Pessina to Build More Stakes in China, Open Pharmacies

Alliance Boots Holdings Ltd. Chairman Stefano Pessina said the company plans to expand in China by buying into the biggest pharmaceutical company there in five years’ time and opening pharmacies in the Asian nation.

While local laws make it difficult to take outright control of a Chinese business, “it is very likely we will have a stake in the largest operator,” Pessina said in an interview at the World Retail Congress in London today, without being more specific. “We have been in talks with everybody in China.”

Alliance Boots is already the largest foreign owner of Chinese pharmaceutical businesses after its purchase last week of a 12 percent stake in China’s Nanjing Pharmaceutical Co., the fifth-biggest drugs wholesaler. It has had a joint venture with Guangzhou Pharmaceuticals Corp., the sixth-largest wholesaler, since 2008. China’s pharmaceutical wholesale and retail market is worth 431.3 billion renminbi ($68 billion), according to Zug, Switzerland-based Alliance Boots.

While Pessina didn’t identify businesses that his company may seek to take a stake in, he said Sinopharm Group Co. is China’s biggest drugs distributor, with about 10 percent of the market, followed by Shanghai Pharmaceuticals Holding Co. and China Resources.

Alliance Boots will have “a large chain of pharmacies sooner or later,” competing against local chains such as AS Watson Group, the retail arm of Hong Kong-based Hutchison Whampoa Ltd., the 71-year-old billionaire said.

‘Everything is Possible’

“For sure we will have a large chain of pharmacies,” Pessina said. “The law is changing, we have discussed with the relevant authorities, so sooner or later we will be there.” The chain may not be branded Boots, he said, and the company’s cosmetics brands such as No. 7 may not be sold in China as local laws require animal-testing which Boots won’t do, Pessina said.

“In China everything is possible, and it will depend not just on our ability, but the political environment,” he said. “We have some chances to be one of the consolidators.”

Walgreen Co., the biggest U.S. drugstore operator, said in June it agreed to buy 45 percent of Alliance Boots from owners including private-equity firm KKR & Co. and Pessina.

The executive said today that while markets in Europe are under pressure, he is confident Boots will come through stronger than its competitors as it gains market share.

“We are planning inside the company for an additional two years,” of about zero growth in the pharmaceutical market in Europe, Pessina said. “Overall I’m definitely certain we will get out much, much stronger, even if we won’t be able to continue our double-digit growth.

“Now we are not suffering, but if we suffered, many of our competitors who are now suffering will die.”

The U.K. market has shown “a small signal in the last two months it’s slightly improving,” as consumers become accustomed to the “new normal,” Pessina said.

Britons are spending more on medicines and Boots is adding more new products, and value-priced ranges, he said.

(Corrects reference to Chinese foreign ownership in second paragraph of story published Sept. 21.)
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