Merrill LynchConsumer Focus Day

November 2003

Healthcare Strategy in South Africa

• Strategy

• UPD

• Clicks

• Clicks Pharmacy

“The realisation of a dream”

Multibrand Strategy – South Africa

LifestyleBeautyHealth

Consolidated Retail

Pharmacy

Specialist

Wholesale

Healthcare Strategy

• Leverage benefits of integrated channel to market

• Extend retail presence & expertise into pharmacy

• Establish efficient, compliant & profitable low-cost drugstores

• Promote co-ownership model

• Improve front to back shop ratio

• Synergies from combining pharmacy with current offering - lower overheads & increased footfall

• Franchise model retained – using compliant format

• Explore black empowerment opportunities

Manufac-turers11%

Distributors49%All Other

Wholesales40%

R988m

R3.788bn

R4.626bn

Wholesale & distribution - UPD model

• Profitable well run business• Efficient working capital

management • Largest national wholesaler

in SA• Expertise in fine distribution

UPD provides distributionfor integrated channel to market

UPD 43%of other

wholesalebusiness

Integrated channel to market

• Pharmacies carry less stock• Act as warehouse for pharmacies • Distribution & service levels key

UPD – in short

• Growth in turnover from PM&A & independent pharmacies

• Retained most independent pharmacy customers

• Standardised terms on FMCG suppliers

• Clicks pricing on top FMCG lines available to customer base

• Two franchise models in the group – Link + Multicare

• Develop Link offering as premium banner

• Develop programmes to enhance Link pharmacy loyalty to

UPD – new franchise agreement

Impact of legislation on UPD

Original source procurement • Levelling of the playing field – ethical standards + transparency

• Small impact on current wholesale customers

• Service levels will be the differentiator

Generic substitution• Single channel distribution - lower market share

of branded ethicals - better placed to benefit

• Currently, margins better

Single exit pricing• Timing – early 2004

• Lack of clarity“Generally

positive for UPD”

“The realisation of a dream”

Clicks - The Vision

• To create an experience of pharmacy that has never been seen before in SA

• To combine the best of what Clicks offers with the best of the pharmacy experience

• To enhance the Clicks brand qualities of value with convenience & service

Pharmacy in Clicks

• Regulatory approval for PM&A deal

• Application for licences

– PM&A

– Additional licences in selected stores

– Underserviced areas – discuss with government

• All New Clicks wholly-owned/JV pharmacies

to be rebranded Clicks

Format 1

Clicks Health, Home & Beauty with Dispensary

• Health & dispensary as additional components to our

current understanding of Clicks

• Value for money

• Servicing woman’s world

“For me, my home, my life”

• Heavy promotional drive

Format 2

Clicks Health and Beauty with Dispensary

• Health & Beauty focus supported by gifting & convenience

statement

• Personal connection to pharmacist

• Strong promotional offering

• Strong value statement

• Convenience & longer

trading hours

What the customers had to say...

• Customers expected Glengariff to be like a Clicks with an added pharmaceutical department

• The relationship with the pharmacist & customer service are key

• Clicks Pharmacies would be more price competitive than other pharmacies

• Can I use my ClubCard?

“Glengariff opens shortly

Systems ready

ClubCard ready”

Learning from Australia

Conversions:

• Converting existing Priceline store (Prahran)

– Sales growing in excess of 40%

– Back & middle shop sales already at 18% - should double

• Converting existing pharmacy (Bentleigh)

– Script sales grown by 20%

– Front shop sales up from 10% to 75%

New site:

• Mornington

– Turnover A$45k per week from 300m²

– Front shop sales 50%

Legal - Competitions Commission, pharmacy licenses,de-link, lease, JV, finance structure

Finance - Integrating 2 systems, debtors, feasibilities(new pharmacies, new partners), budgets

Store development - look and feel, low cost model,property issues

Operations - Operational structures, SOP’s, storeconversion procedures, training

OD/HR - Conditions of service, induction, performancedevelopment program, organizational development

Change Management - Leadership, interfacing,communication

Category - Ranging ‘new formats’, understanding ‘newproducts’

Marketing - Market offering around service, value,convenience and ClubCard. Signage, uniforms

IT - Development store systems, development hostsystems, testing. Ideal to follow

September October November December

Glengariff

13 3

BalfourPark

Rosebank

Atterbury

West CoastVillage

To follow next year: 75 other PM&A’s, Approximately 50 pharmacist enquiries,17 New Clicks Stores, 40 Clicks refurbs

Edgemead

20

27

4

9

9

Preparation/Ground Work Pharmacy Opening Schedule

Questions ?

Thank You