Clicks, the health and beauty retail group which acquired South Africa’s largest pharmaceutical distributor, United Pharmaceutical Distributors (UPD), in 2003 believes that its integrated strategy with UPD drove the group to profit.
“We’ve always seen the management of our own supply chain as a competitive advantage. Certainly 95 per cent of Click’s products come from our own centralised distribution and of course UPD is South Africa’s leading pharmaceutical distributor and that supplies Clicks pharmacies with their medicines,” David Kneale, chief executive of [DATA CLS:Clicks Group Limited] told CNBC Africa.
For the six months ended 28 February 2014, the company’s group turnover increased by 9.6 per cent to 9.3 billion rand, with retail sales growing by 7.4 percent and UPD by 14.7 per cent due to its Clicks customer and private hospital sales.
“UPD has grown its share of the private pharmaceutical market from 25.7 per cent to 26.3 per cent. The completion of the new distribution facility in Johannesburg has increased warehouse capacity by 50 per cent,” said Clicks in a statement.
The company stated that UDP is currently growing at a faster rate than Click’s retail business.
They also signed another distribution contract with the international brand, GNC, as a means to expand their business.
“We are always looking for ways we can grow the business so we’ve just signed an exclusive arrangement with GNC, who is a global leader in health and wellness products, so we’re continuing to bring innovation as well as value to the South African consumer,” explained Kneale.
Focus has also been on investing in their retail space. Clicks generated real volume growth through its promotional activity which accounted for 26 per cent of sales with pharmacy sales 13.1 per cent higher.
The company expanded its stores to 453, with 333 dispensaries and 133 clinics while the Clicks Clubcard loyalty programme has grown its membership to 4.3 million active users.
“We’ve got 4.3 million active members on the Clicks Clubcard. It’s probably the most generous of any retailer’s cashback reward programmes and it’s certainly a way of rewarding loyalty but also a way of engaging with customers,” said Kneale.
Partnerships created with other companies such as beauty salon chain, Sorbet, have also contributed to the company’s successful rewards programme,
“I think if you look at our infinity partners like Sorbet , our customers appreciate that sort of engagement and reward so we’ve seen our active membership grow and it’s still very much part of the Clicks brand’s DNA,” he added.
Despite South African consumer spending remaining constrained, Clicks posted an increase in diluted headline earnings per share of 10.3 per cent to 157.4 cents while an interim dividend of 53.5 cents per share was declared, an increase of 10.3 per cent over the prior period.
(READ MORE: Clicks' sales increase depsite low growth)
“We are relatively pleased with these results, they are solid given the pretty demanding trading conditions that we face,” added Kneale.