Transcript Slide 1

Merrill Lynch Consumer Focus Day November 2003

Healthcare Strategy in South Africa

• Strategy • UPD • Clicks • Clicks Pharmacy

“The realisation of a dream”

Multibrand Strategy – South Africa

Health Beauty Lifestyle Consolidated Retail Pharmacy Specialist Wholesale

Healthcare Strategy

• Leverage benefits of integrated channel to market • Extend retail presence & expertise into pharmacy • Establish efficient, compliant & profitable low-cost drugstores • Promote co-ownership model • Improve front to back shop ratio • Synergies from combining pharmacy with current offering - lower overheads & increased footfall • Franchise model retained – using compliant format • Explore black empowerment opportunities

Wholesale & distribution - UPD model

• Profitable well run business • Efficient working capital management • Largest national wholesaler in SA • Expertise in fine distribution UPD provides distribution for integrated channel to market UPD 43% of other wholesale business All Other Wholesales 40%

R3.788bn

Manufac turers 11%

R988m

Distributors 49%

R4.626bn

Integrated channel to market

• Pharmacies carry less stock • Act as warehouse for pharmacies • Distribution & service levels key

UPD – in short

• Growth in turnover from PM&A & independent pharmacies • Retained most independent pharmacy customers • Standardised terms on FMCG suppliers • Clicks pricing on top FMCG lines available to customer base • Two franchise models in the group – Link + Multicare • Develop Link offering as premium banner • Develop programmes to enhance Link pharmacy loyalty to UPD – new franchise agreement

Impact of legislation on UPD

Original source procurement

• Levelling of the playing field – ethical standards + transparency • Small impact on current wholesale customers • Service levels will be the differentiator

Generic substitution

• Single channel distribution - lower market share of branded ethicals - better placed to benefit • Currently, margins better

Single exit pricing

• Timing – early 2004 • Lack of clarity

“Generally positive for UPD”

“The realisation of a dream”

Clicks - The Vision

• To create an experience of pharmacy that has never been seen before in SA • To combine the best of what Clicks offers with the best of the pharmacy experience • To enhance the Clicks brand qualities of value with convenience & service

Pharmacy in Clicks

• Regulatory approval for PM&A deal • Application for licences – PM&A – Additional licences in selected stores – Underserviced areas – discuss with government • All New Clicks wholly-owned/JV pharmacies to be rebranded Clicks

Format 1

Clicks Health, Home & Beauty with Dispensary • Health & dispensary as additional components to our current understanding of Clicks • Value for money • Servicing woman’s world “For me, my home, my life” • Heavy promotional drive

Format 2

Clicks Health and Beauty with Dispensary • Health & Beauty focus supported by gifting & convenience statement • Personal connection to pharmacist • Strong promotional offering • Strong value statement • Convenience & longer trading hours

What the customers had to say...

• Customers expected Glengariff to be like a Clicks with an added pharmaceutical department • The relationship with the pharmacist & customer service are key • Clicks Pharmacies would be more price competitive than other pharmacies • Can I use my ClubCard?

“Glengariff opens shortly Systems ready ClubCard ready”

Learning from Australia

Conversions: • Converting existing Priceline store (Prahran) – Sales growing in excess of 40% – Back & middle shop sales already at 18% - should double • Converting existing pharmacy (Bentleigh) – Script sales grown by 20% – Front shop sales up from 10% to 75% New site: • Mornington – Turnover A$45k per week from 300m² – Front shop sales 50%

Preparation/Ground Work Legal

- Competitions Commission, pharmacy licenses, de-link, lease, JV, finance structure

IT

- Development store systems, development host systems, testing. Ideal to follow

Marketing

- Market offering around service, value, convenience and ClubCard. Signage, uniforms

Category

- Ranging ‘new formats’, understanding ‘new products’

Finance

- Integrating 2 systems, debtors, feasibilities (new pharmacies, new partners), budgets

Change Management

- Leadership, interfacing, communication

OD/HR

- Conditions of service, induction, performance development program, organizational development

Operations

- Operational structures, SOP’s, store conversion procedures, training

Store development

- look and feel, low cost model, property issues

Pharmacy Opening Schedule September October 13 November 3 December Glengariff 20 BalfourPark 27 Rosebank 4 Atterbury 9 Edgemead 9 West Coast Village

To follow next year: 75 other PM&A’s, Approximately 50 pharmacist enquiries, 17 New Clicks Stores, 40 Clicks refurbs

Questions ?

Thank You