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A transatlantic challenge

After their merger last year, Boots and US giant Walgreens are looking to share ideas that will have ramifications across the entire UK pharmacy sector

It's nine months since Alliance Boots' landmark deal with US pharmacy chain Walgreens, and neither company can be accused of dragging its heels.


At the time, the two pharmacy giants set out plans to create savings of up to £95 million between them as part of their vision to become a "global healthcare leader".


Stefano Pessina, executive chairman of Alliance Boots, vigorously refuted fears that the US company would simply take over the Boots brand. "Why would I do a deal that killed Boots?" he asked critics.


So far, it appears both players have kept their word. Speaking to C+D at the European Pharmacists Forum in Paris earlier this month, chief executive of Alliance Boots' wholesale division Ornella Barra stresses that the projected cost savings have been the partnership's initial priority. And Kermit Crawford, president of pharmacy, health and wellness at Walgreens, seems eager to learn from Boots rather than simply imposing the Walgreens model on the UK.


"We're transforming our format," he enthuses. "When you see the Boots format – the expertise in beauty – that's expertise we don't have... we're bringing that to our front end."


With Walgreens poised to buy out the remaining 55 per cent of Alliance Boots in two years' time, this shared learning is likely to continue. So what could the merger mean for Boots, its pharmacists and pharmacy teams?


A problem shared

Ms Barra is keen to point out that it's still early days for the partnership. The first few months have been mainly about securing efficiency savings, she says, and the full vision for the companies has yet to take shape.


But Boots and Walgreens face common challenges. Both the US and the UK are battling against the effects of an ageing population and an increase in long-term conditions, while healthcare budgets are being squeezed. It may be giving governments cause for concern, but it's the reason why Mr Crawford is optimistic about the future of pharmacy on both sides of the Atlantic.


"We see healthcare and pharmacy as a growing market, so this is an opportunity," Mr Crawford explains. "Healthcare is growing at the same rate [in Europe] as it is in the US, and the ageing population here is happening as it is in the US, so a lot of the best practice in [our] healthcare sector will be able to translate to here."


Services

Alliance Boots and Walgreens take a similar approach to this changing healthcare environment. Mr Crawford wants to bring Walgreens pharmacists out from behind the dispensary and give them more time to counsel patients.


In the UK, Boots is also keen for pharmacists to adopt a service-led role, as pharmacy teams assume more of the dispensing workload.


Walgreens is a step ahead in certain service areas. While Boots offers travel health and flu vaccines, Walgreens vaccinates against a total of 17 conditions, including shingles and meningitis. And Walgreens has also taken a lead on conditions such as HIV, setting up HIV excellence centres in areas where the condition is particularly prevalent; pharmacists can test for the condition and offer specialist advice on medication and the various stages of the disease.


Could we see these initiatives coming soon to the UK? Ms Barra can't yet commit to specific services, but doesn't rule out the possibility. "First we need to understand [about the services and the market], the second thing is to learn and then, if we're able to implement best practice, why not?"


Extending Boots' range of vaccinations looks like it could be a starting point for this work, and Mr Crawford puts this at the top of his wishlist for the UK. "One of the things I would look forward to is... bringing some of the other immunisations to Boots by showing the outcomes and results we have," he says.


Technology

These ambitions may require Boots to follow Walgreens in technology terms, too. Mr Crawford says access to electronic patient records has given pharmacists at the US chain all the necessary medical information to enable them to deliver vaccinations that are unavailable in UK pharmacies.


This information also proves useful for marketing. Mr Crawford points out that even simple use of technology – such as sending text messages to customers when their tetanus immunisation is due – can drive custom.


Ms Barra says Alliance Boots is looking at how this type of technology could work for the UK market but, again, says it is important not to just replicate the US way of working.


"Before we take a decision, it's important to understand what is the best technology for us," she stresses.


One development that's clearly a priority for both parties is the growth of internet pharmacy. In its 2011-12 annual report, Alliance Boots named boosting its online offering as a key goal, and said online orders had "grown strongly" over the year. Walgreens is equally focused on the digital arena. The US chain has taken its online presence well beyond a simple retail website and now uses digital reminders to encourage medicine adherence.



The Walgreens website now receives 12 million visits every week, Mr Crawford says, and half are from customers on smartphones.


This online presence could well be replicated in the UK, as Walgreens appears to share a common aim with Boots. "Our strategy is to deliver whatever the customer wants, when she wants it and where she wants it," Mr Crawford explains.


Retail

When it comes to in-store retail, it seems that Walgreens may follow in the footsteps of its UK colleagues.


Walgreens has historically stocked a wide retail offering – everything from cigarettes to stationery. But this could shift towards a stronger focus on health and beauty, as Mr Crawford says US retailer Walmart has "cannibalised" a large part of its front-end business.


He now has plans to introduce Boots merchandise across the Walgreens network – piloting beauty brand No.7 in selected stores. Mr Crawford is visibly enthusiastic about the "tremendous" results and the potential to extend this to other brands. "When you think about the opportunity... the Boots brand is very well respected, and I think a lot of the products and the innovation we see at Alliance Boots will transfer to the US very easily," he says.


A joint ambition

The Walgreens partnership looks set to leave a strong mark on Boots as we know it. The changes will undoubtedly have a wider impact on UK pharmacy, as others look to emulate the increase in services, clinical focus and online offering.


Whatever happens, the two pharmacy giants are certainly not lacking ambition for the future. As Mr Crawford sums up: "Two big companies the size we are, we can actually change the way healthcare is delivered throughout the world."

 

Expert view

Stephen Springham, senior retail analyst, Planet Retail

"I think extending services at Boots stores is a bit of a no-brainer, really. Walgreens offers up to 17 different inoculations so certainly to extend that to Boots would be a win-win.

Obviously, the UK health service is under great strain, so probably the more people they can get away from those channels such as GP surgeries and hospitals to the high street, which is a more convenient location, the better. For the UK consumer, it can work as well.

Boots is the UK's largest health and beauty retailer and, more importantly, it's a trusted brand, so for consumers there won't be a mental barrier to getting those services done on the high street.

In retail, I would hope they both learn from each other and share best practice. The worst thing that could possibly happen is that Walgreens tries to impose its own values and culture on Boots. Walgreens is a classic US drugstore, which is in many ways a general merchandise store, and you see a lot of non-health and beauty ranges. My experience of major US retailers is they think they know best and tend to impose what they know on what they acquire.

It's encouraging that Walgreens is looking to learn from Boots and take their expertise in own label to roll the No.7 brand across the US. So it's encouraging they're saying these things, but the saying and doing can be two different things."  

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