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EF: A year and a half into the pandemic could you elaborate on Clicks Group role during this time?
VR: We are a healthcare player, and in fact we are South Africa's leading pharmacy group and when the pandemic broke out people gravitated to preventative healthcare very quickly which meant they looked for supplements, multivitamins, vitamin C, PPE masks, etc., and we had to respond very quickly to their needs. But the first priority was to protect our workforce -implementing the right protocols, installing screens to work safely- as we can’t service society as a whole if we first haven’t protected our own workforce. During the various stages of lockdown as a healthcare service provider we remained open, in spite of a challenge with public transport and malls closing earlier. We worked on providing for society in spite of huge operational challenges. When people feel sick the first place they come to is their local pharmacy so there is no doubt we have played a very important role in individual lives, pharmacies as a whole have played a very important role in the Covid-19 pandemic. The role that healthcare plays in society has quite frankly been elevated. We responded to our workforce, to our customers and most importantly we prevented the spread of the virus as best we could.
EF: What were the lessons learnt managing through this period when unlike other companies you had to continue working on a face to face basis?
VR: The bulk of our people cannot work from home, the store system is about serving customers face to face, our distribution centers have to pick and supply stock to our stores, so we took a cautious view by prioritizing the protection of our staff and the few that could work virtually did so. We didn’t consider clamping down operations but instead tried to serve more effectively. As the country and our customers needed us more than ever we injected resources to serve consumers. The remote consulting mode was used by doctors, there were less elective surgeries, less people in the pharmacies so we were in a very difficult scenario with some underutilized pharmacy stock and reduced volumes but we had an increase in costs to serve. Our main focus however was to serve our communities.
EF: Did you introduce any new KPIs over the last year?
VR: First of all we watched our people´s infections, we closely monitored store infections and deep cleans of our store facilities and hospitalizations. The care of the staff was primordial and we were conscious of the additional cost our staff had in commuting so we gave all our frontline staff an additional bonus. My directors and I contributed a third of our salaries to a solidarity fund for a period of time, so we did social upliftment projects but our biggest contribution was being there for the patients that needed us. This has been carried forward into the vaccination program and as a single entity I believe we have done the most vaccinations in the country. We have the most sites, so far we have opened 300 vaccination sites and my aim is to have a total of 600 in the next couple of months. The strategy for any business today in South Africa must be to vaccinate because it is the only way to get the economy up and running and is why we took a forward thinking view rather than a conservative one. Since the pandemic began we have significantly opened more stores and invested more money, over the last two years we have accelerated our pharmacy opening program basically because now consumers need us more than ever. We are not just providing “lip service” but putting our money where our mouth is, investing, providing support and opening vaccinating sites, even if it is quite disruptive to have a vaccination site in our stores with people queuing and disrupting normal sales but we do it because it will make a material difference to the wellbeing of society. Opening a vaccination site in a small town means we service the entire community and they don’t have to travel long distances to a centralized vaccination site. We have the footprint to be able to choose to take this approach of going to the people rather than forcing the people to come to us to be vaccinated and we are maximizing the benefit of that footprint.
EF: Is this in alignment with the ´pick and pay´ acquisition?
VR: Certainly, one of the main reasons we did the pick and pay acquisition was so that we could continue to extend our healthcare offer and at the same time to acquire the licenses we don’t have as in South Africa. Licenses are necessary, small in the scheme of things, making practically no difference to the commercial prospects of the organization but it fulfills our ambition which is threefold: i) create easy access to healthcare, ii) ensure affordable access to healthcare, and iii) build skills in healthcare to service the needs of the country.
EF: 2020 was a year of diagnostics and prevention and 2021 of vaccines and being involved with primary care, supply chain and distribution, what challenges and opportunities lie in having vaccination sites?
VR: We must focus on the vaccination program itself and we are spending much of our time and energy on being able to vaccinate as many citizens as possible. UPD plays a phenomenal role in the private sector and has more than 70% share of the hospital market supplying very specialized medicines to the different hospitals. I believe they agree that UPD has done an excellent job all through the pandemic. The hospitals aren’t doing much elective surgeries as they are dealing with Covid and UPD does an absolutely essential job in supplying lifesaving drugs to them. We are seeing large levels of hospitalization due to Covid and UPD has the capability and the resources to support the country in terms of supplying hospital groups and Pharmacies.
