The Boots Company PLC History

Company Perspectives:

The Boots Company embraces businesses operating principally in retailing, the manufacture and marketing of health and personal care products throughout the world and the development and management of retail property. Our objective is to maximise the value of the company for the benefit of its shareholders. We will do so by investing in our businesses to generate strong cash flows and superior long term returns. While vigorously pursuing our commercial interests, we will, at all times, seek to enhance our reputation as a well managed, ethical and socially responsible company.

Company History:

The Boots Company PLC is one of the leading retailers in the United Kingdom, in addition to being a major manufacturer and marketer of cosmetics, toiletries, and nonprescription drugs. Of the company's seven principal operating units, Boots The Chemists (BTC)--the company flagship--is by far the largest, accounting for about two-thirds of the company's total sales. BTC is the United Kingdom's leading drugstore chain, with more than 2,250 locations retailing a wide range of health and beauty products, toiletries, baby products, gifts, and film (as well as film processing). The company's second largest unit is Halfords (responsible for about eight percent of sales), the leading car parts and servicing chain in the United Kingdom, with more than 400 units. Do It All (six percent of sales) is one of the three largest do-it-yourself (DIY) home improvement chains in the United Kingdom, with more than 160 stores. The company's fourth retail chain is Boots Opticians (three percent of sales), a major U.K. optician with about 275 locations offering a full examination and dispensing service. Boots Contract Manufacturing (five percent of sales) was created in 1991 and is the largest contract manufacturer (with more than 4,000 products and over 420 million units per year) in Europe of medicines, cosmetics, and toiletries--most of which are private-label Boots branded; this unit has eight factories and one major development lab. Also created in 1991 was Boots Healthcare International (BHI; five percent of sales), which sells over-the-counter analgesics (pain relievers), cough and throat remedies, and skincare products; three-quarters of BHI's business is generated outside the United Kingdom, in more than 130 countries. Boots Properties (two percent of sales) is one of the U.K.'s largest owners of shopping centers. Although The Boots Company has been steadily expanding abroad, mainly through acquisition, more than 95 percent of overall sales are still generated at home.

Jesse Boot, Founding Father

Jesse Boot, the founder of the company, was born in Nottingham in 1850, the first child and only son of John Boot and his second wife, Mary. An agricultural laborer by trade, John Boot was much influenced by the ideas of popular medicine then current among nonconformists, particularly those of the disciples of the American Samuel Thompson, whose remedies, based on medical botany, were then enjoying considerable success in Britain. After John Boot's health broke down, he opened a small shop in 1849 in Goosegate, Nottingham, selling his own herbal and botanical medicines. His death in 1860 left his widow and her two children dependent on the shop for their livelihood, and Mary Boot continued to run the business with the help of her 10-year-old son. Three years later Jesse Boot left school to work full time in the business, and over the next few years he took charge of it.

In the 1870s, rising real incomes allowed the working class to purchase the patent and proprietary medicines of the kind manufactured and sold by Thomas Holloway and Thomas Beecham, displacing the remedies of medical botany. Although the shop in Goosegate continued to sell herbal medicines, young Jesse Boot started to expand the business, first by adding a range of household goods, including groceries, sold at cut prices; an advertisement of the early 1870s claimed more than 2,000 articles in stock. He decided in 1874 to enter the business of retailing proprietary medicines; as he recalled in 1904, he thought that "if he could afford to sell proprietary articles at prices lower than were being charged by the ordinary chemists, there would be a large future before him." Jesse Boot's commercial strategy, the basis on which he built his large and successful business, was to buy in large quantities from wholesalers and to sell at prices well below those prevailing in the town. It won for him the enduring hostility of the established chemists, first in Nottingham, and later in other towns and cities where he opened branches.

Although at first Boot had difficulties both in persuading the wholesalers to supply him with such large quantities and in finding the money to pay them, he secured the support of a number of influential businessmen and professional men in Nottingham, and, following an extensive advertising campaign in the local press, his business grew rapidly. By the autumn of 1877 his turnover had reached £100 a week, far surpassing his own original target of £20 a week. In the following year he opened a new and larger shop, also in Goosegate, and five years later he extended, refurbished, and refitted it.

