When Boots introduces an own-label cosmetics range called Botanics
next month, it will be more than just a run-of-the-mill launch. For
Boots, the success of its own-label ’power brands’ is central to its
For almost a century, Boots has enjoyed one of the most privileged
positions in retail. The undisputed market leader in pharmacy, cosmetics
and toiletries, enjoying exclusive agreements with major brands and high
margins on sales, it is also one of the country’s most trusted brands. A
recent survey by Right of Admission Reserved (ROAR) found that Boots had
more trust than the Royal Family among consumers aged between 15 and
Despite this, Boots’ share price has plunged since the June announcement
of Wal-Mart’s entry into the UK. Wal-Mart has the UK’s cosmetics and
toiletries market high on its agenda. In the US, its health and beauty
sales account for pounds 8bn, 10% of its turnover, and its imminent
arrival through Asda has sparked a health and beauty price war, with
supermarkets slashing the cost of fragrances, sun creams and toiletries.
Tesco is the latest to attack the sector, launching a pounds 30m
discount campaign last week.
According to a report from Verdict Research, grocers and supermarkets
together now have a larger share of the pounds 11bn health and beauty
market than the specialists, such as Boots and Superdrug.
Concerns about Boots’ future have even prompted rumours of a merger or
takeover, but the company is confident it can survive. Steve Russell,
its new chief executive, admits that ’sitting in the same territory as a
powerhouse (Wal-Mart) is a dangerous place’, but asserts that Boots
could carve out its own niche with a ’differentiation-led strategy’.
Martin Bryant, director of marketing businesses at Boots, explains the
new positioning further: ’We see ourselves as moving from a
products-based business to becoming an expert in health and beauty,
working with great brand companies to be the first to build new
Boots’ own-brands have always been strong - its No7 make-up is now the
UK’s best selling cosmetics brand with annual sales of more than pounds
90m - and the new ’power brands’, of which it plans to launch six over
the next year, including Botanics, are designed to be ’unique and
But wooing the big consumer brands is important. Boots believes leading
brands want to work with a retailer that can enhance their properties
rather than use them as part of a price war. It is currently working to
strengthen its hold on clients such as Johnson & Johnson, L’Oreal,
Procter & Gamble and Smith-KlineBeecham.
The company is also endorsing branded products in its advertising as
’health and beauty award winners’. The brands were identified from
Advantage Card data as being the most popular.
Meanwhile, Boots hopes to capitalise on its reputation for expertise by
giving customers in-store consultations with experienced beauticians and
hairdressers. ’We see our’s as a very different relationship with the
customer to that of a supermarket, which is essentially a needs-based
retailer,’ says Bryant.
To further develop its public presence, Boots has revamped its members’
magazine, Health and Beauty, as a women’s glossy to rival titles such as
Zest, and has launched an internet portal, handbag.com, tailored
exclusively to women. It is also planning a further series of online
moves, including a site for men, and a health and beauty site.
Will added value help keep the company afloat in the event of a price
war? Boots has been quick to dismiss price cuts as ’destructive’, taking
the view that promotional prices are more important than Wal-Mart’s
’everyday low prices’.
But retail analysts believe the company will be forced to lower its
prices, even if it does not wage an all-out price war. ’Because of a
lack of competition in the late-80s and early-90s, if Boots wanted to
grow its margins, all it needed to do was keep putting its prices up.
That has changed,’ says Robert Clarke, retail marketing consultant for
FT Management Reports.
Richard Hyman, retail analyst at Verdict Research, believes Wal-Mart
will not be ’life-threatening’ to Boots, but that ’it will lose some
’Boots has a strong brand, a good market share and good ethical
credentials,’ he says. ’If it has trouble defending its business from
Wal-Mart, God help other retailers.’
Market share (%)
Retailer 1994 1998
Boots 24.5 25.8
Tesco 8.6 11.5
Superdrug 8.9 8.4
Sainsbury’s 7.9 7.8
Asda 4.4 5.8
Safeway 4.4 4.6
Source: Verdict on Health and Beauty retailers 1999
Figures relate to share of toiletries, cosmetics and OTC medicines