Best medicine all round
What was a headache for Pick n Pay will be a growth elixir for Clicks as it builds its dominance in the retail sector
ý Clicks’s tilt at Pick n Pay’s pharmacy business is all part of the health retailer’s efforts to get closer to its customers — literally.
That’s according to Clicks CEO Vikesh Ramsunder, who has inked the company’s first corporate pharmacy acquisition.
“Currently 50% of the country’s population live within 6km of a Clicks pharmacy and we aim to improve this over time as we get closer to customers,” he says.
The purchase includes 25 in-store Pick n Pay pharmacies, which will be rebranded to Clicks, as well as its retail pharmacy business.
Clicks will buy the pharmacy licences and prescription medication, and all staff will transfer from Pick n Pay to Clicks.
Ramsunder says the deal — which will increase Clicks’s national presence to 632 pharmacies — helps to speed up the plan to expand the convenience and accessibility of the pharmacy network.
For a long time now, Clicks — the largest retail pharmacy network in SA — has wanted to have a pharmacy in all its stores, which now number 760.
About 75% of them are the convenience format, and these outperform “destination stores”.
For Pick n Pay, the deal means selling off an operation that never really got going.
Chief strategy officer David North says it took the company 16 years to get to just 25 stores.
“It has never been a core part of our growth strategy, and it has sometimes been difficult for us to compete profitably against the larger players, particularly where their pharmacy operations are vertically integrated.”
Pick n Pay COO
Adrian Naude says the retailer’s strategic objectives “do not include the development of a large pharmacy division”.
“Our main objectives in terms of transferring our pharmacy business have been to ensure that our customers have a seamless transition and maintain the quality of service they have been used to with Pick n Pay, and that our pharmacy staff are looked after. We are pleased to have reached an agreement with Clicks which meets both of these objectives.”
Both businesses are rehoning their strategies. Clicks is closing its last Musica store at the end of this month after several loss-making years. That’ll free up management time to focus on its core Clicks stores (including pharmacies) and on United Pharmaceutical Distributors, which had a cracker first half to end-February, growing turnover by 18.9% to R13.2bn.
Meanwhile, Pick n Pay is focusing on expanding its grocery stores, notably its discount Boxer chain, which, according to former CEO Richard Brasher, is the fastest-growing retailer in SA.
Boxer has doubled its footprint over the past five years and last year opened about 44 stores, the biggest rollout in its history.
It competes with Shoprite and Usave, both part of the Shoprite stable.
Alec Abraham, senior equity analyst at Sasfin Wealth, says the Clicks deal is a relatively small one — neither party has to disclose its value because it’s not material to their earnings. “It simply confirms Clicks’s dominance in the pharmaceutical retail sector. Clicks has a strong network of both large format stores and numerous smaller format stores [and] this ubiquity is certainly one of the group’s strongest competitive advantages.”
In fact, says Abraham, “this news immediately makes me think of Dis-Chem, whose progress in rolling out smaller stores to challenge Clicks’s dominance in peri-urban areas has been a little bit disappointing”.
It has never been a core part of our growth strategy, and it has sometimes been difficult for us to compete profitably
David North