Issue 174
Written by Sherman
Recording by Zhu Cong
In terms of revenue and number of stores, Boots is undoubtedly one of the largest retailers in the UK and Ireland, with a total of 2500 stores, covering large beauty and healthcare chains, pharmacies. Boots has been offering people product options since 1849. Today, the chain with a history of more than 170 years has been affected by e-commerce and may change owners.
In late 2021, the Walgreens Boots Alliance (WBA), the parent company of Britain's largest beauty retailer Boots, convened a Wall Street bank goldman Sachs consultant to find the new proprietor of the more than 170-year-old retailer, valuing Boots at a whopping £5 billion.
Some sources also said that this may not mean that the WBA spun off the Boots business, but rather made it a separately listed company.
In March, the battle over Boots continued after CVC and Bain Capital pulled out of the bidding. U.S. private equity firms Apollo and Sycamore have competed with billionaire Issa Brothers (owners of the Asda supermarket chain) and British private equity firm TDR Capital, with Boots selling up to £7 billion.
Boots is one of the UK's leading retailers and a major manufacturer and marketer of cosmetics and over-the-counter medicines. Among the company's seven main operating divisions, the company's flagship product, Boots The Chemists (BTC), accounts for about two-thirds of the company's total sales, retailing a variety of health, beauty, toiletries, baby products and more in more than 2,000 outlets.
01
The second generation took over the family business at the age of 10
The new business established a leading position
In 1849, John Boot opened the first Boots shop on Goose Gate Street in Nottingham, England, selling herbs, and was very popular with the local people who could not afford to pay for medical care.
Jesse Boot was born in Nottingham in 1850 as the only son of John and his second wife, Mary. Jesse was not a conformist, he was heavily influenced by popular medicine, especially by the American herbalist and botanist Samuel Thomson, whose famous alternative medicine system, "Thomson Medicine," was wildly popular in the 19th century.
After John's death in 1860, his widow continued to run Boots with the help of 10-year-old Jesse. Three years later, Jesse left school to devote herself to corporate work. In the 1870s, when the income-growing working class was able to pay for patented medicines in pharmacies such as Thomas Holloway and Thomas Beecham, the herbal status was in jeopardy. However, Goose Gate's store continued to sell herbs, but Jesse began to expand its business, entering the patented pharmaceutical retail industry in 1874.
In July 1883, Boot and Company Limited was formed, which could have opened up external investments for Boots, but Jesse chose to take control of it in her own hands. The company's regular capital amounts to £10,000, of which nearly half have been fully subscribed, most of which has been subscribed by Jesse herself.
Boots' more important milestone in the 1880s was the opening up of a new business area – dispensing.
In 1883, Boots hired Edward Waring, a famous British mathematician and MD, as the first pharmacist in the Nottingham store, and dispensed the medicine at half price, and the prescribing department had a good start. By 1885, Boots' annual turnover had reached 40,000 pounds (about 333,000 yuan), and by the end of 1893, Boots was the largest drug chain at that time.
In 1888, Boots and Company was reorganized into Boots Pure Drug Company Limited, and in 1899 it became the holding company of several subsidiaries such as Boots Cash Chemists (Lancs) Ltd. In 1901, Boots acquired the Southern Pharmaceutical Company and the Metropolitan Pharmaceutical Company, and by 1914. Boots has 560 stores in the chain.
02
"Crazy" acquisitions
Expand into global markets
While pharmaceuticals and dispensing remain at the heart of Boots' business, the range of retail merchandise is also expanding, adding departments such as libraries, cafes, tea rooms, printing and more. In 1911, Boots' sales exceeded £2 million.
Jesse, who was knighted as a baron in 1916 and feared the impact of the postwar recession on business, sold a controlling stake to Louis K. Liggett and American pharmacy giant Rexall Group, whose son was vice chairman of the company. Boots was part of the Liggett Group from 1920 to 1933, and in 1928 Louis, affected by the Great Depression in the United States, decided to sell Boots for a price between £6 million and £7 million.
