- James Dudley Management

January 2015
The News Bulletin of James Dudley Management
Driving OTC Healthcare and Front end Pharmacy – is Multi-channel
Pharmacy the Solution?
There are more consumers in Europe who shop in
pharmacies who regularly switch between online shopping
and visits to traditional pharmacies than use Internet
pharmacies exclusively. In both Germany and the United
Kingdom for example around a third of online pharmacy
shoppers claim to make purchases in traditional pharmacies
as well as online. Typically these European online pharmacy
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shoppers buy skincare, cosmetics and OTC medicines .
Online pharmacy shoppers are principally attracted to mail order
and Internet pharmacies by discounts. Yet, convenience of
ordering at home and wide ranges of available products from
online pharmacies are among the other reasons given that stand
out. Ordering online and ‘picking up in store’ is becoming a key
growth driver in digital retailing across Europe’s main healthcare
markets and indeed is much favored by Spanish, Polish and British
pharmacy shoppers.
Picture: Courtesy of Walgreens
While tradition divides pharmacy into two separate categories, i.e. ecommerce ‘pure play’ mail order services linked to online ordering
and home delivery and traditional ‘bricks and mortar’ drugstores, the
gap is closing. This is because among the major innovations
challenging ‘pure play’ mail order and Internet pharmacies is the
concept of integrating e-commerce into a multi-channel shopping
experience by trail blazing retail pharmacy groups. This is especially
the case in the United Kingdom, Australia and USA and to a lesser
extent in the Netherlands, Norway, Spain and Poland. (Continued
page 2)
These are among the findings of a major study published this
month - Mail Order and Internet Pharmacy in Europe – Entering
the Digital Battleground from James Dudley Management. The
report covers 17 European States and the USA.
Consumers who switch between traditional and digital
pharmacies are known as multi-channel shoppers. Who,
according to Walgreens are three times more valuable than a
single channel shopper hence the need to go after them.
Walgreens Completes Alliance Boots Deal
Pharmacy owners who want to create competitive retail
strategies to secure loyalty among this increasingly fickle multichannel customer base, should form resilient marketing groupings
and focus on integrating digital pharmacy into their portfolio of
retail tools. They should also work closely with suppliers to expand
into profitable front end categories free from price regulation.
Walgreens, the largest drugstore chain in the USA, completed
the deal to acquire Europe’s leading pharmacy and distributor
group, Alliance Boots, on New Year’s Eve 2014 by purchasing the
remaining 55% of the company’s shares. The deal finalizes a two
part acquisition first initiated in 2012 when Walgreens bought
45% of Alliance Boots shares and the two companies formed a
joint venture which effectively made the combined business a
major global entity.
Today, 356 million Internet users live in the 17 European countries
covered in the Dudley report. There are around 7,000 authorized
pharmacy e-commerce websites some of which operate as small
scale independent pharmacy based Internet businesses, others
are larger cross border ‘pure play’ mail order pharmacies and
many are integrated into the multi-channel digital strategies of
leading pharmacy chains.
Walgreens took full ownership of Alliance Boots on Wednesday
(December 31) having acquired the remaining stake in Alliance
Boots from KKR for $4.7 billion in cash and Walgreen shares
Walgreens Boots Alliance has an international retail estate of
around 12,800 stores and 370,000 employees across 25
countries
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Typischerweise europäischen Online-Apotheke Shopper
kaufen Hautpflege, Kosmetik und OTC-Arzneimittel.
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January 2015
Continued from page 1 Driving OTC Healthcare and Front end
Pharmacy – is Multi-channel Pharmacy the Solution?
Britain’s biggest pharmacy chain and online pharmacy market
leader Boots the Chemist, claims that around 60% of its online
business is ‘pick-up- in-store’.
Typical Online Pharmacy Shoppers in Europe
Purchase Cosmetics, Skincare and OTC Medicines
Boots runs the largest online pharmacy business in its home
market with one in five online pharmacy shoppers purchasing
from Boots.com. This compares to half the number shopping
online at Lloydspharmacy (Cellesio McKesson) or Superdrug
(Watson).
Who shops online for pharmacy products in Europe? First
there is a gender bias. More women than men use Internet
pharmacies in Europe and this is reflected in the products they
buy. For example Spanish and British online pharmacy
shoppers are twice as likely to purchase cosmetics or skincare
and non-prescription medicines.
