The future of pharmacy rethinking strategies for the future

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James Dudley's presentation to Zukunft Apotheke conference Frankfurt 19 June 2012. Three game changing events shaping European pharmacy channels – Multi-format regional pharmacy chains, multi-channel pharmacy trends and the Walgreens Alliance Boots merger

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The future of pharmacy rethinking strategies for the future

  1. 1. The Future of PharmacyRethinking Strategies for the Future by James W. Dudley Tel. ++ 44 1562 747705 Fax ++ 44 1562 750275 e-mail information@James-Dudley.co.UK www.James-dudley.co.uk © James Dudley International Ltd 2012
  2. 2. Agenda • Changing retail landscape for consumer health and personal care in Europe • Arrival of new pharmacy groupings – Mixed format multi-channel structures with Europe-wide reach • New retail trends - the multi-channel shopping experience – integration of online services with traditional pharmacy supported by retail and mobile apps at point of sale • Game changing impacts - buying power and marketing clout of a globally organized drugstore chain Walgreens Alliance Boots • A new vision of the futureSource: OTC Distribution inEurope 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 2
  3. 3. Based on 2 Major Consumer Healthcare Market Studies from James Dudley Management OTC Distribution in Europe 2012 edition Mail Order and Internet Pharmacy in Europe 2012 edition http://www.james-dudley.co.uk/21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 3
  4. 4. A Study of Consumer Healthcare Channels in 19 European Countries 588 million inhabitants 157,000 pharmacies €231 billion Retail Pharmacy Market Source: OTC Distribution in Europe 2012 edition21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 4
  5. 5. European Retail Pharmacy Market (19 Market Study) European retail pharmacy is made up of relatively small turnover enterprises highly dependent on price regulated businessSource: OTC Distribution in Europe 2012 edition• Average turnover is €1.47 million p.a.• 2 thirds of pharmacy turnover is priceregulated i.e. reimbursed business, feesand services OTC Distribution in Europe 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 5
  6. 6. European Healthcare - Change Factors• Cost of social healthcare - Capital investment, new sophisticated drugs and procedures – pharmaceuticals antheir distribution channels become easy targets for cost cutting – prices, margins, fees, generic substitution targeetc.• Aging populations – emerging silver market – longer term health issues and costs – home treatment and care• Concentration of the intermediary sector in Europe e.g. Alliance Boots – Anzag, Sanastera (Sanacorp CERPmerger) with :  Diversification along the supply chain – retail chains, Internet services, pre-wholesaling  Growing investment in emerging markets outside Western Europe (e.g. Celesio Brazil, Alliance Boots Turkey, Middle East , China and SE Asia, Oriola Russia)  Shift from price regulated to unregulated price sectors (Manufacturer outsource services, homecare etc.)  Maintenance of core wholesaler business as the main cash cow to invest in new sectors and markets OTC Distribution in Europe 2012 edition21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 6
  7. 7. Mass Market Chains new Stakeholders in Consumer Healthcare • Mass market operators taking share of non-prescription market in the United Kingdom, Switzerland and Sweden as well as the Central and Eastern European States • All major supermarket chains in the United Kingdom operate pharmacy chains – Tesco, Sainsbury, Morrison and the Coop • Galenica has opened 44 pharmacies in a joint venture with the Coop under the name Coop Vitality in Switzerland • In Sweden Oriola-KD formed a partnership with KF (Kooperativa Förbundet) for a pharmacy chain Kronans Droghandel and the supermarket chain ICA has opened up shop-in-shop pharmacies under the banner ICA Cura • Jeronimo Martins (JM), a Portuguese retailer, is developing a pharmacy chain in its Biedronka discount chain, the largest in Poland with 834 outlets • Coop, Auchan, Leclerc and Carrefour have set up pharmacist managed pharmacy corners in their hyper- markets in Italy • In Russia, A5 has opened drugstores in some of the supermarkets owned by Х5 Retail Group, Russia’s largest food retailer with a minority holding in А5 • German and Austrian druggists taking a pharmacy position in partnership with mail order and Internet pharmacy operators21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 7
