Growth in China on the cards at Boots

 
Marion Dakers
HIGH STREET health and beauty retailer Boots hopes to make headway in China when its executive chairman travels to the country as part of David Cameron’s first official visit as Prime Minister.

Stefano Pessina has reportedly organised talks with potential partners in Beijing and Shanghai while he is in the country, as part of a move to accelerate growth in China. The meetings will deal mainly with expanding the group’s wholesale distribution but with scope for acquisitions.

Alliance Boots, the retailer’s parent company owned by private equity house KKR since 2007, already runs a joint venture in China with state-owned Guangzhou Pharmaceutical. The venture began trading in January 2008, and remains the largest pharmaceutical joint venture between a Chinese and overseas company with revenue in the last quarter of 1.1bn yuan (£102m).

In the two and a half years since the venture was set up, it has taken an 18 per cent market share in Guangdong province, with 11 warehouses supplying more than 12,000 customers.

Pessina will also be looking to take advantage of the Chinese authorities’ recent commitment to make medicine more affordable to the public within the next ten years.

He is one of a handful of UK business leaders accompanying the Prime Minister on the trip, alongside RBS chairman Sir Philip Hampton and Standard Chartered chief executive Peter Sands.

Business delegates will be involved in talks tomorrow with the Chinese premier Wen Jiabao intended to improve trade relations between the two countries, before taking part in business-to-business events on Wednesday, a Downing Street spokesperson told City A.M. yesterday.

“The Chinese market is by all means highly strategic for Alliance Boots due to its size, growth and potential,” said Pessina yesterday in an e-mailed statement. “We already have a presence in China and are deeply committed to establishing future partnerships to help develop innovative healthcare solutions to meet the needs of this fast-paced market.”

A company spokesperson declined to comment on reports about any specific meetings scheduled for Pessina while he is in China.

Alliance Boots has recently expanded in several markets. It took control of Turkish drug wholesaler Hedef Alliance in July.

TESCO | STRONG GROWTH FOR RETAIL GIANT
The world’s third largest grocer first entered the Chinese market in 2004, when it formed a 50:50 partnership with local retailer Ting Hsin International Group, owner of 25 Hymall superstores.

Tesco increased its stake in the business to 90 per cent in 2006, opening it’s first own-brand store in Beijing in 2007.

The grocer now operates 99 stores across nine provinces, employing 23,000 people. The outlets include 87 hypermarkets, four giant ‘Lifespace’ malls and 12 ‘Express’ convenience stores.

Interim results out last month show Tesco’s Asia operation generated £5.3 bn sales, up ­19 per cent on last year’s figures for the same period.

Tesco made a small overall loss in the first half of this year, though expects to be profitable in the seasonally important second half.

The company is pressing ahead with investment plans, and says the retail environment is improving thanks to rising consumer confidence.
Richard Partington

BURBERRY | “EXCITING” MARKET PROSPECTS???
High-end fashion retailer Burberry first established itself in China in 1992.

The retailer bought out its Chinese franchises in a £70m deal in July to take control of its 50 mainland stores, operating across 30 cities.

The company expects the deal to add £20m to operating profits in the coming financial year.
Interim results showed sales in the stores grew by 25 per cent on last year for the same period.

Burberry saw strong 18 per cent sales growth for the half-year to 30 September, and says it plans to open 10 new stores in China.

The London-based clothing retailer is implementing a digital marketing initiative in the region to further reinforce the brand’s image.

Chief executive Angela Ahrendts describes the Chinese market as “exciting”, and says the company is confident that it will be able to deliver long-term growth in the region over the coming year.
Richard Partington

CARREFOUR | EUROPE’S BIGGEST RETAILER IN CHINA
The world’s second largest retailer first entered the Chinese market in 1995, after forming joint ventures. The firm entered into direct deals with the local governments of a number of provinces in order to gain approval for its stores.

The French retailer began by selling products sourced from China, with stores operating to fit in with the local requirements of differing regions.

The grocer today operates 163 hypermarkets across China, making it Europe’s biggest in the country.

Chief executive Lars Olofsson thanked emerging markets, including China and Latin America, for strong third-quarter performances.

Sales in China grew 16 per cent at constant exchange rates, generating €1.22bn (£1.06bn). Sales increased more than seven per cent like-for-like for the third quarter.

The retailer most recently opened two stores last month in Cheng Du, Sichuan province, and Haikou, on the island of Hainan. Both outlets are over 5,800 metres squared.
Richard Partington

MARKS &?SPENCER | A CAUTIONARY TALE
M&S has been a fixture on the British high street for 126 years. However, more than a century of experience selling custard creams and underwear was lost in translation when the firm opened a flagship branch on Shanghai’s busiest shopping strip in 2007. The store on West Nanjing Road sat uneasily among the more traditional Chinese fare, and was seen as too expensive by most locals.

Chinese customs held crates of British stock at the border, causing the shelves to lie bare for days on end. The store’s inauspicious start was compounded four days after the opening when a 24-year-old shopper fell four storeys to his death after leaning over an escalator.

In 2009, Marks & Spencer parted company with its head of Chinese operations Richard Sweet, who worked at the company for 20 years and successfully oversaw expansion in India and Russia. The retailer currently has just two shops in China, both in Shanghai, and has all but halted plans to open 50 new branches until the existing stores find their feet.
Marion Dakers