The Boots Company PLC

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The Boots Company PLC

Nottingham NG2 3AA
United Kingdom
(0602) 506111
Fax: (0602) 592727

Public Company
Incorporated: 1883 as Boot and Company Ltd.
Employees: 78,648
Sales: £3.38 billion (US$6.32 billion)
Stock Exchange: London

The Boots Company PLC’s business is the manufacture, marketing, and distribution of pharmaceutical and consumer products in its own retail stores, in Britain and overseas. Manufacturing takes place at four sites in the United Kingdom and the group’s subsidiary companies have manufacturing units in Australia, France, Kenya, Pakistan, South Africa, Spain, and the United States, while its associated and joint-venture companies manufacture in India, West Germany, and Yugoslavia. Despite this geographical spread, the company’s business remains principally in the United Kingdom, which provided more than 80% of total turnover in 1990; business in the United States accounted for 8% of turnover in that year and in Europe for between 5% and 6%. The company’s activities are carried on through four operating divisions, a structure adopted in 1989.

Boots The Chemists is the largest division, in 1990 contributing 67% of the company’s total turnover and 53% of its profit before tax, and is responsible for the 1,051 retail stores that offer a wide range of health and beauty products, toiletries, baby products, film, and film processing services—areas in which Boots is a market leader. The 220 larger stores also sell audiovisual equipment, kitchen equipment, leisure products, and other home merchandise.

The retail division, which in 1990 accounted for 16% of the company’s turnover and 7% of its profit before tax, is composed of a number of separate retail businesses owned by the parent company—Boots Opticians, Children’s World, Halfords, A.G. Stanley, and the Pay less do-it-yourself (DIY) home improvements chain, the latter merged in 1990 into a jointly owned operation with W H Smith’s Do It All DIY business. Two small overseas retailing operations—Sephora in France and Boots The Chemists in New Zealand—are also part of the retail division.

The pharmaceutical division, which in 1990 contributed 17% of total turnover and 31% of profit before tax, carries out research and development on prescriptions drugs; its major products are Ibuprofen, flurbiprofen, dothiepin, and levithyroxine. It also manufactures and markets over-the-counter pharmaceutical products, such as Strepsils throat lozenges, Sweetex artificial sweetener, and Optrex eye drops. The property division was established to manage the company’s property portfolio in the United Kingdom.

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 & Company Ltd., 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.

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. 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. 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, 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 tea-rooms 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.

World War I brought new opportunities that Sir Jesse Boot—knighted in 1909—was quick to sieze. 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—aspirin 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.

Sir 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 post-war 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. Sir Jesse, who remained titular chairman of Boots until 1926 and was made Lord Trent in 1928, 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% 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.

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.

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 similiar to that of Boots. In 1935 it had merged with Taylors Drug Company Ltd., a long-time 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.

Instead Boots turned its attention to the United States, where in 1977 it acquired Rucker Pharmacol, and in 1986 it added to the company’s United States 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% 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% of the Spanish company Laboratorios Liade S.A. in 1979, and 95% of the West German company Kanoldt in 1984. New branches of the Sephora shops in France were opened. In 1985 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. Boots bought Farleys Health Products in 1986 to add to its manufacturing base. Drugstore operations were increased with the acquisition of Underwoods in 1989, and in the same year the purchase of the Ward White group brought Halfords and DIY retailing into Boots. Ward White’s U.S. operations were eventually sold off.

The strength of the Boots the Chemists retailing chain is largely unchallenged; the synergy with Halfords and DIY retailing, however, could well be questioned. Despite its acquisitions and diversifications of the last ten years, Boots remains, in an age of global business, predominantly a U.K. operation.

Principal Subsidiaries

A.G. Stanley Ltd.; Boots Development Properties Ltd.; Boots Opticians Ltd.; Boots Print Ltd.; Boots Properties plc; Boots the Chemists Ltd.; Children’s World Ltd.; Crookes Healthcare Ltd.; Farley Health Products Ltd.; Halfords Ltd.; LCP Holdings PLC; Lowpine Properties Ltd.; Miller and Santhouse PLC; Optrex Ltd.; Payless DIY Ltd.; Underwoods (Cash Chemists) Ltd.; Ward White Group plc; Ward White Developments Ltd.; Whites Property Co. Ltd.; The Boots Company (Australia) Pty. Ltd.; The Boots Company (Belgium) S.A.; Flint Laboratories (Canada) Ltd.; Laboratories Boots-Dacour S.A. (France); Beauté, Hygiène et Soins, S.A. (France); The Boots Company (Holland) B.V.; The Boots Company (Ireland) Ltd.; Boots Italia S.p.A.; Boots Finance Ltd. (Jersey); The Boots Company (Kenya) Ltd.; Optrex (Malaya) Sdn. Bhd.; Boots the Chemists (New Zealand) Ltd.; The Boots Company (Pakistan) Ltd. (56.5%); The Boots Company (Philippines) Inc.; The Boots Company (Far East) Pte. Ltd. (Singapore); The Boots Company (South Africa) Pty. Ltd.; Laboratorios Liade S.A. (Spain); The Boots Company (Thailand) Ltd.; The Boots Company (USA) Inc.; Boots Pharmaceuticals PR. Inc. (U.S.A.); Kanoldt Arzeneimittel GmbH (Germany).