In July 1883 Boot incorporated his business as Boot and Company Limited, with a nominal capital of £10,000 of which almost a half was fully subscribed, most of it by Boot himself. Incorporation with limited liability could have opened the way for external investment in the business, but Boot chose to keep control in his own hands, offering shares only to a few close friends and associates in the 1880s; for the time being, he continued to rely on the banks for financial backing, and a decade later, when he started to encourage investors, he sold only preference, nonvoting shares. Some of these shares were offered to customers, through the shops, and some to employees, for the cooperative ideal attracted the nonconformist and liberal side of Jesse Boot's character, although at the same time he was determined to keep control of his business.

Began Dispensing Prescriptions in 1880s

More significantly at the time, incorporation opened up a new area of business for Boot's shop, that of dispensing prescriptions. In a test case brought by the Pharmaceutical Society in 1880 against the London and Provincial Supply Association, the House of Lords decided, much to the chagrin of the society, that limited liability companies had the right to employ qualified pharmacists or chemists to dispense prescriptions. In 1883 Boot recruited Edward Waring as the company's first pharmacist in the Nottingham store and, with dispensing at half-price, the prescription section was off to a good start.

Expansion of the business continued with the opening in 1884 of branches in Lincoln and Sheffield and the start of small-scale manufacturing behind the shop in Goosegate. By 1885 Boot's annual turnover had reached £40,000, but in that year his health deteriorated, and he briefly contemplated selling the business. He recovered, and while recuperating on holiday in Jersey he met Florence Rowe, daughter of a bookshop owner. In August 1886 they were married.

The 1890s saw an ambitious plan of expansion implemented. New shops were opened to extend the company's coverage of England and Wales, and Boot also bought, where he could, small chains of chemists' shops. By the end of 1893, according to The Chemist and Druggist, Boots was then the largest of the company-chemist chains.

Boots and Company was reconstituted in 1888 as Boots Pure Drug Company Limited, which became the holding company for a number of subsidiary companies such as Boots Cash Chemists (Lancs) Ltd., 1899. The size of the company--there were 180 shops by the end of the century--was enhanced when in 1901 Boot bought the Southern Drug Company and the Metropolitan Drug Company, which together formed a chain of more than 60 shops, the largest in the metropolitan area. Between 1901 and 1914 more new shops were opened, bringing the total to 560 in 1914, including prestigious sites in Princes Street, Edinburgh, in 1911 and Regent Street, London, in 1912.

While pharmaceuticals and dispensing remained the core of the business, the range of merchandise retailed also widened, particularly in the larger shops, which were closer to department stores, and as the company tried to widen its appeal to attract middle-class customers. Florence Boot's experience of retailing in her father's bookshop gave her a direct interest in the business, resulting in the introduction of departments offering stationery, books, artists' materials, and gifts that proved popular and successful and remained in her charge. Around the turn of the century, Boots Booklovers Libraries were established and cafés or tearooms were installed in some of the larger stores; both these innovations proved a success in terms of customer appeal.

By 1892 manufacturing, which had started in a small way behind the shop, occupied the whole of a former cotton mill in Nottingham, and the interest always taken by Jesse Boot in the design, fitting, and appearance of the shops led to the establishment and growth of a building and shopfitting department. A printing department to serve the company's needs opened in 1890. The continued growth of the business was reflected in its rising sales, which passed the £2 million mark in 1911 and reached £2.5 million in 1913.

Manufacture of Pharmaceuticals Began During World War I

World War I brought new opportunities that Jesse Boot--who was knighted in 1909--was quick to seize. Despite being increasingly disabled by arthritis, he continued to control the company. In the last two decades of the 19th century, the German fine-chemical industry had discovered, developed, and patented a number of pharmaceuticals&mdashpirin and phenacetin for example--that it exported to the United Kingdom. The outbreak of war left Boots and the country without a supply of these and other essential fine chemicals, and Boot soon decided to start to manufacture them. He recruited research chemists from Burroughs Wellcome, and production at the new plant started in 1915. In addition to fine chemicals, the company also started to manufacture saccharin during the war. Sales increased at this time, reaching £5 million in 1918.

Jesse Boot, who was awarded baronetcy in 1916 as a reward for contributions to the Liberal Party, was 70 in 1920. Fearing the effects of the postwar slump on business, which was becoming increasingly burdensome to him to run but which he did not want to hand over to his son John, Boot negotiated privately the sale of his controlling interest to American Louis K. Liggett and his Rexall group of U.S. drugstores. Liggett paid £2.27 million for Boots. Jesse, who remained titular chairman of Boots until 1926 and was made Lord Trent in 1929, gave large amounts of the money to his home city, particularly to University College, Nottingham, which used the money to fund the construction of buildings on the city's outskirts. After the sale of the business, he retired to Jersey where he died in 1931.

