apotek hjärtat building the leading pharmacy offering in ......2015 1.361 2014 25 1.331 2013 1.303...

Apotek Hjärtat – building the leading pharmacy offering in Sweden

Anders Nyberg

CEO Apotek Hjärtat

Source: Swedish Pharmacy Association (Sw. Sveriges Apoteksförening)

35 Bn SEK Swedish pharmacy market

ICA Gruppen CMD 2015

Rx gross profit primarily driven by volume, price is

much less important

Free pricing

Free pricing

Fixed pricing

(regulated by TLV)

Broad

Selective retail stores

(regulatory approval

needed)

Pharmacies

SEK bn

Market split 2014 Pricing model Channel presence Sample products

TG

OTC

26

3

5

Over the counter (OTC)

Prescribed (Rx)

35

Retail

Market

Traded goods (TG)

2

Stable market growth and positive gross profit mix shift

ICA Gruppen CMD 2015

Sweden pharmacy market (retail)

TG

OTC

Rx

Estimated

growth outlook(2)

Around to slightly below 5y

historical average

Slightly below 5y

historical average

In line with 5y historical

average (volume)

Estimated

industry retail

gross margins(2)

40-50%

35-45%

20-22%

Sales development (SEKbn)(1)

3%

7%

10%

(Value)

(a)

1%

4%

9%

(a)

‘09-’14 ‘00-’14

2% 2%

(Volume)

CAGR

Note: (a) Historical OTC sales includes both the pharmacy channel and the non-pharmacy channel.

Source: 1) Swedish eHealth Agency (Sw. eHälsomyndigheten) and Swedish Pharmacy Association (Sw. Sveriges Apoteksförening). (2) Management estimates.

Positive mix shift

Rx

OTC

TG

3

Main drivers

More rational market behavior

Consolidation has provided

larger players with scale

Smaller players experience lower

profitability

Fewer attractive locations remain

a

b

c

Number of new pharmacies(1)

YoY %

change +21% +11% +3% +2%

Note: Please note that the graph is not to scale. Apotek Hjärtat net openings 2012 includes 3 pharmacies opened by Vårdapoteket prior to Apotek Hjärtats acquisition.

Source: (1) Swedish Pharmacy Association (Sw.Sveriges Apoteksförening) and Apotek Hjärtat.

143

106

1526242515

50

929

2015

1.361

2014

2

1.331

2013

5

1.303

2012

7

1.274

2011

14

1.242

2010

1.122

2009

APH, net openings

Others, net openings

Number of pharmacies

+2% +2%

New pharmacy establishments are slowing down

ICA Gruppen CMD 2015 4

Apotek Hjärtat well positioned for the future

Swedish state

ICA Gruppen

Oriola-KD

Swedish state/ entrepreneurs

Celesio

Player Owner # of retail

pharmacies/

Positioning in key strategic dimensions Background

Brand

awareness(3)

#1

#3

#2

#5

n.a.

E-commerce

✓

✓

Own

distribution

✓

✓

✓

-

-

Food retail

cooperation

✓

(✓)

-

-

-

Source: (1) Retail market size

from Swedish Pharmacy

Association; # of retail

pharmacies as of year end

2014. (2) Annual reports, 2014

figures except for Lloyds

(2013). (3) Blue Carrot survey.

370

390

309

167

79 ✓

✓

✓

✓ ✓ #4

ICA Gruppen CMD 2015 5

Most respected

companies 2014:

1. Ikea

2. Apoteket

3.

4. Arla

5. Google

6. Clas Ohlsson

7. Volvo PV

8. Samsung

9.