  8. 8. Agenda • Changing retail landscape for consumer health and personal care in Europe • Arrival of new pharmacy groupings – Mixed format multi-channel structures with Europe-wide reach • New retail trends - the multi-channel shopping experience – integration of online services with traditional pharmacy supported by retail and personal health apps at point of sale • Game changing impacts - buying power and marketing clout of a globally organized drugstore chain Walgreens Alliance Boots • A new vision of the futureSource: OTC Distribution inEurope 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 8
  9. 9. Pharmacy membership of Groupings in Europe Almost half of Europe’s Pharmacies are in groupsJames Dudley OTC Distribution in Europe 2012 edition. 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 9
  10. 10. Number of Pharmacies in Wholly Owned Groups 16% of Pharmacies in Europe are owned by Chains Main international distributors forming pharmacy chains in selected markets - Celesio, Alliance Boots, Phoenix, Mediq, Doz SA(PGF) Limited sized wholly owned groups reducing economic inefficiencies - e.g. Germany Reductions in State owned pharmacies – CEE and SwedenJames Dudley OTC Distribution in Europe New entrants - Major International retail groups participating in the pharmacy sector Walgreens, Leclerc, Carrefour, Auchan, Penta, Tesco, Sainsbury, Jeronimo Martins, Wal-Mart. A.S Watson etc. Restrictions on wholly owned groupings in Europe’s largest markets Over half of chain owned pharmacies are located in the UK OTC Distribution in Europe 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 10
  11. 11. Importance of the Major Distributors in Europe • A small number of distributors control well over half the intermediary pharmaceutical market in Europe • These companies invest in retail pharmacy as wholly owned chains or as affiliated marketing groups (voluntary groups) 5 distributors are driving the future of retailJames Dudley OTC Distribution in Europe 2012 edition. pharmacy in Europe 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 11
  12. 12. Major Retail Pharmacy Chains Expanding the size and geography of retail pharmacy multiples through the creation of hybridJames Dudley OTC Distribution in Europe groupings made up of mixed estates of wholly owned, franchise concept chains and affiliated voluntary members OTC Distribution in Europe 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 12
  13. 13. Pharmacies in Voluntary Groupings • 78% located in France and Germany – where they do not have to compete with large wholly owned chains • Largely driven by main pharmacy distributors e.g.:- Celesio, Phoenix, Alliance Boots, Sanastera, Doz SA, (PGF)- Poland, Galenica – Switzerland, Hungaropharma – Hungary • Strengths of a chain, benefits of independent management • Branding, buyer power and patient/consumer services 29.6% of Europe’s pharmacies in voluntary groupingsJames Dudley OTC Distribution in Europe 2012 edition. 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 13
  14. 14. Types of Voluntary GroupLoose unbranded Group of independent pharmacies aligned to a wholesaler – usually low costwholesaler group membership, range of services members can choose from – the main purpose is to promote loyalty to the sponsoring wholesaler Group of independent pharmacies aligned to a wholesaler – members sign up to aTight branded brand concept and services and participate in promotions, advertising campaignswholesaler group and share consumer loyalty programmes including store cardsBranded Group of independent pharmacies formed into a cooperative sharing a commoncooperative brand, or speciality – members buy shares in the cooperative, usually appoint a(independents) management team - participate in promotions, advertising campaigns and share services Group of independent pharmacies acting as a buying collectiveUnbranded buyinggroupFranchise Concept Independent pharmacies invest in a retail brand umbrella whose marketing, procurement operations and formats are controlled by the brand owner OTC Distribution in Europe 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 14
  15. 15. Problems with Voluntary Chains• There are few mechanisms to maintain the discipline of the chain• The failure on the part of their managements to understand the importance of differentiating their retail offer, positioning andbranding• Wholesalers have concentrated on retaining pharmacy loyalty through the leadership of groups• Members ‘cherry pick’ intermediary offers rather than building a retail brand• Lack of full hearted support for organized brand promotions by group members is frustrating for manufacturers and underminesthe group buying strength• Consumers’ trust in retail brands reflect their experiences, expectations and quality and cost perceptions, so chains which fail toprovide a consistent consumer offer undermine this trust .....Members are realising that as well as good buying, innovation such as loyalty cards, branding, formatting and promotions are important elements for competing in a competitive retail sector..... OTC Distribution in Europe 2012 edition21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 15