EF: Could you elaborate on the company performance over the last year?
VR: Considering the half year was fully impacted by Covid compared to a non Covid half year the Health and beauty retail sales grew 7%. What is positive is the diluted HEPS –an important measure of a company's performance- was up 9.5% which was primarily impacted by the closure of the Musica business. If we remove that anomaly the continued operations of diluted HEPS was up 14%, reflecting the Groups resilience in dealing with the impact of the pandemic. For example the makeup category has fallen but healthcare products are up, pharmacy products had small sales but we sold many more kettles irons and toasters basically because people are home. The business model itself is defensive in that no matter what happens in society one category may offset another. It is of course a difficult time but our business model as said previously is resilient. What eventually made the numbers was cost-control which was possible because we could save money on travel during this period where the world came to a standstill and everybody was home. Our cost control was phenomenal, the team did an amazing job and we had no retrenchments due to the pandemic and we didn’t have to cut back on people. It was also not just about good business but we could afford to protect jobs during a very tough situation for everybody.
EF: Did you see growth on your online selling channel considering reduced physical attendance at stores?
VR: We didn’t drive growth on online sales, we simply offered it as an option for the customer. We gave the customer the choice of delivery but our preference is for them to come in to the store because we are chasing profitable market share and every effort we make must have a commercial return to benefit society, government and our people. If we don’t make profit we cannot invest in the country or pay taxes or do social good. We decided not to chase market share metrics but rather to service our customers in the channels they prefer to use. My objective is to put patient care before sales. Ethics must come before profit as it will enable a lot more profit in the long term. Value driven patient care is our number one priority.
EF: You mentioned reinvesting in profitable business so what are your thoughts on Silicon Valley companies that have a lot of unicorns, projects with great evaluations but no profits?
VR: There is a lot of discussion on online retail and my opinion is that online retail has a fraction of the margin of conventional retail. I have the resources and the trust of the investors and for me value creation for all stakeholders is paramount and I aim to create commercial value for everyone, for the communities, for government, for the people. Profit is a very important component and in my opinion chasing unprofitable business is value destruction. I am very clear on two points concerning business, i) my company does not work in isolation but is attached to the communities in which it operates and if we serve the communities by giving them value they will reward us with profits and in turn we expand and create more jobs to service more communities creating a virtuous circle. Profit creation is a wonderful thing if it is done ethically because there are so many beneficiaries and for me the primary way companies can add value to their countries. The way I see it is that value is added by re-injecting a proportion of what we make via the tax system and societal contributions that go beyond financial contributions.
EF: If you had to design a Master in Pandemic Administration program, which two courses would you consider mandatory?
VR: A course on Ethics would be important mainly because there are many ethical dilemmas with no obvious right or wrong answer. The second course I would choose would be Corporate Strategy because it is about learning how to make things grow and in a world such as ours we all know that no growth means more poverty.
EF: Over the last 18 months a tactical approach to decision making has taken precedence over strategic decisions, do you agree with this?
VR: We have actually made very few tactical decisions, mainly because we haven’t let the short term noise interfere with what we know to be a clear long term plan. Covid has arrived but it hasn’t changed the fundamentals, there are still people in this country that need health, beauty and baby products and Covid hasn’t affected that, there are still 900 shops I can open in South Africa and Covid won’t affect that either. It is important not to let emotion drive our long term fundamental decisions on what the consumer requires and as we continue to service the consumer over this period we see no reason to change our strategy. I make operational decisions on which stores to open or how to manage the organization, which is difficult at the moment as circumstances continue to affect us operationally but the two most important things needed in a time of crisis are fiscal and strategic discipline. Leadership needs to be crystal clear on the facts on which we base our decisions and these fundamentally have not changed
The biggest catalyst that came from the pandemic was public/private sector collaboration which is very strong. The public and private sector need to work closely together because the pandemic affects everybody regardless of who or where they are, it doesn’t discriminate by race or religion forcing us all to work together.
EF: When you look back to this period in your professional career, what would you like your tenure to be remembered for, what would you like to have accomplished?
VR: Not necessarily for the business performance because it is what is expected of us and it’s the job we are paid to do, but I would like people to remember how we responded when they needed us the most. The real value for me would be that Clicks was there as a service provider for everyone when we were most needed. Clicks did a significant amount of vaccinations and continued investing because the consumer and the country needed us that’s what I want us to be remembered for over this period.