In a deal that still requires regulatory approval, Clicks is buying Pick n Pay’s retail pharmacy business as it accelerates the expansion of its network across the country, reports Business Maverick. No value was given for the deal.
The transaction includes 25 in-store pharmacies which will be rebranded to Clicks.
The health, beauty and pharmacy chain said it would acquire the pharmacy licences and ethical drug stock from Pick n Pay, while all staff employed in the pharmacies would transfer from the supermarket group to Clicks.
In April, Clicks said it planned to speed up its store expansion with the opening of 40 new stores and 36 pharmacies this year – excluding those acquired from Pick n Pay. At the end of February it had 760 stores in total and 601 pharmacies. The acquisition takes its national presence to 632 pharmacies.
“Currently 50% of the country’s population live within six kilometres of a Clicks pharmacy, and we aim to improve this over time as we get closer to customers,” Clicks CEO Vikesh Ramsunder said.
Pharmacies don’t make money in their dispensaries, according to independent retail analyst Syd Vianello. While the back shop brings customers into the stores, the front shop makes the real money. So for Pick n Pay it’s a good deal when looked at this way and Clicks benefits from the additional licences, which are difficult to acquire.
“So PnP keeps the customer, because they will continue to come to PnP to buy groceries and toiletries etc, and all they lose is the drug (ethical) business, which needs a pharmacist and runs at a loss.
“Spar faces the same dilemma. I wouldn’t be surprised if they do something similar with the very few pharmacies they own.”
Clicks said the transaction didn’t make allowances for more Clicks pharmacies in Pick n Pay stores, as its focus would remain on opening dispensaries in its own Clicks outlets.
“For Clicks, the real benefit, in my view, is the ownership of the pharmacy licences which I presume are transferable, and I guarantee will in time be transferred to sites where Clicks can open new full size stores and will make money,” Vianello said.
While Pick n Pay’s in-store pharmacies have failed to gain any significant scale since it opened its first dispensary in 2006, Shoprite, which launched its MediRite pharmacy network in 1999, has grown it to more than 140 in-store dispensaries.
“Shoprite’s pharmacies operate on a different level,” Vianello said.
“Obviously they have the same issues as PnP, but Shoprite owns Transfarm, a large pharmacy wholesaler, which supplies its pharmacies… so it gets volume from the pharmacies to add to the other business of Transfarm.
Maverick reported that the deal wasn’t expected to have a material impact on the earnings or financial position of either company.