  16. 16. European Multi-Format Pharmacy Estates Wholly owned retail stores • Hybrid groups – expanding across Europe in multi-format Pharmacy Estates Affiliated Chains • Formats designed to meet local regulatory Franchise concept Chains and market conditions The brand is wholly owned regardless of E Commerce and Mail order who operates the pharmacy Multi-format Multi-channel pharmacy estates shopping Multi strategies State brands e.g. Celesio, Alliance Boots, Dban o Zdrowie - Doz SA(PGF)21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 16
  17. 17. Agenda • Changing retail landscape for consumer health and personal care in Europe • Arrival of new pharmacy groupings – Mixed format multi-channel structures with Europe-wide reach • New retail trends - the multi-channel shopping experience – integration of online services with traditional pharmacy supported by retail and personal health apps at point of sale • Game changing impacts - buying power and marketing clout of a globally organized drugstore chain Walgreens Alliance Boots • A new vision of the futureSource: OTC Distribution inEurope 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 17
  18. 18. Growth of Internet and Mail order Pharmacy • Germany is the largest ‘pureplay’ Internet pharmacy market in Europe €1.2 billion ($1.5 billion) • Growth in the absence of wholly owned pharmacy chains •Shake out and consolidation of the ‘pureplay’ sector i.e. Zur Rose acquisition of DocMorris (Germany, Switzerland, Netherlands, Austria & Czech) • Importance of alignments with Druggist chains in Germany and Austria In Germany ‘Pureplay’ and ‘Bricks and mortar’ pharmacies are seen as separate and competing channels21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 18
  19. 19. Linking mail order Internet technology with traditional ‘bricks and mortar’ pharmacies into a multi-channel experience –New trends in the USA and progressive European States Mail Order and Internet Pharmacy in Europe 2012 edition21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 19
  20. 20. Walgreen’s Case Study Philosophy - Walgreens multi-channel shoppers are estimated to be three times more valuable than a single-channel shopper• Walgreen’s stated objective of becoming a multi-channel retailer for consumer health and lifeneeds in America.•Acquisition of Drugstore.com - $456 million insales and 3 million loyal customers• Top 10 e-commerce player• Enhances Walgreen’s multi-channel productoffer and shopper experience by leveragingdrugstore.coms websites - drugstore.com™,Beauty.com™, SkinStore.com™ andVisionDirect.com™. James Dudley Mail Order and Internet Pharmacy the 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 20
  21. 21. Walgreen’s Case StudyPhilosophy - Walgreens multi-channel shoppers are estimated to be three times more valuable than a single-channel shopper • To capture this target audience Walgreens has developed and expanded a multi-channel strategy M Commerce through heavy investment in e- channel commerce and mobile technology •The new model has enabled the company to leverage its brick-and- mortar locations with convenient, sophisticated online options. • Walgreens has also developed mobile phone applications into another channel which allows customers to refill prescriptions, order photos, browse the weekly ads and other applications James Dudley Mail Order and Internet Pharmacy the 2012 edition21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 21
  22. 22. Boots –Leading Pharmacy Chain in the UK - Multi-channel Strategy E Commerce - Channel • Order online pickup in-store • Online promotions • E Pharmacy • E Clinics • Mobile apps In-store Channel Alliance Boots 2012 Latest • LoyaltyBoots is currently testing the use of iPads schemes and to support in-store ordering rewards “Our ambition is to create a seamless • On-shelf customer experience across our online promotions and in-store offering, and to bring the • In-store based very best Boots U.K. has to offer to our clinics including customers," Ruth Spencer, Boots U.K. smoking loyalty and multi-channel director cessation, flu (Drug Store News 8th November 2012) jabs etc Sempora UK Pharmacy Study 2012 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 22
  23. 23. Agenda • Changing retail landscape for consumer health and personal care in Europe • Arrival of new pharmacy groupings – Mixed format multi-channel structures with Europe-wide reach • New retail trends - the multi-channel shopping experience – integration of online services with traditional pharmacy supported by retail and personal health apps at point of sale • Game changing impacts - buying power and marketing clout of a globally organized drugstore chain Walgreens Alliance Boots • A new vision of the futureSource: OTC Distribution inEurope 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 23
