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Boots parent company to focus on UK as part of cost-saving programme

Walgreens Boots Alliance believes the programme can "counter the trading pressure we are facing"
Walgreens Boots Alliance believes the programme can "counter the trading pressure we are facing"

Boots' parent company has announced plans to “improve operational performance” in the UK, as part of a $1 billion global cost-saving programme.

Walgreens Boots Alliance announced plans for a three-year programme – which will aim to save $1bn annually by the end of its third year – alongside its latest financial results, which also showed a 35% year-on-year drop in Boots UK’s adjusted operating income.

When asked by C+D whether the programme would result in pharmacy closures or staff redundancies in the UK, the parent company said it could not comment further on the announcement.

It has begun a 16-week “assessment phase” to review the company’s costs, with a focus on US and UK markets, as part of a three-year global programme to “simplify our operations and reduce the cost of running the business”, it said last month.

“At the end of that 16 weeks, we will have enormous transparency and granularity. We will know who spends on what, down to the lowest level,” the company's global chief financial officer James Kehoe said during a conference call with analysts to discuss the financial results.

The company will start to roll out the savings programme “immediately” after the 16-week assessment, Mr Kehoe said.

“Need to modernise our customer preposition”

Co-chief operating officer and president of Walgreens Boots Alliance Alex Gourlay said that, while Boots is “strongly positioned in the UK”, it “recognised the need to modernise our customer proposition”.

Boots has “started work on this already”, by “looking to shift where we invest”, focusing on new products and propositions, and “digitalising the whole beauty experience”, Mr Gourlay said.

“All that we are doing fits into an overall plan in developing our offering and the structure to offer materially enhanced, focused and over, time, more personalised and bespoke services to each and every one of our customers,” he added.

“Countering trading pressures”

Stefano Pessina, Walgreens Boots Alliance executive chairman and chief executive officer, said: “A key part of preparing for the future is establishing the right cost based structure and infrastructure for the business as we look to the future in an increasingly automated and digitised world.”

“We believe the transformation programme…has the capacity to counter the trading pressure we are facing in a number of our markets,” he added.

In 2016, Boots cut 700 jobs in the UK, including head office and finance staff. No store-based pharmacists were affected by the redundancies.

A C+D investigation last year also revealed the multiple closed 22 branches in England since the funding cuts came into force, although it insisted this was “usual practice”.

What do you make of Walgreens Boots Alliance's cost-saving programme?

Richard MacLeavy, Dispenser Manager/ Dispensing Assistant

I think it will largely result in Branch closures and possibly adapting their business model to become more like superdrug. What I mean by that is not having a pharmacy in every branch. Some of their stores have good retail propositions but don't make sense from a pharmacy perspective. I can think of one store in Bristol City centre that only dispenses around 800 items a month but has a good retail trade, mainly on sandwichs bought by office workers. If they were sensible they would close this pharmacy and just trade it as a retail store. 

Leon The Apothecary, Student

Definitely, especially with a digital offering that in an idealistic world be taking 80% of your prescriptions from regular patients, there are a lot of savings to be made once centralisation and digitalisation are in full swing. Places and people are going to see a dynamic shift.

RS Pharmacist, Primary care pharmacist

This essentially means branch closures and staff cuts, especially when you have to use words like “granularity”.

Operationally Boots used to seem well run, but lately their branches are poorly run and staff are overworked and under supported.

Ben Merriman, Community pharmacist

"We will have enormous transparency" sounds almost Trumpian...

Leon The Apothecary, Student

Says the company who refuse to share how they work out their staffing levels, quoting it on BBC as a "Trade Secret" despite it being easily worked out using a bit of maths and publically available knowledge from NHS digital.

We all know what is coming and high streets would never be the same again. When Boots plan “digitalising the whole beauty experience” I'm thinking that means moving more business online and store closures. 

This is another wake up call for independents that business models need to change. Fast.

Happy 2019 everyone.

RS Pharmacist, Primary care pharmacist

Paul Dishman, Pharmaceutical Adviser

A wake up call to independents to look to take business off Boots as they shed staff and close branches

Paul, yes there has been a shift in dispensing volume towards independents but that's not the point. The fact is that Boots are realising that they NEED to do this to make their business sustainable. That is what independents need to also do. Not just pick up Rx from sites that close.

3,000 banks have closed in the last 3 years. Barclays have not kept branches open because Nat West were closing them. They have all done this because they want to be a profitable as possible with a model of free personal banking.

Boots has around 2,500 stores and will undoubtably decide to consolidate at some point. The reasons why are obvious. The key to survival will be to adapt your business model so that pharmacists spend 95% of their time in private consultation rooms generating a profit for the business and being available to deal with dispensary queries if and when they arise.

Leon The Apothecary, Student

I think independents are set to have an uphill battle, they are going to struggle to afford dispensing technology compared to the big boys.

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