Alliance Boots chief executive of health and beauty Alex Gourlay speaks exclusively to Retail Week about how the merger with US pharmaceutical giant Walgreens will impact the UK business.
Why is Walgreens a good partner for Boots UK?
There is a cultural fit for both companies, being pharmacy-led and being dedicated to local community pharmacy and healthcare.
What’s very interesting is that we have grown up in different markets so what we’ve invested in has been different because the markets have evolved differently. Walgreens have been really successful in investing in pharmacy, particularly IT and their Take Care clinics and healthcare solutions - they have spent a lot of time and effort and done a good job in developing that side of the business.
We have over 400 people in Nottingham that develop, manufacture and distribute unique product brands - No7, Soltan, Botanics, Boots Laboratories - so you get quite a different model [from the two businesses coming together].
How does this deal boost the Boots business?
Because we’re a brand manufacturer the synergies and opportunities really come from three areas: procurement because of the scale of the business; the opportunities to sell and leverage the Boots products quickly in the American market where they’re already popular; and the opportunities to share best practice across pharmacy and logistics and IT.
Will customers see big changes in their familiar Boots store?
I don’t think so. Our strategy in the UK is very clear. We will continue to bring to the market innovative, distinctive products in health and beauty, we’ll continue to develop our Advantage card, we will continue to become a truly multichannel enterprise.
Is manufacturing staying in UK?
Yes. The head office site is part of an enterprise zone and we’re working up a plan as best we can as to how we can make it a hub for health and beauty product and technical innovation, not just for Boots but for the whole supply chain and our partners. Nottingham is the heart of Boots, always has been and always will be, so this will strengthen [as we grow]. In the conference call Stefano said: “I want Nottingham to be the window to the world for health and wellness.”
You already sell products through Target stores in the US. Will that partnership continue?
Yes, that’s been a great partnership, they sell hundreds of millions of dollars of product through Target stores, not just No7 but a range of Boots beauty brands. We will continue to sell these products in these stores.
Would Walgreens open standalone stores in the UK?
No. The brands are very clear that there is Boots in the UK and it’s Walgreens in America. We will work out as we internationalise the businesses over time what’s the most appropriate brand with the most customer appeal and that will be different by territory.
How quickly will the expansion take place?
In the first stage it is important the regulators tick off the deal. They’re hoping that by July the first stage will be done. Then at that point we’ll have the teams running and focusing on where the synergies are.
Has Alliance Boots chairman Stefano Pessina’s stake in Alliance Boots changed?
It has changed in that obviously he has sold some of his shares to Walgreens but he has an 8% share in Walgreens.
Looking towards the second phase he will tell you very clearly two things – he doesn’t plan to retire and he doesn’t plan to sell a single share. He will be on the Walgreens board and will become a substantive shareholder in phase one and then a much bigger shareholder in phase two.
Has your role changed?
Not really. My responsibility is divisional head and we’ve always worked in a very flexible way across the group. I’m sure I’ll be heavily involved in the partnership work as I have been so far, and heavily involved in the development of the new platform.
There has been negative press about British brands being taken over by overseas companies. How do you think it will play out?
People are proud of Boots and therefore they want Boots to be successful. We’re very lucky the way we’ve always had that consumer [support] and we really feel responsible for maintaining that.
And I genuinely don’t understand what more Stefano and KKR have to do to prove what they’ve done to Boots. When they took over the business Boots had 1,500 branded Boots stores all in the UK. We now have 2,500 in the UK plus 500 Opticians in the UK. We have almost 300 internationally in Norway and Thailand’s expanded.
From day one Stefano said: “I want to take the brand out of the safe and show it off to the world”.