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Pessina: Walgreens-Boots partnership 'a good fit'
October 9th, 2012
by David Pinto
LONDON – There is no one architect behind the merger of Walgreen Co. and Alliance Boots. But if there were, it would be Stefano Pessina.
Pessina is the executive chairman of Alliance Boots, a position he has held since 2007. In that role he oversees global wholesaling and retailing operations for a $36 billion company with retail or wholesale operations — often both — in 25 countries throughout Europe, the Middle East and Asia. The Walgreens-Alliance Boots merger will extend that sphere of influence to the world’s largest and most important market.
Pessina is one of those rare business executives who can see what comes after what comes next. He has operated and succeeded within that context for his entire business career, with the result that he has emerged as one of the most important and influential global executives in the retail and wholesale drug industry.
WALGREENS & ALLIANCE BOOTS:
Pessina has done more than 1,500 deals, big and small, during his lifelong career in the health care sector. Only a handful of these have been transformational; all, however, have contributed to his immense experience of joining businesses together to achieve strong results for all stakeholders.
Pessina sees the Walgreens merger in very simple terms. “This is an alliance that will benefit both companies,” he says, “because it is a good fit. These are very similar companies, yet each has strengths that the other lacks.
“For example, Walgreens is a stronger and more sophisticated prescription drug retailer than Boots is, and is stronger at negotiating with suppliers. On the other hand, Boots has an especially productive front-end presentation, and we’re very good at developing and marketing own-label brands. As a result of these different strengths, I believe we’re stronger together than each company is separately.”
Pessina thinks the first year is crucial if the merger is to ultimately provide the synergies and benefits both companies are looking for. “During the first 12 months we will build a platform on which to engineer change,” he says. “The first step is to create a new culture, a new identity. We can’t adopt one culture or the other, that’s not what this is about. And neither company is strong enough to absorb the other. Again, that’s not what this is about. It’s all about learning from each other — and using that learning to strengthen each company.”
"I believe we’re stronger together than each company is separately."
— Stefano Pessina
For its part, Alliance Boots is bringing to the merger a global knowledge that Walgreens, a purely U.S. retailer, has never had the opportunity to develop.
“One of our strengths is our strongly international presence,” Pessina says. “We understand what happens around the world. That’s knowledge we plan to share with Walgreens.”
Initially, the two companies have created a synergy team whose assignment is to learn about each other’s business and explore the best means of exchanging ideas, programs and ways of doing business. The teams have set an initial goal of delivering $100 million to $150 million of savings in the first year of the partnership, and $1 billion by the end of 2016.
The synergy team has started exploring the ways in which Walgreens can begin selling some of the high-volume Boots brands, particularly the No7 beauty line, the U.K.’s leading skin care brand, in some, but not all, of its drug stores. As well, Alliance Boots team members are even now looking at ways of bringing some of Walgreens’ highly regarded best practices in pharmacy to its retail stores in the United Kingdom.
As for Pessina’s role going forward, he plans to work closely with Walgreens chief executive officer Greg Wasson, with whom he has already developed a strong relationship, to ensure that the two companies maintain the level of dialogue they have already established, while continuing to develop initiatives that will create a new culture and ensure that each company continues to adopt those programs that have made the other so special.
That’s not something that’s new for Stefano Pessina. Rather, it’s something he has done successfully for his entire business career — and one of the reasons he has climbed so steadily to the top of the global business ladder.
*To read the full 14-page special report on the Walgreens-Alliance Boots merger, which includes interviews with the architects of the deal and key executives of both companies, please see the Oct. 8, 2012, print issue of Chain Drug Review.