It is only "a matter of time" before other supermarkets follow Sainsbury’s lead and sell off their pharmacies, an economics expert has said.
Sainsbury’s sold its 281 pharmacies to Lloydspharmacy last week for £125 million, and other supermarkets will be considering whether similar deals can benefit their business, said Michael Thomas, a partner at economic analysts AT Kearney.
UK supermarkets’ pharmacy businesses are “simply not punching their weight” in comparison to their US counterparts, Mr Thomas told C+D last week (August 1).
“It’s getting tough on retail outlets. Supermarkets will literally be looking at every square foot they’ve got to make sure it’s productive,” he said.
The sale also marked the “beginning of an endgame” for how the sector was structured, Mr Thomas stressed.
“We’re talking a big chain buying a mid-size chain. You’re clearly going to see three big chains [dominating]: Boots, Lloydspharmacy and Well – that seems to be where the sector is heading,” he said.
While independent pharmacies would “always have a role” in the health sector, they face an increasing challenge to “compete profitably with the larger chains”, he said.
“That’s something the next pharmacy settlement is going to have to [bear in mind], unless there’s regulatory reform that allows independents to exploit the economies of scale that big chains do through centralised dispensing,” he said.
Lloydspharmacy told C+D last week that Sainsbury's employees' existing contractual terms will be protected when it takes over the pharmacy business in March, in the wake of fears over pay cuts.