Upload
bevis-hodges
View
29
Download
0
Tags:
Embed Size (px)
DESCRIPTION
Restoring health. Partnering with pharmacies to survive and thrive. Three changes in the convenience industry create new opportunities. 1. 2. 3. Channel blurring between supermarkets and convenience stores. Increasing regulation around tobacco sales. Increasing labour costs. - PowerPoint PPT Presentation
Citation preview
Restoring health
Partnering with pharmacies to survive and thriveMiranda Adams Eddie Robinson Madison Ure Katharine Ward
Three changes in the convenience industry create new opportunities
1
Channel blurring between supermarkets and convenience stores
2 3
Increasing regulation around tobacco sales
Increasing labour costs
Industry revenue growth indicates a need for change
Source: IBISWorld, 2014
Change in industry revenue (%)
Population increasingly health conscious
As consumer preferences change, health and wellness have taken on increased importance
Increasing engagement with digital advertising
Expectation for 24/7 availability
Increasing OTC medicine consumption
Source: Australian Institute of Health and Welfare, 2013
Consumer Trends
Value ($ mil) Growth (%)
Medicinal 26 7.3
Beverages 235 6.2
Grocery 74 2.1
Personal Care 36 0.1
Confectionery 396 -1.0
Retail Growth
Source: Aztec & Retailer Contribution, 2013
Strategy Overview: Repositioning convenience stores and redefine convenience
1
$
New revenue stream
Expand Over-the-Counter (OTC) pharmaceutical
range
2
Alliance with the Pharmacy Guild
3
The convenience store industry requires a long term and far reaching solution
What does a solution require?
Source: Aztec & Retailer Contribution, 2013
Scalable
Innovative, to gain a first mover advantage
Capitalise on key consumer trends
Short and long term sustainable benefits
Convenience stores can advertise through LED screens on street front
Coca Cola used biometrics and facial recognition technology via a clear LED digital screen on fridges.
The screen serves ad campaigns, collects sales data and can detect customer interaction.
This has boosted sales by 12% compared to standard fridges.
Source: Coca-Cola Is Using Facial Recognition Technology On Fridges In Australia To Sell More Drinks, May 2014, Business Insider
Benefit for convenience stores
Maximise street frontage
Supplement POS advertising
Generate new revenue
How will it work?
1. Convenience stores install LED screens
2. Digital advertising space available to sell
Will it work?
Interactive capabilities provide new content experiences that can boost a product’s sales and brand loyalty
$A quick win for convenience stores
Expanding pharmaceutical offerings will provide additional convenience for consumers
Currently
Some OTC products sold
Limited knowledge and awareness of pharmaceutical offerings
Limited association of ‘health and wellness’ with convenience stores
Opportunity for convenience stores
Increase and market OTC product range
Opening hours and locations provide an opportunity to meet consumer demand
Pain relief, in your hour of need
Community Pharmacy Agreement - Up for review 2015
Positioning now to benefit from growth and anticipated demand for pharmaceutical products and services
Proven success from the hybridised value of pharmaceutical and convenience stores
Positioning now to improve the accessibility of health services in urban and regional settings
Meet consumer health and wellness needs
The pharmaceutical and convenience industries share characteristics, making it an ideal partnership
Benefits for convenience
stores Access a wider range of
consumers
Legitimise health and
wellness focus
Point of differentiation
Motivations for
pharmacies New growth opportunity Cost reductions
Increased presence
An alliance between AACS and Pharmacy Guild will provide consolidated strength against supermarkets
1: Woolworths in new bid for pharmacy, October 2013, AFR; Small grocers shocked at proposed increase in hours of trade, May 2014, Dynamic Business.
Why will this deliver value? How will value be realised?
