WALGREENS: 4 PARTNERSHIP PROFILES: KROGER, McKESSON, MICROSOFT, PRIME THERAPEUTICS
- Leading companies seeking strategic alliances with Walgreens
- Kroger, McKesson, Microsoft and Prime Therapeutics collaborating with Walgreens
- Brand marketing, pharmacy, market access and technology partnerships driving revenue for Walgreens and partners
Market access, commercial synergies and profit in strategic partnerships
Walgreens Boots Alliance ( NASDAQ: WBA ) ranks at number 17 on the Fortune 500 list of largest firms. Reportedly they are exploring options to take the company private which may also be a strong signal to other industry leaders that it is open to takeover offers. Regardless of what their ultimate goals are, they remain a global force in retail, pharmacy, wholesaler and other sectors. The company’s CEO, Stefano Pessina, has communicated Walgreens is actively pursuing more partnerships as a business strategy that enable it to generate revenue by asserting its corporate, financial, clinical and operations resources to build market access and revenue while disrupting competitors — without having to deploy funding for complete acquisitions that contribute to further to debt loads.
Walgreens Boots Alliance ( WBA ) financial profile based on value, revenue and debt
For many, Walgreens is a widely recognized retail drugstore chain that competes against consumer and pharmacy players such as CVS Health, Target, Walmart, grocery store pharmacies and online juggernaut Amazon’s consumer and pharmacy businesses. In 2014, Walgreens completed an acquisition exercise valued at $4.9 billion cash plus 144.3 million common shares valued at $10.7 billion to acquire UK and Swiss-based Alliance Boots ( Walgreens had earlier committed $4 billion cash and 83.4 million common shares to get the deal underway ). Based in Deerfield, Illinois, ( a Chicago suburb ), the new organization, which deems itself as a holding company, immediately transformed into a global, multi-sector competitor.
Primary elements of Walgreens Boots Alliance financial profile
- Market capitalization of $50 billion
- Annual sales: $136.86 billion ( 2019 figures which represented a 5.8% increase over 2018 )
- Earnings: $3.982 billion
- Debt: $15 billion
- Ownership stake of 16% held by CEO Stefano Pessina
Strategic global attributes of WBA
- Business operations in more than 25 nations
- Over 415,000 employees
- More than 18,500 stores located in 11 countries
- Over 390 distribution centers servicing pharmacies ( including pharmacies not owned by WBA ), physician offices and healthcare provider organizations
- Ownership stake of 26% in AmerisourceBergen ( NYSE: ABC ), a global leader in healthcare wholesaler operations ranked at number 12 on the Fortune 500 list; annual sales of $153 billion
A formidable commercial enterprise, competitor and coveted partner
Based on its success and expertise dating back to 1901, Walgreens is acknowledged as an industry leader in consumer, pharmacy, wholesale and other business sectors. While it has various collaborations in place with a number of entities, it has 4 partnerships with established industry leaders equal to its own scope and scale. They demonstrate how attractive Walgreens is as an ally and business opportunity. Their relationships with Walgreens underscores Walgreens’ ability to innovate and operate outside of conventional business model structures to share knowledge and resources which benefits both partners while increasing sales.
U.S. grocery store leader Kroger Co.
Walgreens has been collaborating with grocery store giant Kroger ( NYSE: KR ) in several marketing initiatives and late in 2019 announced the formation of their own GPO, Retail Procurement Alliance. By combining their orders, Kroger and Walgreens seek to lower costs and boost operational efficiencies. The two companies are already selectively marketing each other’s private label brand products in test market stores across the nation.
Cincinnati, Ohio based Kroger operates over 2,800 stores under 17 different names in 35 states with annual sales exceeding $122 billion. Kroger ranks at number 18 in the Fortune 500. By working together, Kroger and Walgreens are developing wider market access for each of their product portfolios while developing synergies to more effectively operate and compete against Amazon, Walmart, Target, CVS Health, Albertsons, Costco plus other grocery and pharmacy rivals.
The global leader in healthcare wholesale operations McKesson Corporation
Late in 2019, Walgreens entered into a collaboration with McKesson, the world’s largest wholesaler. The two companies formed a joint venture to combine each of their drug wholesale units ( Alliance Healthcare Deutschland based in Frankfurt and GEHE Pharma Handel based in Stuttgart) in Germany. McKesson ( NYSE: MCK ) has a 30% stake int the venture and WBA owns the remaining 70%. The organization will optimize efficiencies and strengthen a competitive position in Germany. The joint venture ( yet to be named and still requiring approval by regulators) is exclusively deployed within Germany’s borders and does not extend into other nations.
This arrangement is particularly interesting relative to Walgreens 26% ownership in AmerisourceBergen, one of McKesson’s primary competitors. McKesson, headquartered in San Francisco, ranks at number 7 on the Fortune 500 list by producing over $208 billion in yearly sales.
Technology champion and innovator Microsoft Corporation
Early in 2019 Walgreens Boots Alliance entered into a deal with Microsoft to enroll over 380,000 employees in Microsoft 365 cloud apps which encompass mobile, Office 365, security features and other applications. Walgreens will also transition the majority of its IT workload to Azure and Microsoft’s cloud platform. The two organizations are further working on solutions to optimize data workflow throughout WBA including administrative, pharmacy, operations and other areas through artificial intelligence ( AI ) and other technology. Microsoft has deep AI capabilities spanning, voice, advanced machine learning, data science, Internet Of Things ( IoT ) / Interoperability applications and robotics.
This arrangement benefits Walgreens as it gives them access to Microsoft’s technology resources and IT savvy while Microsoft gains a wider presence in the consumer / patient data management, retail, pharmacy, operations and other sectors ripe for advanced technology development. Through the partnership, both are staking a competitive position against a mutual consumer, healthcare and commercial technology rival, Amazon. Ranked at number 24 in the Fortune 500, Seattle based Microsoft churns out more than $110 billion in annual sales.
Blue Cross Blue Shield pharmacy benefit manager leader Prime Therapeutics
In 2017 Walgreens entered into a partnership arrangement with Prime Therapeutics, one of the largest pharmacy benefit management companies in the United States. The venture, called AllianceRx Walgreens Prime, is a ten year commitment for the 2 partners. Walgreens is the central ( but not exclusive ) retail pharmacy provider for Prime Therapeutics and the two jointly operate a specialty pharmacy plus mail order pharmacy services. AllianceRx Walgreens Prime benefits WBA with enhanced market access to the membership of 14 BCBS plans plus other customer groups.
Prime Therapeutics realizes the benefit of being aligned with a leader in retail, mail and specialty pharmacy services and operations. Prime Therapeutics, based in Eagan, Minnesota, was founded in 1998. It services more than 28 million members and patients. Their cooperative ownership structure is comprised of 14 Blue Cross Blue Shield plans across the United States.
Walgreens building its future through clinical, operations, and technical transformation plus strategic alliances
As it assesses its options to go private or potentially be acquired, it is also implementing cost reduction measures while keeping its eye on the ball with finding ways to increase sales. Through the company it keeps such as the 4 partners profiled in this article and its willingness to reinvent itself; Walgreens fortifies its ability to profitably grow and compete. By maximizing assets and attributes with equally adept and equipped partners, Walgreens cultivates organizational effectiveness and revenue opportunities. Moving forward, Walgreens has numerous options to satisfy the demands of consumers, patients, payers and shareholders while continuing to be a preferred strategic ally for existing and future partners.
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