Superdrug/A.S. Watson to benefit from ParknShop sell-off in Hong Kong?

Hutchison Whampoa could get $4bn from the sale as Octogenarian Li Ka-shing, ranked by Forbes as Asia's richest man in 2012, plans to sell the business to focus on Hutchison's health and beauty retail operations, which have a bigger global footprint and offer higher margins compared with the supermarket business…

Your colleagues in China may be a little more interested in the Asian deal which would give a 30% market share of the Hong Kong market, attracting the attention of Japan's Aeon, China Resources Enterprise, Sun Art Retail, and Australian retailers Wesfarmers and Woolworths, among the eight parties invited to the process and weighing bids, with Walmart a possible late arrival. 

Walmart opened its first China store in 1996 and now operates over 380 stores spread across various formats, including Supercenters, Sam's Clubs and Neighborhood Markets.

KKR and TPG Capital have also been invited to bid and other buyout firms including Blackstone Group LP have held talks with banks about financing a possible bid.

In other words, by the bid deadline of the 16th August, that line up of talent will guarantee Li at least $4bn to enhance his global H&B offering… 

The real issue for global H&B suppliers is whether Li will now use the money in a final bid to catch up with Alliance Boots global ambitions via a bid for Celesio, a snip at €2.8bn....

This would provide A.S. Watson with a global wholesale arm, and in one move make it more of a match with Alliance Boots, as they each explore the world in search of H&B acquisitions....
Worth a thought?

Boots breaks the 'silence' as it agrees deal with China firm

Alliance Boots, under the terms of a strategic alliance agreement signed yesterday, announced that it will acquire a 12% stake in Nanjing Pharmaceutical Company Limited, through a private placement, for a total consideration of approximately £56 million (RMB560 million), making it the second largest shareholder with Board and operational management representation.

Boots China profile
Nanjing Pharmaceutical Company Limited, which is listed on the Shanghai Stock Exchange, is the fifth largest pharmaceutical wholesaler in China with sales of around £2 billion (RMB20 billion) in 2011.
Alliance Boots first entered the Chinese pharmaceutical distribution market in 2008 through its Guangzhou Pharmaceuticals Corporation joint venture, which operates in complementary geographies and continues its successful development.

A powerful stepping-stone...
In all, with this latest move Boots is aiming at gaining a 20-30% share of the Chinese pharmaceutical distribution market. Apart from the inevitable appeal of adding a retail element in China asap, this major wholesale step is a clear indicator that even without the Walgreens’ tie-up, Alliance Boots is determined to pursue its policy of increasing its global reach and scale.

This will not only make it more influential in the Walgreens-Boots mix, but will be another step in making the company one of the most connected and centrally-run health & beauty operations in the world, at least in the short and medium term, say five years.

Impact on suppliers
This increasingly scalable company will continue to be heavily geared in a global economic environment. As a result there will be increasing pressure on the company to provide an exit strategy for its stakeholders via re-flotation.

All of this adds up to increasing power and influence in its relationships with suppliers, a position that will inevitably cause it to bring issues like prices & terms disparities, and especially absolute cost-prices to the negotiation table.

Action
It hopefully goes without saying that any supplier wishing stay in the ring needs to factor the full global profile of W-B into the mix, fast.
….and if anyone, anywhere in your company still needs convincing of the obvious, why not run the numbers on Walgreens-Boots owning even 20% of global Health & Beauty retail & wholesale, with power to match…  

Underestimating a 26% CAGR customer in a flatline zero-sum world…

With a vision ‘to be the earth’s most customer-centric company; to build a place where people can come to find and discover anything they want to buy online’, the problem in many categories is that Amazon’s vision is becoming reality, fast.

Walmart-like origins

Essentially, having started trading in 1994, Amazon has grown fast, and in relatively low profile to its current global scale of US$48bn, growing over the four years of the global financial crisis at a CAGR of 26%, producing a net margin of 2.2% and an ROCE of 9.06% in fiscal 2011. In other words, serious customer-centric retailing, from a standing start, rather like Walmart - only faster - with an EDLP platform that seems to retain its excitement for consumers, everywhere.

Customer-level assortment
Amazon is raising not only the online commerce bar, with all of its potential efficiencies, but is also going to the heart of state-of-the-art retailing, providing much more than store level assortment. It is, in effect, tailoring the offering to individual consumer level, better than any other provider.

Convincing colleagues, fast
Our free analysis of Amazon’s business model aims at helping you build an in-house case to raise its profile within the business. We have also added a key-point treatment of the wealth of insight available within Amazon’s 2011 Annual report to help you explore the implications for your categories.

Finally, if still in any doubt about Amazon’s impact on your business, think 50% of most categories in the next 5 years, and see if that provides an appropriate wakeup call…

Nestlé Wins Battle For Pfizer Unit With $11.9bn Deal

Pfizer has agreed to sell its baby food unit to Nestlé, in a deal worth $11.9bn, giving the Swiss food giant a major boost in emerging markets across the world.

With 85% of Pfizer’s sales in emerging markets – the deal will complement Nestle’s existing infant nutrition business perfectly. The sale marks Pfizer’s largest divestiture since it divested some consumer health brands to J&J in 2006 for $16.6bn. The unit owns infant formulas such as SMA and Promil, and also makes Enercal supplements for adults. It has a network in more than 60 countries, and was the world’s fifth-largest maker of infant formulas in 2010.

