Clicks Group is set to become the largest retail pharmacy network in South Africa, after it announced the acquisition of the retail pharmacy business of supermarket chain Pick n Pay. The new stores will be rebranded as Clicks. The deal is still subject to approval by competition and regulatory authorities.
The acquisition of the 25 Pick n Pay stores will mean that Clicks has 632 pharmacies in South Africa. Clicks also added 16 stores through organic growth in the six months to end February 2021. Clicks markets itself on the basis of convenience, saying that 50% of South African consumers live within 6km of a Clicks store.
The deal is also significant, because it puts Clicks in prime position to be Pick n Pay’s partner for any future in-store pharmacies. It also means Clicks may use its learnings to look at becoming a dedicated pharmacy partner with other retailers outside South Africa (although Pick n Pay has an extensive network of stores in Southern Africa).
Rival Shoprite has adopted a different approach: it operates its own pharmacy chain, MediRite, and its own pharmaceutical wholesaler, Transpharm. Transpharm uses Shoprite’s buying power and distribution infrastructure to deliver to pharmacies it does not own.
The Pick n Pay model has a precedent. In France Carrefour, for example, signed an agreement in 2019 with Medi-Market to operate pharmacies in its hypermarkets. By contrast Tesco, the UK market leader, operates its own in-store pharmacies. As do Walmart and Kroger in the US.
Strategically, the Clicks partnership with Pick n Pay also exposes it and rival Dis-Chem are diverging. Clicks is winning the battle on convenience and proximity, which has served it well during the COVID-19 pandemic when consumers have minimised their travel. However, it is rival Dis-Chem that has gained market share recently. Clicks has suffered from a lack of a cold and flu season in South Africa as consumers continue to spend less time at work and socialising. Meanwhile Dis-Chem’s broader focus on health and lifestyle sector has appealed to consumers during the pandemic.
Investors like what they see about Clicks’ expansion: this week, Clicks’ share price has risen this week by 2.8% (from Monday am to Friday lunchtime). But: the share price growth of rival Dis-chem has been explosive. Over the same period, its share price has risen by 11.6% on the back of strong financial results.