Boots was part of the Liggett group from 1920 to 1933, although in 1923 John Boot, vice-chairman of the company, who had disliked his father's transaction with Liggett, persuaded Liggett to sell 25 percent of its shareholding in Britain; thus, for the first time, Boots shares became publicly held, and the company was quoted on the London Stock Exchange. In 1928 the L.K. Liggett Company became part of a much larger U.S. combine, Drug Inc., which, faced with the effects of the American Depression, decided to sell Boots. The money required for the purchase, between £6 million and £7 million, was raised by a group led by Sir Hugo Cunliffe-Owen and Reginald McKenna.

During the 13 years of U.S. ownership there were some major organizational changes, which lasted beyond that time. Two committees-later merged into one--composed of Boots's senior managers and American representatives, were designated in 1920 to run the company. Nine territorial general managers were appointed to control the 600 shops, and senior managers were sent to the United States to be trained. Stricter control of stock and better accounting systems were introduced, for although sales had continued to rise, profitability had slipped.

As Britain emerged from the worst of the postwar slump, Boots became prosperous again. John Boot, joint managing director, gradually asserted his control over the business, and in 1927 work started on a long-planned new factory at Beeston, just outside Nottingham, which opened in 1933.

From 1933 until 1953 John Boot, now the second Lord Trent and chairman and managing director as his father had been before him, ruled Boots as autocratically as his predecessor. In the years immediately before World War II, expansion was steady--the 1,000th shop opened in Scotland, at Galashiels in 1933, and in 1936 the first shop in New Zealand was opened.

Slow Recovery Following World War II

Between 1939 and 1945, like most of the British industry, Boots's manufacturing capacity was directed to the war effort, and the production of pharmaceuticals such as mepacrine, for the treatment of malaria, took priority. Many of the company's shops and some of its manufacturing sites were destroyed or severely damaged by the bombing. Recovery after the war was slow, not least because of the shortage of building materials and skills. The manufacture of new pharmaceutical products increased as Boots started to make antibiotics and, in 1953, cortisone products. The immediate postwar years also saw the start of businesses in Kenya, South Africa, Singapore, Australia, and Pakistan. At home, however, the company had an increasingly old-fashioned image as consumer tastes started to change and shoppers expected a wider range of products.

The second Lord Trent retired in 1954 and died in 1956; his successor as chairman was his former chief assistant, J. P. Savage, who had then been with the company for more than 40 years. When Savage retired in 1961, the offices of chairman and managing director were separated, with W. R. Norman, the second Lord Trent's son-in-law, becoming chairman and F. A. Cockfield, who had joined the company in 1952 from the Board of the Inland Revenue in order to introduce cost accounting methods, being named managing director.

Acquired Timothy Whites in 1967

A reorganization of the company took place in 1967 and included establishment of a divisional structure. In 1968 Boots bought--it was described at the time as a merger, a face-saving formula to preserve corporate pride--the business of Timothy Whites, a long-standing competitor holding more than 600 retail branches, most of them drugstores selling other consumer goods, and more than 100 shops selling housewares merchandise only. The Timothy Whites business had been founded in Portsmouth in 1848 and had followed a pattern of growth similar to that of Boots. In 1935 it had merged with Taylors Drug Company Ltd., a longtime competitor of Boots. The drugstores were integrated immediately with Boots, but the Timothy Whites Houseware branches continued to operate as such until 1983.

In 1971 the purchase of Crookes Laboratories Ltd. and Crookes Anestan Ltd. brought more pharmaceutical business to Boots, and a merger proposed in the following year would have given Boots greater presence in that field. In 1972 the Beecham Company made an unwelcome bid for Glaxo, which instead turned to Boots and a hastily arranged defensive merger. Both arrangements, however, were reported to the Monopolies Commission and in July of that year the commission ruled that neither should take place.

Anxious for expansion in Europe, Boots tried in 1973 to take over the House of Fraser, which already had some department stores in Europe. The bid was referred to the Monopolies Commission again, but even before their adverse recommendation was made, the oil crisis of that year and its effect on stock market prices made it impossible for the two to agree on price.

