GROUP STRATEGY

80%
Clicks sales health and beauty
As a health and beauty retail and supply specialist, the Clicks Group is uniquely positioned in the South African market.

Good growth prospects in the health and beauty markets, together with the strength and scale of the group’s brands, will allow the business to capitalise on organic growth opportunities to gain market share and ensure sustainable competitive advantage.

Organic growth will be complemented by tactical acquisitions of related businesses to accelerate entry and growth into new markets. Recent examples include the acquisition of Direct Medicines in the 2009 financial year which enabled Clicks to expand its retail pharmacy offer and enter the courier pharmacy market, while the acquisition of Botswana-based Kalahari Medical Distributors in 2008 enabled UPD to grow its export business.

While Musica is not considered core to the group’s strategy, the business is the market-leading entertainment retailer in the country and is managed to maximise shareholder value.

Sustainable growth markets

The country’s healthcare market is expected to show sustainable long-term growth owing to the increasing proportion of the population entering the private healthcare market and the critical need for primary healthcare services. As the life expectancy of South Africans increases, this ageing population will require healthcare services for longer.

Higher living standards have resulted in a steady growth in the middle class population and an expansion of the universe of formal retail shoppers. This is creating a growing market for the group’s beauty products.

Risk management

The directors and management recognise that certain risks need to be taken to achieve the group’s strategic objectives and to deliver sustainable growth and returns to shareholders.

Risk management is embedded in the group’s annual business planning cycle and a disciplined approach is followed in evaluating risks and developing appropriate strategies to mitigate and manage the risk.

The major risks facing the group, together with mitigation strategies, are outlined in the Risk Management Report.

Strategic objectives

Management has identified two core strategic objectives to drive the sustainable growth of the business and achieve financial targets:
     
     
Pre-eminence in health
and beauty retailing
  Pre-eminence in healthcare supply and pharmacy management
     
     
These objectives are supported by two strategic enablers:
 
     
Enhancing organisational capability to deliver sustained performance   Efficient management of cash and capital
     

Performance against strategic objectives for 2010

The performance against these objectives is covered throughout the annual report and specific achievements are summarised below:

     
Pre-eminence in health and beauty retailing   Pre-eminence in healthcare supply and pharmacy management
     
  • 80% of Clicks’ sales from health and beauty (2009: 78%)
  • Front shop health market share at 38.7% (2009: 37.2%)
  • Beauty market shares:
    Personal care 24.9% (2009: 24.4%)
    Colour cosmetics 30.1% (2009: 29.6%)
  • Opened net 23 Clicks stores (target 20 to 30 stores)
  • 17.8% of Clicks’ sales from private label and exclusive brands (2009: 17.6%). Front shop private label 23.0% of sales (2009: 21.8%)
  • Fine fragrance market share increased to 8% (target was 7%)
  • ClubCard membership up to 3.1 million (2009: 2.7 million)
 
  • Opened 44 new pharmacies in Clicks (target was 30 to 40)
  • Increased Clicks’ retail pharmacy market share to 13.6% (2009: 11.1%)
  • Clicks Direct Medicines grew medical schemes network to 25 (2009: 15)
  • UPD’s private pharmaceutical wholesale market share at 23.7% (2009: 23.6%)
  • Link network increased to 247 pharmacies
  • UPD export turnover increased 21%
  • Partnering with government in national HIV testing campaign

 


Strategic focus areas and plans for 2011

Clicks Group follows a consistent strategic direction in its quest to enhance shareholder value. The strategic focus adopted by the group five years ago has again been analysed and debated by management and remains core to the future of the group. The strategic objectives as outlined above therefore remain unchanged for the year ahead. The delivery against these objectives is supported by the strategic focus areas of each business unit which is covered in the Operational Review.

     
Pre-eminence in health and beauty retailing   Pre-eminence in healthcare supply and pharmacy management
     
  • Open 20 to 30 new Clicks stores
  • Grow sales from private label and exclusive brands to 20% – 25%
  • Continued product innovation in beauty and electrical merchandise
  • Grow Clicks ClubCard membership base to 3.5 million (2010: 3.1 million)
 
  • Open 30 to 40 dispensaries in Clicks stores
  • Grow Clicks’ retail pharmacy market share (medium-term goal 30%)
  • Grow UPD export business
  • Build distribution agency business in UPD