In the second half of the last century, Boots' leadership group kept changing, but what remained unchanged was the pace of acquisitions. Boots developed ibuprofen painkillers in the 1960s and was therefore awarded the Queen's Award for Technical Achievement in 1987. In 1967, Boots acquired rival Timothy Whites, which had more than 600 retail outlets, and in 1971, Crookes Laboratories and Crookes Anestan in the United Kingdom, Boots Pure Drug Company changed its name to The Boots Company Limited.
In the late 1970s and 1980s, Boots turned its attention to North America, launching 5 acquisitions to increase the company's presence in North America, but also expanded further through acquisitions. In 1989, the company was divided into four operating divisions: Boots The Chemists (consisting of the BTC pharmacy chain); retail divisions (which primarily included Boots Opticians, Children's World, Halfords, A.G. Stanley and Payless); boots Pharmaceuticals (which includes the pharmaceutical, nutraceuticals, cosmetics and toiletries businesses). The newly formed real estate division, later known as Boots Properties.
In 1991, Boots created two new operating units outside of Boots Pharmaceuticals: Boots Healthcare International (BHI), which is responsible for the over-the-counter drug business, and Boots Contract Manufacturing (BCM), which manufactures private label health and beauty products. In 1995, the BCM division strengthened its beauty business with the acquisition of croda International's own cosmetics and toiletry manufacturing operations in France and Germany.
At the same time, Boots sold several businesses, including the French Sephora retail business, which was sold in fiscal years 1993-1994. In the late 1990s, more than 95% of Boots' sales still came from the UK, and BHI, BCM and BTC all showed growth potential worldwide.
03
E-commerce impact, profits cut
The century-old chain may change owners
In 2006, The Boots Company plc merged with European healthcare provider Alliance UniChem to form Alliance Boots, which a year later was acquired by KKR and Italian businessman Stefano Pessina, privatizing the company and moving its headquarters to Switzerland.
In 2012, Walgreens bought a 45% stake in Alliance Boots from KKR for $6.7 billion, buying the remaining shares within three years, and Walgreens and Alliance Boots fully merged to form the Walgreens Boots Alliance, with both Walgreens and Boots becoming subsidiaries of the new company on December 31, 2014.
In the same year, Alliance Boots, which had established a joint venture with Guangzhou Pharmaceutical Co., Ltd., also completed the acquisition of a 12% stake in Nanjing Pharmaceutical Co., Ltd.
The deal is said to combine the market advantages of the two companies to maximize the exposure of both brands, with Boots making a name for itself in Europe and the United States and Walgreens being better known in the UK and China.
In May 2019, Boots announced that it would close more than 200 underperforming stores. As the retail experience becomes obsolete and beauty chains face an onslaught from digital retailers, Boots continues to diversify its brand options while abandoning traditional beauty counters and featuring open furniture, with "trend zones" and "discovery zones" in hopes of attracting modern shoppers back to the chain. But Boots' profit in 2019 was £167 million (about 1.39 billion yuan), down 47.3% from 2018.
So it's not unreasonable to get rid of Boots. Walgreens spent about $22 billion (about 140.05 billion yuan) to buy Boots, and Boots has been struggling with the impact of digital retail ever since. Boots currently has a network of more than 2,000 stores, but despite its sheer size, the retailer struggled to meet sales targets throughout the Covid 19 pandemic.
Boots' sales fell nearly 30 percent in fiscal 2020, and the WBA was forced to downgrade its 2021 growth plan to low single digits. Boots did, though, recover in the new year, with sales up nearly 40 percent year-over-year by the third quarter of 2021.
Speculation about whether Boots will continue to be part of the WBA since last June when it sold its European distribution arm, Alliance Healthcare, for $6.5 billion, and late last year, the sale of Boots confirmed industry speculation. Current bidders include British billionaire Brothers Issa and private equity firm TDR Capital, which bought Asda from Walmart for $8.8 billion in 2019, along with Sycamore Partners.
Previous bidders, including Bain Capital and the CVC Capital Partners consortium, abandoned the first round of bidding, but could rekindle interest in Boots if the WBA is willing to lower the asking price.