Several Acquisitions Marked Late 1970s and 1980s

Instead Boots turned its attention to the United States, where in 1977 it acquired Rucker Pharmacol (renamed Boots Pharmaceuticals Inc.), and in 1986 it added to the company's U.S. operations with the £377 million purchase of the Flint Division of Baxter Travenol. Also across the Atlantic, Boots bought in 1977 and 1978 two chains of drugstores in Canada, and in 1978 it also bought 60 percent of Hercules Agrochemical in the United States. This was merged with Fisons agrochemical interests in 1980, and the joint venture was sold to Schering in 1983. In Europe Boots acquired 50 percent of the Spanish company Laboratorios Liade S.A. in 1979, and 95 percent of the West German company Kanoldt in 1984. New branches of the Sephora shops in France were opened. In 1982 the parent company was renamed The Boots Company PLC.

The acquisition of consumer eye products manufacturer Optrex in 1983, for £9 million, led to the opening of optical services departments, and sometimes separate shops, augmented by the purchase of opticians' chains, including Clement Clarke in 1986, Curry & Paxton in 1987, and Miller and Santhouse in 1989; these moves led to the formation of the Boots Opticians chain. Boots bought Farleys Health Products, maker of baby food and adult nutrition products, in 1986 to add to its manufacturing base. In 1987 Boots launched Children's World, a new retail chain selling clothing, toys, and other items for babies and children under 12. The following year, the company divested its loss-making Canadian drugstore chain. Domestic drugstore operations were increased with the acquisition of Underwoods Chemists in 1989. That same year, the £900 million purchase--in a bitterly fought takeover battle--of the Ward White group brought into Boots the Halfords auto parts chain, the Payless do-it-yourself (DIY) home-improvement chain, and A. G. Stanley, operator of the FADS DIY home-decorating chain (Ward White's U.S. operations were soon sold off).

The Ward White acquisition was largely attributed to chief executive James Blyth (later Lord Blyth of Rowington), who had taken over the position only in 1987. Blyth also engineered a 1989 restructuring, whereby the company's activities were divided into four operating units: Boots The Chemists, the largest unit, consisting of the BTC chain of drugstores; a retail division, which primarily included Boots Opticians, Children's World, Halfords, A.G. Stanley, and Payless; Boots Pharmaceuticals, developer and marketer of prescription and over-the-counter medicines and healthcare products, cosmetics, and toiletries; and a newly created property division, later known as Boots Properties, which managed the company's property portfolio in the United Kingdom, including a large assortment of shopping centers.

Tumultuous 1990s

Blyth's attempt to diversify Boots into other areas of retailing quickly turned sour. In 1990 the Payless chain was merged into the Do It All chain, a 50-50 joint venture with W.H. Smith. Unfortunately, the U.K. housing market plunged into a five-year depression, which severely cut into DIY sales, thereby turning both Do It All and FADS into loss-makers. Boots was also hurt in the early 1990s by the high debt it had to incur to acquire Ward White. On the plus side, Halfords was consistently profitable in the 1990s.

The company's Boots Pharmaceuticals unit also faced difficulties, largely because its small size made it difficult to compete in the drug industry. In 1991 Boots created two new operating units out of Boots Pharmaceuticals: Boots Healthcare International (BHI), which assumed the over-the-counter drugs business; and Boots Contract Manufacturing (BCM), which became the company's maker of mostly private label health and beauty products. Boots Pharmaceuticals thus became a prescription-drugs-only unit. In 1993 this unit failed in an attempt to create a breakthrough drug to keep itself viable, when development of its Manoplax heart treatment drug had to be abandoned because of side effects. Boots quickly decided to divest the unit, and in early 1995 did so in selling Boots Pharmaceuticals to BASF for about £850 million, thus ending the company's 80 years in the prescription drugs business.

Meanwhile, Michael Angus, chairman of Whitbread, had been serving as Boots's chairman, with Blyth taking on the additional role of deputy chairman. Also in 1994 Boots sold the Farleys group to H. J. Heinz for £94 million; Farleys had been part of BHI but did not fit into the core over-the-counter categories the unit decided to specialize in, notably pain relievers, cough and throat remedies, and skincare products. In 1995 the BCM unit was bolstered through the acquisition of Croda International PLC's private label cosmetics and toiletries manufacturing businesses in France and Germany.