Focusing on improving front-end performance is becoming a
critical requirement in Europe’s pharmacy channels. Generics
business is becoming more commoditized and punitively price
regulated in many European countries. Together these factors
have pressured pharmacy margins.
In Belgium the leading online pharmacy claims 70% of its
shoppers are female. In Spain 90% of online pharmacy
shoppers are women according to Nexusfarma. In Germany
the gender gap for pharmacy shoppers is narrower with 33%
of women and 27% of men purchasing from online
pharmacies.
Multi-channel pharmacy strategies can in part help retailers to
exploit front end opportunities through reaching consumers
seeking fragrances, skincare and cosmetics as well as those
looking for discounts on high value non-prescription
healthcare products or the anonymity of the Internet to
purchase embarrassing products.
Consumers who either shop exclusively or mix online shopping
with traditional drugstores are principally attracted by
discounts. For example 46% of British online pharmacy
shoppers gave cheaper prices as a main reason to buy online,
as did 59% in Austria and 51% in Germany, and Spain.
Brocacef Acquires Mediq
Brocacef Groep NV (the joint venture pharmacy company
owned by Phoenix and Celesio McKesson) announced that
subject to approval from the Dutch competition authority
approval it will acquire Mediq Pharmacies Nederland B.V. with
the objective of becoming the leading integrated healthcare
provider in The Netherlands.
Convenience of ordering at home and wide ranges of available
products from online pharmacies are among the other reasons
given that stand out.
Spanish Consumers who Shop Online Pharmacies – What they Buy
The transaction includes Mediq’s 219 pharmacies and the
company’s wholesale distribution business as well as its logistics
and hospital delivery operations and manufacturing packing
operations.
Proforma estimates give the new business revenues of €2.1
billion, a network of pharmacies with nationwide coverage,
5,300 employees and a complete offering of pharmaceutical
products and services.
Source: PromFarma.com 18,000 Consumers who Shop Online Pharmacies
Mediq pharmacies will be rebranded into Brocacef’s Benu label.
In the United Kingdom one in five British consumers buying
from online pharmacies order fragrances, skincare and
cosmetics, while one in ten buy non-prescription OTC
medicines and other health products.
Arthur de Bok, CEO Mediq explained the reason for disposing its
pharmacy and distribution business in the Netherlands: "At
Mediq the two divisions Mediq Pharmacies Nederland and
Mediq Direct & Institutional have different dynamics, activities
and strategy. Mediq Direct & Institutioneel operates
internationally, contrary to Mediq Pharmacies, and delivers
medical devices and accompanying care in 14 countries….We
have decided to focus within Mediq in further growing the
position of Mediq Direct & Institutional and finding a new owner
for Mediq Pharmacies”.
Diclofenac Tablets Reverse Switch in the United Kingdom
People will no longer be able to purchase diclofenac tablets, used
to treat pain and inflammation, from pharmacies without a
prescription from their doctor due to the small risk of heart
problems the Medicines and Healthcare products Regulatory
Agency (MHRA) announced 14 January 2014. Topical products
such as gels will remain available for purchase from pharmacies.
The acquisition is subject to the approval of the competition
authorities. The expectation is that the acquisition will be
effected next year.
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January 2015
CA Gruppen to Acquire Sweden’s Apotek Hjärtat
The deal is subject to the Swedish Competition Authority and
Drug Administration approval, expected to be received in April
2015
Apotek Hjärtat is Sweden’s largest private pharmacy chain and
was founded in 2009 following reregulation of the Swedish
retail pharmacy sector. The business has approximately 2,700
employees and operates 306 pharmacies. Apotek Hjärtat’s net
sales for 2013 were SEK 8,266 m and for the period JanuarySeptember 2014 SEK 7,050m. EBITA were for 2013 SEK 345m
and for the period January-September 2014 SEK 339m
Cura apoteket was founded in 2010 by ICA Gruppen and is
ICA’s own pharmacy chain, which is located in large ICA stores
across the country.
Picture: Fredrik Persson
Cura apoteket has grown organically and currently has around
700 employees and 65 pharmacies with a turnover of SEK
2,000m in 2014. Cura apoteket’s net sales for the full year
2013 was SEK 1,671m and for the period between JanuarySeptember 2014 SEK 1,525m. EBITA for 2013 amounted to SEK
-32m and for the period January-September 2014 SEK 12m.
