”

 

Meanwhile, pharmacy minister Neil O’Brien last week pointed to the changing shape of community pharmacy as MPs raised concerns about the number of pharmacy closures seen throughout 2023. 

Speaking at a Westminster Hall debate on community pharmacy on Thursday (September 14), he noted that the number of pharmacies owned by “divesting” large multiples was decreasing, while the number of “small independent pharmacies” was on the rise. 

Mr O’Brien said that the government was “monitoring the market very closely as it evolves”, adding that there were still more pharmacies open today than in 2010 and “an awful lot more pharmacists”.

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