Face a shared market pressure
Collaborative efforts will provide new value
Stronger voice
Increased Lobbying power
Access to a shared consumer base
Shared resources
Combined marketing efforts
Legitimising existing healthy offerings
Gain strength through collaboration
The Restoring Health strategy will generate a net present value of $259,000 over three years per store
Components $259,000by 2017 (Net-Present-Value for 3 years)
Range (accounting for uncertainty)Variable Min Max
Initial market share 10% 25%
Market share growth 2% 10%
Advertising Revenue $10,000 $12,000
Fixture Costs $30,000 $80,000
Store Closing Cost $5,000 $20,000
Pharmacist Cost $45,000 $67,000
Advertising Cost $500 $2,000
Source: IBISWorld, 2014
Break even in 18 months
87% ROI
Net Present Value of $259,000 per store
Restoring Health can be implemented over three years
6 months Year 1 Year 2 Year 3
Pharmaceutical expansion
LED screen
CommunicationPlanning
Restoring Health can be implemented over three years
Commence talks with pharmacy
guild
Planning
6 months Year 1 Year 2 Year 3
Pharmaceutical expansion
LED screen
Implement OTC range
Establish and begin the alliance
Expand OTC range
Move towards hybridised stores
Communication
Restoring Health can be implemented over three years
Procure and install LED
screens
Commence talks with pharmacy
guild
Planning
6 months Year 1 Year 2 Year 3
Pharmaceutical expansion
LED screen
Sell advertising space
Communication
Implement OTC range
Establish and begin the alliance
Expand OTC range
Move towards hybridised stores
Expand LED functionality
Understand and adapt
Restoring health
Partnering with pharmacies to survive and thrive
$0.00 $200,000.00 $400,000.00 $600,000.000.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
Probability distribution for strategy net present value
DCF Industry Initiative per StoreYears Passed 0 1 2 3Year 2014 2015 2016 2017Tax Effect Revenue from pharmacy sales $269,273.09 $280,779.87 $292,778.36Advertising $13,482.67 $14,024.02 $14,587.09Less cost of goods sold -$188,491.16 -$196,545.91 -$204,944.85Less pharmacist wages -$60,443.23 -$62,237.97 -$64,086.00Less maintenance -$840.51 -$874.26 -$909.36Taxable Income $32,980.86 $35,145.75 $37,425.24Tax Payable $13,192.34 $14,058.30 $14,970.09Net Cash FlowRevenue from pharmacy sales $269,273.09 $280,779.87 $292,778.36Advertising $13,482.67 $14,024.02 $14,587.09Less COGS -$188,491.16 -$196,545.91 -$204,944.85Less pharmacist wages -$60,443.23 -$62,237.97 -$64,086.00Less fixtures costs $50,552.48Less costs of closing for installation $10,610.33Less advertising maintenance -$840.51 -$874.26 -$909.36Net Cash Flow $61,162.81 $32,980.86 $35,145.75 $37,425.24Discounted Cash FlowDiscount Factor 1 0.940500582 0.831911648 0.692076991Discounted Cash Flow $61,162.81 $31,018.52 $29,238.16 $25,901.15NPV $147,320.63
Discounted cash flow analysis of strategy
Variables used in DCF of strategy
Variables Min Max Mean Deviation NorminvarRevenue from Pharmacy ProductsRevenue from a pharmacy $2,000,000.00 $2,500,000.00 $2,250,000.00 $375,000.00 $2,342,769.55Market share taken in 1st year 10% 25% 18% 3% 16%Growth in product sales 2% 10% 6% 1% 5%
Costs from Pharmacy ProductsCOGS $1,400,000.00 $1,750,000.00 $1,575,000.00 $262,500.00 $1,469,789.72New fixtures in store $30,000.00 $80,000.00 $55,000.00 $9,166.67 $46,695.48Cost of closing store for installation $5,000.00 $20,000.00 $12,500.00 $2,083.33 $12,172.87Cost of pharmacist $45,000.00 $67,000.00 $56,000.00 $9,333.33 $51,657.69Wage increase for pharmacist 2% 4% 3% 1% 2%
Revenue from AdvertisingPer week revenue $100.00 $400.00 $250.00 $41.67 $289.13Revenue growth 2% 5% 4% 1% 4%Number of weeks 52
Costs from AdvertisingInstallation $5,000.00 $20,000.00 $12,500.00 $2,083.33 $12,518.43Maintenance (yearly) $500.00 $2,000.00 $1,250.00 $208.33 $1,446.83
Tax Rate 40%Discount Rate 6% 8% 7% 1% 9%