CA Gruppen has concluded an agreement with Altor Fund to
take over Apotek Hjärtat, Sweden’s largest private pharmacy
retailer for SEK 5.7 billion cash.
The combined businesses should generate SEK 11 billion
turnover making ICA Gruppen the number two retail
pharmacy player the Swedish market with around 30% share.
Mail order and Internet Pharmacy in Europe
The 2015 edition
Entering the Digital Battleground
“This essential multi-country study researched and written by James Dudley explores
game changing digital developments in retail pharmacy across Europe’s main markets
and exposes many of the strategic and economic issues that retailers and healthcare
suppliers need to address”
A STUDY OF MAIL ORDER AND INTERNET PHARMACY IN 17
EUROPEAN COUNTRIES PLUS KEY LEARNINGS FROM THE USA
This expanded third edition of Mail Order and Internet Pharmacy in Europe
shows how e-commerce is reshaping pharmacy and tracks the development
of online pharmacies. It shows how leading retailers are entering the digital
battle ground with multi-channel retail strategies.
The report also provides information on multi-channel pharmacy shoppers their needs and motivation
Mail Order and Internet Pharmacy in Europe covers: Austria, Belgium, Czech
Republic, Finland, Denmark, France, Germany, Hungary, Italy, Netherlands,
Norway, Poland, Slovak Republic, Spain, Sweden, Switzerland, the United
Kingdom and draws comparisons and case studies from the USA.
Download executive summary and order online at
http://www.james-dudley.co.uk/
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January 2015
Oriola-KD Operating Profit in Russia 2010 to Q3 2014 in €millions
Oriola-KD Quits Russia
Oriola-KD Corporation has decided to sell its discontinued
Russian businesses to the Russian pharmacy chain CJSC Apteki
36.6 for RUB 3,700 million, equivalent to approximately EUR
56 million in a debt free cash deal. Russia's competition
authority has approved Apteki 36.6's purchase.
According to the company the decision to dispose of its
Russian businesses was based on its perceptions of the future
outlook of the Russian business environment. These included
the overall development trend of Russian pharmaceutical
markets and the current and future competitive environment
in both pharmaceuticals wholesale and retail markets.
As at the end of September 2014, Oriola-KD’s Russian business
included a nationwide distributor covering major regions of
Russia; a central distribution centre and head office in Moscow
and 12 regional branches as well as 229 pharmacies operating
under two major brands Stary Lekar and 03 Apteka.
Source: Oriola KD Corporation Shareholder Presentation
December 8, 2014
Oriola-KD generated around €1 billion in sales in Russia last
year. In the first nine months of 2014 net sales amounted to
€557.9 million
UK - Medicines and Healthcare products
Regulatory Agency closes down 1,600
Illegal Websites
However, the company reported that it had not produced a
positive operating profit over the past four years and updated
estimates on future profitability development potential for the
Russian businesses themselves were far from optimistic.
The Medicines and Healthcare products Regulatory Agency
(MHRA) in Britain closed down more than 1,600 websites
illegally advertising and selling medicines last year the Agency
th
claimed on 8 January 2015.
Vladimir Kintsurashvili, Director General of PJSC "36.6" said "In
2014 we have completed work on asset restructuring, which
allowed us to concentrate on the further development of the
business. The acquisition of the Russian business Oriola-KD is a
strategically important step in the development of the group's
business in our key markets”.
Many of the medicines offered were falsified, counterfeit or
unlicensed.
Enforcement officers also seized medicines with a value in
excess of £3 million (€3.8 million). These included quantities of
erectile dysfunction medicines, slimming products, as well as
powerful and often misused drugs including sleeping pills and
antidepressants. The majority of packages seized originated in
India and China.
Additionally, within the last year nearly 19,000 online videos
were removed for illegally advertising medicines as part of
MHRA’s continuing collaboration with social media and
auction sites such as YouTube, Amazon and eBay to identify
and take action against illegal operators.
MHRA also continues to work with internet domain registries,
credit card companies and Interpol to take down websites and
close their accounts.
Picture: Oriola-KD Corporation
Contact www.James-dudley.co.uk
information@james-dudley.co.uk
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