  24. 24. Walgreens Alliance Boots Game changing impacts - Buying Power and Marketing Clout of a Globally Organized Chain21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 24
  25. 25. Walgreen’s• Walgreens top 10 global retailer•Walgreens - the largest drugstore chain inthe US with 19% share of the retailpharmacy market and 20.1% ofprescriptions in 2011• Sales of $72 billion in 2011• 6 million customers a day• 7,818 drugstores in all 50 states, theDistrict of Columbia and Puerto Rico James Dudley Mail Order and Internet Pharmacy the 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 25
  26. 26. Alliance Boots Global Footprint $40.6 Billion Retail Wholesale Wholly owned retail Boots Wholly owned Pharmacies Eg, Esp. G. Cz, Fr, L, Nl, Rom, R, T, UK 3,280 (UK, N, Ir, R, L,T) Affiliated Chains Associates and JVs +6,000 stores ChinaAlphega (Cz, Fr, It, Esp, R, UK)Vivesco (G) SwitzerlandKring (Nl) Italy Associates and JVs Internet and Mail orderSwitzerland PharmacyItaly UK, Nl, NMiddle East Online andSweden (Franchise concept) In-store clinics UK 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 26
  27. 27. Walgreens Alliance Boots Combined Global Footprint $40.6 Billion $73.0 Billion Alliance Boots Retail Alliance Boots Wholesale Wholly owned retail Walgreens stores Internet Wholly owned retail Boots Wholly owned and Mail Pharmacies 7,800 USA order Eg, Esp. G. Cz, Fr, L, Nl, Rom, R, T, UK 3,280 (UK, N, Ir, R, L,T) In-store clinics Affiliated Chains Associates and JVs +6,000 stores ChinaAlphega (Cz, Fr, It, Esp, R, UK)Vivesco (G) SwitzerlandKring (Nl) Italy Nearly 4X the Associates and JVs Internet and buying clout Mail order of its nearestSwitzerland Pharmacy EuropeanItaly UK, Nl, N competitorMiddle East Online andSweden (Franchise concept) In-store clinics UK $113.6 Billion before disposals and synergies 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 27
  28. 28. Walgreens Boots – The First Global Healthcare Enterprise Procurement Revenue Enhancing Prescription drugs Beauty Branded goods Own brands Private brands Wellness solutions Indirect spend Best & Next Practices Store formats Loyalty $130 Billion E-commerce Prevention & adherence enterprise Pharmacy by 2016 Walgreens Alliance Boots Investor meeting June 201221 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 28
  29. 29. Agenda • Changing retail landscape for consumer health and personal care in Europe • Arrival of new pharmacy groupings – Mixed format multi-channel structures with Europe-wide reach • New retail trends - the multi-channel shopping experience – integration of online services with traditional pharmacy supported by retail and personal health apps at point of sale • Game changing impacts - buying power and marketing clout of a globally organized drugstore chains Walgreens Alliance Boots • A new vision of the futureSource: OTC Distribution inEurope 2012 edition 21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 29
  30. 30. New Visions for the Future Globalization of the pharmacy channel, new multi-channel retail strategies and spreading multi-format regional pharmacy chain brands will greatly intensify the competitive landscape and force further restructuring right along the healthcare supply chain • Multi-format pharmacy groupings will in future create brands with meanings to consumers, leverage marketing clout, generate multi-channel shopping experiences through E commerce, home delivery and E value loyalty schemes linked to store cards and mobile technology applications –M Commerce • Chains will exert buyer power on a global/regional basis to maximize market share forcing further consolidation in the supply chain to match the demands of pharmacy groups in terms of prices, cost of goods, promotional spend and services • Pharmacy groups may well follow segmentation strategies of other retail sectors with a distinction between those which will become big discounters and those targeting premium opportunities (In Russia the major chains run two or more brands) • The development of ‘own’ or ‘private label ’ as an intrinsic part of each retailers’ brand building strategies • International manufacturers will transfer brand marketing technologies across borders these will include QR codes that can be read in-store by mobile apps and linked to retailer promotions, M Commerce POS and E value loyalty cards to exploit the holistic nature of the multi-channel shopping experience21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 30
  31. 31. This Presentation was Based on 2 Major Consumer Healthcare Market Studies from James Dudley Management OTC Distribution in Europe 2012 edition Mail Order and Internet Pharmacy in Europe 2012 edition http://www.james-dudley.co.uk/21 November 2012 www.James-dudley.co.uk © James Dudley International Ltd 2012 31

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