As the 1990s progressed, Boots began to pull back from its diversified retail operations. During the 1993-94 fiscal year, the Sephora retail chain in France was sold. In 1996 Children's World was sold to Storehouse PLC. Later that same year, the company bought W. H. Smith's 50 percent share of Do It All for £63.5 million, taking complete ownership of the troubled chain. Although Do It All was approaching profitability by late 1997, speculation that Boots would divest itself of this albatross was rife. The company did jettison one of its loss-making Ward White businesses in late 1997 when it sold A. G. Stanley to Alchemy Partners, a private venture-capital group, for a nominal amount. By early 1998, Boots's remaining non-drugstore retail operations--Boots Opticians, Halfords, and Do It All--were each operating as separate units, providing the company with a seven-unit structure (including BTC, BHI, BCM, and Boots Properties).

Meanwhile, the flagship Boots The Chemists chain continued to keep the company profitable. In its first moves outside the United Kingdom since its failed Canadian venture, BTC announced in late 1996 plans to expand the chain on a pilot basis into Thailand (where six stores opened in 1997) and the Netherlands (where three stores opened in 1997). In the fall of 1996 BTC opened its first unit in Ireland, and had seven stores there by the end of 1997. In January 1998 Boots acquired the Hayes Conyngham & Robinson drugstore chain, the largest such chain in Ireland with 15 stores. In April 1998 BTC expanded in both the United Kingdom and Ireland through the £18 million purchase of Connors Holdings Ltd., a privately owned pharmacy chain with 25 stores in Northern Ireland, five in the Republic of Ireland, three in England, and one in Wales.

Boots Healthcare International was also bolstered in 1997 through the £173.6 million (US$275.6 million) acquisition of Hermal Kurt Herrmann, the leading manufacture of skincare products in Germany, from Merck. The purchase added Germany to BHI's European operations, which already included the United Kingdom, France, and Italy.

More than 95 percent of Boots's sales were still being generated in the United Kingdom in the late 1990s. With the rapid expansion of BHI and BCM in the 1990s and the potential for overseas growth of the BTC chain, it appeared that Boots would become a much more international company in the 21st century. It also seemed that the success of BHI and BCM could pave the way for the divestment of Do It All and even Halfords--neither of which provided much synergy with the company's other units. It could nonetheless be said with some certainty that Boots's healthcare, retailing, and manufacturing operations faced a very bright future indeed.

Principal Operating Units: Boots The Chemists; Halfords; Boots Opticians; Do It All; Boots Healthcare International; Boots Contract Manufacturing; Boots Properties.

Further Reading:

• Britton, Noelle, "Boots Treads Carefully," Marketing, May 26, 1988, p. 22.
• Buckley, Neil, "Divide and Thrive at Boots," Financial Times, July 4, 1994, p. 12.
• Buckley, Neil, and David Blackwell, "Boots to Expand Health and Beauty Division," Financial Times, June 29, 1995, p. 18.
• Chapman, S., Jesse Boot of Boots the Chemists, London: Hodder & Stoughton, 1974.
• ------, "Strategy and Structure at Boots the Chemists," in Hannah, Leslie, ed., Management Strategy and Business Development, London: Macmillan, 1976, 267 p.
• Green, Daniel, "BASF in £850m Deal to Acquire Boots' Drugs-Making Business," Financial Times, November 15, 1994, pp. 1, 20.
• Greenwood, J. E., A Cap for Boots: An Autobiography, London: Hutchinson, 1977, 254 p.
• Hollinger, Peggy, "Boots Back on International Stage," Financial Times, October 11, 1996, p. 24.
• ------, "Slow Waking from a Nightmare," Financial Times, August 29, 1997, p. 16.
• ------, "Trying to Lay a £900m Spectre," Financial Times, November 6, 1997, p. 29.
• Hollinger, Peggy, and Graham Bowley, "Boots Expands into Germany," Financial Times, September 11, 1997, p. 31.
• Humes, Christopher Brown, "DIY, Disillusionment and Divorce," Financial Times, August 22, 1996, p. 21.
• Jackson, Tony, "Registering the Value of Cash," Financial Times, January 19, 1998, p. 14.
• Monopolies and Mergers Commission, The Boots Company Limited and the House of Fraser Limited: A Report on the Proposed Merger, London: HMSO, 1974, 44 p.
• Weir, Christopher, Jesse Boot of Nottingham: Founder of the Boots Company, Nottingham: The Boots Company PLC, 1994.
• Weyer, Martin Vander, "Good Value at Boots," Management Today, September 1995, pp. 42+.

Source: International Directory of Company Histories, Vol. 24. St. James Press, 1999.

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