Walgreens 2014 Annual Report Download - page 16

Pharmacy-led Health and Beauty Retailing. Alliance Boots is a market leader in the pharmacy industry with
stores located in the United Kingdom, Norway, the Republic of Ireland, The Netherlands, Mexico, Chile,
Thailand and Lithuania and through its associates and joint ventures in China, Italy and Croatia. In addition, as of
March 31, 2014, there were approximately 80 Boots branded stores operated in the Middle East on a franchised
basis. Alliance Boots seeks to locate its stores in convenient locations and to put pharmacists at the heart of
healthcare. Alliance Boots pharmacists are well placed to provide a significant role in the provision of healthcare
services, working closely with other primary healthcare providers in the communities they serve. Alliance Boots
principal retail brand in its Health & Beauty Division is Boots, which Alliance Boots trades under in the United
Kingdom, Norway, the Republic of Ireland, The Netherlands and Thailand. The Boots offering is differentiated
from that of competitors due to a number of factors including the product brands that Alliance Boots owns and
“only at Boots” exclusive products.
Pharmaceutical Wholesaling and Distribution. Alliance Boots pharmaceutical wholesaling and distribution
businesses seek to provide high core service levels to pharmacists in terms of frequency of delivery, product
availability, delivery accuracy, timeliness and reliability at competitive prices. Alliance Boots also offers its
customers added-value services that help pharmacists develop their own businesses. This includes membership in
Alphega Pharmacy, Alliance Boots pan-European network for independent pharmacies. Alphega Pharmacy had a
membership of more than 4,800 pharmacies in seven countries as of March 31, 2014. This is expected to increase
following the March 2014 vote by the vivesco pharmacy network in Germany, which has approximately 950
members, to rebrand as Alphega. In addition to the wholesale of medicines and other healthcare products,
Alliance Boots provides services to pharmaceutical manufacturers who are increasingly seeking to gain greater
control over their product distribution, while at the same time outsourcing non-core activities. These services
include pre-wholesale and contract logistics, direct deliveries to pharmacies, and specialized medicine delivery
including related home healthcare.
Product Brands. In its Health & Beauty Division, Alliance Boots has product brands such as No7, Soltan and
Botanics, together with newer brands such as Boots Pharmaceuticals and Boots Laboratories. Alliance Boots is
seeking to continue to internationalize its key product brands, selling them through select retail partners, its own
and third party internet shopping sites, and independent pharmacies. In the United States, where Boots product
brands have been sold through Target for many years, Alliance Boots is, in addition, introducing No7 and other
key Boots product brands into the drugstore channel through certain Walgreens stores on a phased basis. In
Europe, its Boots Laboratories line of products was sold by independent pharmacies in five countries as of
March 31, 2014. In addition, Alliance Boots has partnerships with a select number of third party brand owners to
sell their products in Boots stores on an exclusive basis, sharing in the future brand equity. Alliance Boots also
continues to manufacture a significant proportion of its most popular own brand and exclusive products. Through
its Pharmaceutical Wholesale Division and associates, Alliance Boots currently sells Almus, its line of generic
medicines, in five countries and Alvita, its line of patient care products, in six countries.
Financial Information about Foreign and Domestic Operations and Export Sales
All Company sales during the last three fiscal years occurred within the United States, Puerto Rico, Guam and
the U.S. Virgin Islands. There were no export sales. We account for our 45% investment in Alliance Boots,
described under “Overview of Alliance Boots” above, using the equity method of accounting on a three-month
lag basis, as described in Note 5 to the Company’s Consolidated Financial Statements in Part II, Item 8 of this
Form 10-K. As a result, no Alliance Boots sales are included in the net sales reported by the Company in its
consolidated financial statements.
Investments accounted for under the equity method are recorded initially at cost and subsequently adjusted for
the Company’s share of the net income or loss and cash contributions and distributions to or from these
entities. The Company’s investment in Alliance Boots was recorded as an asset with a $7.2 billion aggregate
value on the Company’s August 31, 2014 balance sheet, which represented 29.1% of the Company’s long-lived
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