10. Stadium

(Sources: Nordic Brand Academy / Dagens Industri)

ICA Gruppen CMD 2015 6

Sweden’s leading private pharmacy chain

• Nationwide coverage with approx. 390 pharmacies and e-commerce

• Approx. SEK 12 billion in sales

• 3,200+ employees, HQ in Stockholm

• Own product supply

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Our Vision

To be the pharmacy of the future with

Sweden’s leading health offering

Our Mission

Help our customers to better

health and well-being

ICA Gruppen CMD 2015 8

Strongest brand development

Source: BlueCarrot, 7 weeks’ moving, median value

30%

35%

40%

45%

50%

55%

60%

65%Awareness

2014 2015

ICA Gruppen CMD 2015 9

Intensifying differentiation of store format

Close to care (83 units)

Close to homes (104 units)

Close to stores (98 units)

Shopping (105 units)

E-commerce Launched September

2014

ICA Gruppen CMD 2015 10

ICA Gruppen CMD 2015 11

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Looking ahead

1. Secure successful integration

2. Continued growth

3. Increased investments in our e-commerce

4. TG development – expanding into new categories

5. Expanding our test of health care services

6. Becoming the most attractive employer and building a culture of engagement

ICA Gruppen CMD 2015 13

New customer club solution with joint bonus

ICA Gruppen CMD 2015

1,300 grocery stores: 390 pharmacies:

Monthly bonus statement (all channels)

ICA 2,900 points

Hjärtat 700 points

ICA Försäkring 4,100 points

Total bonus: 7,700 points

1% bonus

3% bonus

14

Club membership numbers continue to grow 2015 (thousands)

1 606 1 633

1 660 1 682

1 710 1 734

1 754 1 776

1 800

1 850

1 900

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

ICA Gruppen CMD 2015 15

Opening new pharmacies 2015/2016

97

4

2927

2321

Q1-2016 Q4-2015

15

Q3-2015 Q2-2015 Q1-2015

15

Q4-2016 Q2-2016 Q3-2016

ICA Gruppen CMD 2015 16

ICA Gruppen CMD 2015 17

ICA Gruppen CMD 2015 18

Sharp rise in willingness to buy

ICA Gruppen CMD 2015

42%

36%

70%

64%

Curiosity Willingness to buy

Zero measurement 2014 New concept

Source:

BlueCarrot StorePower September

and December 2014.

Base: 202 IP (Sept.) and 204 IP

(Dec.).

”Reference” refers to experience in an

”average Swedish shopping centre”.

This consists of experience from 80

different stores in two Swedish

shopping centres.

Response: What was your impression of the store today?

19

ICA Gruppen CMD 2015 20

E-commerce increasingly important channel

ICA Gruppen CMD 2015 21

E-commerce investments in five priority areas in 2016

Platforms Supplier ability Assortment Awareness

Competitor analysis Blue Carrot customer study Internal evaluation

Organisation

ICA Gruppen CMD 2015 22

Investments in the assortment 2016

• New assortment offerings

• New products important

• Focus on basic offering – category project

ICA Gruppen CMD 2015 23

Hjärtat Basic necessities, med-tech and special care

Hjärtat Everyday products

Apolosophy Skin, hair and facial care products, and cosmetics

Own label development

ICA Gruppen CMD 2015 24

ICA + Hjärtat = a stronger offering through cooperation

ICA Gruppen CMD 2015 25

Health services Private labels Rx

Expanding our customer offering

ICA Gruppen CMD 2015 26

ICA Gruppen CMD 2015 27

Hjärtat #1 in Pharmacy Barometer!

ICA Gruppen CMD 2015

2015

Rank Employer % Trend

1 Apotek Hjärtat 47%

2 Apoteket AB 36%

3 Kronans Apotek 35%

4 ICA Cura Apoteket 18%

5 Apoteksgruppen 17%

6 LloydsApotek 14%

7 Apotea 8%

2014

Rank %

2 39%

1 42%

3 29%

4 17%

5 12%

6 10%

7 3%

28

Building the leading pharmacy offering in Sweden

ICA Gruppen CMD 2015

Part of ICA Gruppen –

integration according to plan

Well positioned to become

market leader

Developing our value

proposition

• Health concept of the future

• New products, private label range and services

• Growing the business by both bricks and clicks –

continued investments in our multi-channel offering

• All Cura pharmacies converted by end November

• Integration process runs according to plan, loyalty

programs, IT, logistics etc

• Synergies being realized

29