Alliance Boots’ neighbourhood pharmacy business aims to corner the UK self-care market, following in the footsteps of its parent company’s US partner, Walgreens.

Alliance Boots’ neighbourhood pharmacy business aims to corner the UK self-care market, following in the footsteps of its parent company’s US partner, Walgreens

Alliance Boots’ health and beauty brand Boots is a British institution. Its well-loved and trusted stores stretch up and down the country, sometimes with two or more along one high street.

However, fewer people are as familiar with Alliance Boots’ Alphega Pharmacy business. Alphega’s Europe managing director Caitlin Sorrell wants to change that and transform the retailer into a household name.

Made up of 1,000 independently owned pharmacy members in the UK - where stores are mainly located in villages - and a further 5,000 members across Europe, it is not a business to be sniffed at. A company spokeswoman said Alphega’s ambition is to reach 10,000 members in the medium term. Speaking at Alphega Pharmacy’s European Convention 2013 in Monaco last month, Sorrell said she saw “enormous potential” for growing the Alphega market outside of its core European homeland. “Alphega Pharmacy is an absolutely central part to Alliance Boots’ strategy,” she said.

Despite both catering for the pharmaceutical market, Boots and Alphega are very different retail propositions. The Boots chain operates 2,500 stores in the UK, offering an extensive range of gifting, health and beauty, pharmacy and even food. But Alliance Boots has positioned the Alphega network to serve the local community by offering a more personalised, familiar service, similar to that people get from their GPs. Sorrell said: “Boots has had 160 years to develop. We’re not trying to compete with Boots. As long as there are private pharmacies we want Alphega to be the lead-ing brand.”

Although Alliance Boots doesn’t break out trading figures for its Alph-ega business, Verdict senior analyst Carly Syme believes it is likely to be a “relatively well-performing fascia” given its expansion plans.

Alphega was founded 12 years ago by chief executive of Alliance Boots’ pharmaceutical division Ornella Barra. It operates a similar model to a franchise agreement, except Alphega charges a membership fee only, rather than taking a cut of the profits. Alliance Boots emphasises the independence the pharmacies retain, despite using the Alphega branding and supply chain.

Alphega launched in France in 2001 and then in Italy and Spain before reaching the UK in 2008. It now also has members in the Netherlands, Russia, the Czech Republic and Germany.

Sorrell is keeping detailed plans for Alphega under wraps but it is clear the brand is important to Alliance Boots. Its executive chairman Stefano Pessina spoke at the convention to convince Alphega members to stick with Alliance Boots and Walgreens.

The two struck a game-changing partnership last year that resulted in the formation of a global powerhouse of 11,000 Boots and Walgreens stores, as well as Alphega’s 6,000 pharmacies.

Pessina told Alphega members: “The building of a world healthcare company is aimed at providing you with an unlimited range of competitive advantages, which will help reinforce your position as local pharmacy champions.

The pharmacy sector is going through transition. UK pharmacies in particular have suffered from squeezed margins due to unpredictable levels of Government reimbursement on prescription drugs. There has also been a big surge in sales of generic medicines, which are no longer exclusively manufactured by a single company, leading to more competitive prices for consumers and lower margins.However, there are reasons for pharmaceutical retailers to be cheerful. With an ageing pop-ulation, healthcare costs are set to surge, by as much as 5% in Europe, the equivalent of $2.2 trillion (£1.34 trillion) by 2016, according to Walgreens president for pharmacy, health and wellness Kermit Crawford.

This presents an opportunity for the retailer, because more people are expected to manage their health more carefully and independently, thrusting the pharmacy into an ever more critical role in healthcare. Syme adds that Alphega “will really benefit from an ageing population who are less mobile and looking for convenience”.

Crawford said Walgreens has already seen the shift. “For years the product in our pharmacy has been about the pill. The pill is no longer the product. The product is the patient outcome. How we can help our patients live and better manage their diseases,” he said.

Walgreens drugstores offer immunisations, have nurses in stores and can assess, diagnose and treat conditions and diseases such as diabetes, high cholesterol, hypertension and asthma, giving more people access to cheaper healthcare.

Alphega already offers some similar services and is expected to implement more as it vies for the British pound in a market dominated by its better-known sister business.