Alliance Boots to refocus on beauty, skin care products contract manufacturing business

Personal care products retailer Alliance Boots has revealed a new strategic approach for BCM, its contract manufacturing business for beauty, skin care products, which includes a programme to improve the efficiency and overall performance of its facility located at Nottingham, UK.

The programme is also designed to address a reduction in manufacturing volumes, which is the result of a fall in external market demand for contract manufacturing and an increase of regulatory compliance requirements.

The retailer claims that the programme will refocus the business on activities where it has a maintained competitive advantage, including the group’s leading beauty and skin care product brands.

According to the firm, the programme will also include investment in new product technologies to enable greater flexibility and support for Boots product development, as well as building a stronger factory for the future.

With the new decision, the company is planning to gain a better position in the business with growth opportunities, which are expected to be generated by the further internationalisation of the group’s product brands, including within the US market.

Under the programme, the retailer is planning to exit certain unprofitable areas of third-party manufacturing, which includes reduction of around 200 jobs over the next two years and every effort will be made to offer redeployment opportunities elsewhere in the group.

The retailer said the one-off cost of the reorganisation will be just over £30m, of which £18m is non-cash.

The cost cutting includes the write-off of fixed assets and inventory, and the reduction in roles within the Nottingham factory, which will occur in 2012-13 year.

Alliance Boots health and beauty division chief executive Alex Gourlay said the company aims to strengthen its position for the future by increasing global footprint of its product brands, which will be undertaken by overhauling and improving the efficiency of its Nottingham factory.

"It is an important step in our continued efforts to keep contract manufacturing in the U.K., despite the ongoing challenges that the industry faces," Gourlay added.