Merrill Lynch
Consumer Focus Day
November 2003
Healthcare Strategy in South Africa
• Strategy
• UPD
• Clicks
• Clicks Pharmacy
“The realisation of a dream”
Multibrand Strategy – South Africa
Health
Consolidated
Retail
Pharmacy
Specialist
Wholesale
Beauty
Lifestyle
Healthcare Strategy
• Leverage benefits of integrated channel to market
• Extend retail presence & expertise into pharmacy
• Establish efficient, compliant & profitable low-cost
drugstores
• Promote co-ownership model
• Improve front to back shop ratio
• Synergies from combining pharmacy with current
offering - lower overheads & increased footfall
• Franchise model retained – using compliant format
• Explore black empowerment opportunities
Wholesale & distribution - UPD model
• Profitable well run business
• Efficient working capital
management
• Largest national wholesaler
in SA
• Expertise in fine distribution
UPD 43%
of other
wholesale
business
All Other
Wholesales
40%
R3.788bn
Manufacturers
R988m
11%
UPD provides
distribution
for integrated
channel to
market
Distributors
49%
R4.626bn
Integrated channel to market
• Pharmacies carry less stock
• Act as warehouse for pharmacies
• Distribution & service levels key
UPD – in short
• Growth in turnover from PM&A & independent pharmacies
• Retained most independent pharmacy customers
• Standardised terms on FMCG suppliers
• Clicks pricing on top FMCG lines available to customer base
• Two franchise models in the group – Link + Multicare
• Develop Link offering as premium banner
• Develop programmes to enhance Link pharmacy loyalty to
UPD – new franchise agreement
Impact of legislation on UPD
Original source procurement
• Levelling of the playing field – ethical standards + transparency
• Small impact on current wholesale customers
• Service levels will be the differentiator
Generic substitution
• Single channel distribution - lower market share
of branded ethicals - better placed to benefit
• Currently, margins better
Single exit pricing
• Timing – early 2004
• Lack of clarity
“Generally
positive for UPD”
“The realisation of a dream”
Clicks - The Vision
• To create an experience of pharmacy that
has never been seen before in SA
• To combine the best of what Clicks offers
with the best of the pharmacy experience
• To enhance the Clicks brand qualities of
value with convenience & service
Pharmacy in Clicks
• Regulatory approval for PM&A deal
• Application for licences
– PM&A
– Additional licences in selected stores
– Underserviced areas – discuss with government
• All New Clicks wholly-owned/JV pharmacies
to be rebranded Clicks
Format 1
Clicks Health, Home & Beauty with Dispensary
• Health & dispensary as additional components to our
current understanding of Clicks
• Value for money
• Servicing woman’s world
“For me, my home, my life”
• Heavy promotional drive
Format 2
Clicks Health and Beauty with Dispensary
• Health & Beauty focus supported by gifting &
convenience statement
• Personal connection to pharmacist
• Strong promotional offering
• Strong value statement
• Convenience & longer
trading hours
What the customers had to say...
• Customers expected Glengariff to be like a Clicks
with an added pharmaceutical department
• The relationship with the pharmacist &
customer service are key
• Clicks Pharmacies would be more price
competitive than other pharmacies
• Can I use my ClubCard?
“Glengariff opens shortly
Systems ready
ClubCard ready”
Learning from Australia
Conversions:
• Converting existing Priceline store (Prahran)
– Sales growing in excess of 40%
– Back & middle shop sales already at 18% - should
double
• Converting existing pharmacy (Bentleigh)
– Script sales grown by 20%
– Front shop sales up from 10% to 75%
New site:
• Mornington
– Turnover A$45k per week from 300m²
– Front shop sales 50%
Preparation/Ground Work
Pharmacy Opening Schedule
September
Legal - Competitions Commission, pharmacy licenses,
de-link, lease, JV, finance structure
October
13
November
December
3
Glengariff
IT - Development store systems, development host
systems, testing. Ideal to follow
20
BalfourPark
Marketing - Market offering around service, value,
convenience and ClubCard. Signage, uniforms
27
Rosebank
Category - Ranging ‘new formats’, understanding ‘new
products’
4
Atterbury
Finance - Integrating 2 systems, debtors, feasibilities
(new pharmacies, new partners), budgets
9
Edgemead
Change Management - Leadership, interfacing,
communication
OD/HR - Conditions of service, induction, performance
development program, organizational development
Operations - Operational structures, SOP’s, store
conversion procedures, training
Store development - look and feel, low cost model,
property issues
9
West Coast
Village
To follow next year: 75 other PM&A’s, Approximately 50 pharmacist enquiries,
17 New Clicks Stores, 40 Clicks refurbs
Questions ?
Thank You