Boots as we still think of it is no more

April 21, 2016

Boots, one of the UK’s venerable and iconic companies, has been the subject of two takeovers since 2007. The company appears to have retained public perceptions of its brand on the high street. Recent allegations against the parent company, Walgreens Boots Alliance, may be threatening its corporate reputation

The breaking story in the US concerns subpoenas concerning the corporate relationship between Walgreens Boots Alliance and a blood-testing company Theranos.

In the UK, the news focus is quite different. The Guardian broke the results from an investigation of mis-use of government funds by the Boots pharmacy operations:

Managers at Britain’s biggest pharmacy chain were found to be directing their chemists to provide medicine-use reviews (MUR) to customers who didn’t need them, in order to claim public money from the NHS (National Health Service) which pays £28 for each MUR, which is carried out by a pharmacist and intended to give patients professional advice on health, diet and how best to manage their medicines.

The Guardian has also seen a recent unpublished survey by the trade union, the Pharmacists’ Defence Association (PDA), to which more than 600 Boots chemists – more than one in 10 of the entire company’s pharmacists ­– responded. Asked “how often do you believe financial cutbacks imposed by your main employer have directly impacted upon patient safety”, over 75% of Boots chemists said that was true “around half” or more of the time. A number volunteered complaints about being “pressurised into conducting MURs whether or not patients are eligible to receive the service” and “Boots keeps asking me for more MURs”.

As subscribers to LWD will know, we have followed the fortunes of the iconic company over two takeovers in the last decade.

The first takeover (2007)

The first takeover in 2007 was seen as a bloodless coup:

Cherished British Drug company Boots merges with European partner, whose wealthy owner, Stefano Pessina, becomes deputy chairman in the new company, Alliance Boots.

The amicable arrangement suggested that in any leadership transition, Mr Pessina would be a cuckoo in the nest. In short order, chairman Sir Nigel Rudd resigned. further friendly discussions were followed by a takeover by private equity firm KKR. The move was presented openly as a vehicle which would install Pessina as its main driver.

KKR and Stefano Pessina had made it known that they wanted to keep the top team intact. But for all the continuing expressions of good will, the inevitable was to happen.

Thursday July 12th 2007, Richard Baker decided to accept a severance deal that would be worth some £10 million. It seems as if they made an offer for him to stay, or decline with honour

The second takeover (2014)

The second takeover is far from complete. This time it is with the mammoth American firm Walgreens, and was initiated in 2014

 

Walgreens Boots Alliance, has the new Nasdaq label WBA. [not to be confused with WBA, aka The Baggies, or West Bromwich Albion, another venerable brand in England, and a midlands- based Football club.] The merger was suggested to have been imposed on Walgreens by impatient shareholder activists.

The change had more executive bloodshed on the Walgreen side. The veteran Stefano Pessina of Boots Alliance again became the most obvious winner, just as he was when he engineered the Merger of Boots with his own Swiss-based operations earlier. The financing of the deal cost Walgreens five billion dollars plus shares.

National and International Issues

In the UK, liberal regulations encourage international takeovers, where investment and efficiency gains are prized until collateral damage to employees becomes contentious.

Only then is the rhetoric of corporate social responsibility really tested.

The case of Tata steel is still rumbling on. The Indian conglomerate Tata, hailed as a saviour of the aging British Steel Industry, announced closure of its UK operations. Tataa became the scapegoat for closures resulting from the global over-production of steel.

So far, ‘Boots the chemist’ has retained its positive image in the eyes of the public, long after Boots as a corporate identity exists as little more than a convenient product brand.  (Compare the national standing of Cadburys, another mythical beast masquerading as a much-loved national manufacturer of chocolate goodies).

Notes

I still think ‘Boots’ not ‘Alliance Boots’, just as I think ‘Manchester Business School’, when the new name is the ‘Alliance Manchester Business School’.

Ideas and cultures hang around a lot longer than brinks and mortar.


Michele Ferrero (1924-2015): Obituary of a discrete global leader

February 18, 2015

Ferrero-Rocher-PyramidThe notion of servant leadership is open the accusation of self-serving hypocrisy masking as humility and piety. Michele Ferrero’s life refutes such charges in his case

The Guardian noted:

When Michele Ferrero took over his family’s confectionery firm on the death of his uncle, Giovanni, in 1957, he wrote a letter to his employees. “I pledge myself to devote all my activities and all my efforts to this company,” it said. “And I assure you that I shall only feel satisfied when I have managed, with concrete results, to guarantee you and your children a safe and tranquil future.”

Ferrero was an entrepreneur of a kind Italy throws up from time to time, inspired more by the social doctrines of the Roman Catholic church than by any belief in the merits of the free market.

The case of Nutella

Michele’s father Pietro converted a family pastry shop into a chocolate factory with what became a world-beating product in Nutella, a Business School case favourite. Pietro lived in a region south of Turin famous for its natural products including hazel nuts, a key ingredient of Nutella. Michelle demonstrated his flair for confectionery and marketing when he reformulated and re-branded the choconut spread. Today the product takes around 20% of the world’s supply of hazel nuts.

The Ferrero group

Pietro instilled in Michele a passion for confectionery and product innovation. His son converted the local business into The Ferrero group, a global giant, making him one of the wealthiest of the world’s billionaires.

The business he inherited stands alongside other firms with a socially responsible ethos which transcends the structure of a CSR department. There are parallels with the Tata group of India, and various firms founded under the spirit of what Weber called ‘the protestant ethic’  including another confectionery giant, the former Cadburys group.

Its treatment of employees is at very least of high quality and in many aspects best-practice. The firm initiated the practice of collecting and returning employees to their villages. Medical care and other welfare services are of high quality. Ferrero’s workers have never gone on strike. The organization is active in awareness of and sustainability in the developing countries from which it sources its products.

 The iconic praline

The Ferrero Rocher brand has produced one of the most famous of images, that of the gold-wrapped praline product served at the exclusive party to guests of his excellency. When shown at cinemas, the ad always produces a humorous if ironic response at the incongruance between the product and the intended imagery of top-of-the-market tastes in confectionery.

By your acts shall you be known

The actions of Bill Gates and other modern titans of industry have helped us rediscover The socially responsible entrepreneur. We need not look for other-worldly piety. Critics point to Michel Fererro’s decision to leave Italy for Monaco under threat from The Red Brigades. He remained in tax-enlightened exile. He made no efforts to project or protect his public image.

He deserves to be remembered for his contributions to the well-being of his employees, and the satisfaction of consumers of his company’s products.