Implications:

• As the No.1 food company in many countries, Nestlé are accustomed to, and will have anticipated issues raised by anti-trust/monopoly legislation.
• This step to full global coverage will enable the company to develop and sustain a fully global strategy for the combined brands in baby food.
• However, given that the company will probably take its time integrating the two operations in order to secure a smooth transition for the companies and the trade (the 1988  Nestlé–Rowntree integration took several years), this may give competitor brands some time to adjust to the new category dynamics…although a couple of what-ifs this morning might be a wise precaution...

Tesco's strategic options, suppliers' strategic response

What is this about?

Tesco’s core issue is its profit warning in January, ultimately a driver of ROCE, in turn affecting the share price. With 2/3 of its business in UK, any setback causes the company to challenge one of the basic ‘rules’ in global retailing – ‘dominate the home market’. However, any company having more than 25% of a national retail market attracts negative attention from media, politicians and ultimately shopper-voters. Within the home market, supply chain efficiency made some large space redundant unless freed-space is filled via product diversification. Meanwhile, having grown share at the expense of less efficient competitors, Tesco is now being challenged by retailers that are as good as, or better, for a share of a zero-sum, flat-line market in terms of range, quality and service, as it strives to return to the Tesco 'rule of 25'.

Finally, the early retirement of a strong unchallenged leader left at least four people who felt they should fill his shoes…

Where is it headed?

Essentially, Tesco has four complementary options:

• Sell more of its current products to current users (increase basket size)
• Sell new products to existing users (Clubcard data, trade up via diversification)
• Sell current products to new users (use Clubcard data to profile ideal Tesco users and attract more of this profile with current products)
• Sell new products to new users (high risk, given two unknowns)

They need to re-apply this formula in the UK, delivering greater perceived value to shoppers, vs. competition, and then roll this strategy out globally.
They need to re-assess their competitive appeal in the eyes of shoppers, vs. the competition in terms of range, quality and service, vs. price. The leadership issue needs sorting in order that the entire company pulls in one direction, rather than each function attempting to ‘rescue’ Tesco. This was the challenge faced and successfully dealt with by McLaurin many years ago….

How does it affect you?

Essentially depends upon category, geographical spread and degree-of-partnership, but in the short term the above strategy will put pressure on all aspects of the supplier-retailer relationship, especially price and supply-chain efficiency, as Tesco re-appraises its supplier-base vs. alternatives available

What to do about it?

• Re-assess your competitive appeal to Tesco as a company, and brand within key categories, and re-engineer to optimise, where necessary
• Re-evaluate your match with trade partnership criteria (Potential, Partnership, Profit and Performance)
• Invest (time, money, people) in what can demonstrably help Tesco implement its strategies, and meets your ROCE objectives 

Above all, insist on fair-play in all aspects of your Tesco trade partnership, a once-only opportunity…

Unprecedented Treats for Unprecedented Times?

A $200,000 bottle of whisky made to mark the 60th year on the throne of Queen Elizabeth II is on sale in Singapore for a mere S$250,000 ($198,500) a bottle - and it may well find a buyer, (for a buyer?).

No doubt it's a premium sip. Only 60 bottles of Diamond Jubilee were made by the Johnnie Walker unit of Diageo PLC from a blend of whiskies distilled in 1952.

It's also a premium price for Asian aficionados at the month-long Master of Spirits II event featuring specialty wine and liquor put on by luxury travel retailer DFS Group, part of the LVMH empire of high-end goods and services.

Discerning palates, and expats' excessive longing for the old country apart, this differential vs. a spirits’ bogof at Tesco has to be a reflection of the gap  building up in societies everywhere… the issue is whether this gap will continue to increase to breaking point, or whether new governments will take steps to keep the lid on via attempts to return to normal supply and demand in markets everywhere… Either way, time for suppliers to reassess trade strategies and avail of opportunities, ahead of  competitors locked in old patterns…

Incidentally, should any potential expat buyers like to take a first class trip back to the UK and pick it up locally, the same package - the vintage whisky in a crystal decanter with silver trimmings, two crystal glasses and a leather-bound booklet - is priced at 100,000 pounds ($159,100) in Britain.

New CEO Carrefour, hypermarket fix instead of breakup?

Carrefour has picked a retail veteran  with a solid track record in company restructuring, Georges Plassat as its next boss.

Plassat spent 14 years at French retailer Casino and two years at Carrefour Spain before joining Vivarte, a retail fashion chain in 2000. He also holds a stake of about 10 percent in Vivarte.

Global No2 Carrefour has been struggling for years, partly due to its reliance on hypermarkets, which have been losing out as time-pressed shoppers buy more goods locally and online, and prefer to purchase general merchandise from specialist stores.

Squashing speculation of possible breakup and sell-off of global businesses, Plassat may pursue an alternative strategy for the hypermarkets, like downsizing them, slashing prices to lure back cash-strapped shoppers who think that Carrefour products are too expensive and investing more in e-commerce

However, some think Plassat faces an uphill struggle and giant stores are out of touch in a world where you need to give shoppers a good reason to make that out of town trip.

The new move will be watched carefully by suppliers and competitors alike, not least of which Tesco, as it reconsiders the long term value of its superstores....