Executive Summary

Over the last 10 years, there has been little overall growth in the number of retail chemists, due to government legislation having placed restrictions on the number of pharmacies that may operate in any one area. In 1995, the number of retail chemists totalled 12,189.

Some two-thirds of retail chemists are either independently-owned or belong to a small chain comprised of under five outlets. Due to the limited availability of National Health Service (NHS) dispensing licences, retail chemist chains are generally only able to expand their presence in the market through the acquisition of existing licences. Nevertheless, the leading players have all successfully increased their number of outlets and, in doing so, have gradually eroded the independent sector share. In 1995, Boots The Chemists and Lloyds Chemists continued their leadership of the market, with a combined total of over 2,000 retail chemist outlets.

Both retail chemists and drugstores have felt the impact of the overall increase in competition in the UK retail market, particularly from grocery multiples and out-of-town retail parks. The increase in out-of-town retailing -- boosted by the deregulation of Sunday trading -- has impacted most markedly on the chemist and drugstore sales of household goods and toiletries. This factor -- combined with the impact of the National Lottery -- has contributed to the abandonment of the drugstore format by the two leading players in the market, Superdrug and Lloyds Supersave. Their rejection of this format in favour of a `health and beauty store' image has brought about the virtual demise of the drugstore market as a viable retailing force.

By volume, the chemists' prescription dispensing business has continued to increase, fuelled by the increasing emphasis placed on community care and the growing number of elderly people. Sales of over-the-counter (OTC) pharmaceuticals have also continued to increase, through the trend towards self-medication and the process of delisting `prescription only' drugs. Overall, healthcare products represent one of the most buoyant markets in the UK.

It remains to be seen whether the abandonment of the drugstore image in favour of a `health and beauty' store format will be a successful move. With the expansion of Superdrug into the pharmacy sector, Key Note sees a blurring of definitions occurring between these retail sectors. The outcome of the Office of Fair Trading's (OFT) investigation into the price maintenance agreement on OTC pharmaceuticals, is not expected until late 1996. The abolition of any such agreement would have a markedly deleterious impact on the independent pharmacy sector and would weaken the pharmacy multiples' hold on the market.

More Information

  Denotes a required field.