Blog: Walgreens, Boots deal will interest food suppliers

Michelle Russell | 19 June 2012

In a significant deal for the wider retail industry, the largest drug store chain in the US Walgreens is to buy a 45% stake in UK pharmacy chain Boots. And the transaction will have implications for food suppliers on both sides of the Atlantic.

The US$6.7bn deal will, according to Walgreens, create the first global "pharmacy-led, health and well-being enterprise". It has the option to acquire the remaining 55% of Boots in around three years’ time.

While first and foremost pharmacy retailers, both companies also offer a range of food. Only last month Boots, which sells sandwiches, salads and snacks, had said it was aiming to expand its food range with the launch later this year of lines built around evening meals. It is also reportedly looking at selling wine.

Walgreens sells refrigerated items but also includes confectionery, bakery and snacks, frozen foods, fresh produce and baby formula in its grocery portfolio.

The acquisition may have an impact on both companies' food suppliers.

The obvious benefit for the suppliers is the potential for greater listings, given the expanded geographical reach the acquisition will bring for both companies. However, there is also a risk that suppliers may face a loss of contract if renegotiations take place.

Costs related to the transaction sent Walgreens' third quarter and nine-month earnings sliding yesterday.

The group reported net earnings for the third quarter of US$537m, a 10.8% decrease the prior-year period. Nine-month profits slid 7.8% to $1.77bn.

Third-quarter net sales dropped 3.4%, although nine-month sales edged up 0.6% to $54.6bn.

Click here to view full details of the deal.


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