HONG KONG — While a partnership agreement between Boots, the UK’s number-one health and beauty retailer, and Watsons, Asia’s largest health and beauty chain, has surprised many here, executives for the two entities insist the pairing makes perfect sense.

While the two are considered direct competitors in the field, Watsons has agreed to sell Boots brand products in its stores in Hong Kong — and according to Martin Waters, regional director, Asia, for Boots Retail International, the partnership stands to benefit both companies.

"Our international strategy is based on performing as a brand," Waters said. "When we first started our international business five years ago, we just exported the U.K. business model and it didn’t work very well. What you’ve got in Hong Kong [with Watsons] is the region’s best retailer in health and beauty. Why would we want to try to outdo them?"

Initially, six Watsons stores will carry Boots products, and more will be added according to the brand’s success and available space. Said Gordon Reid, managing director of Watsons, "We’re starting with six stores. There are around 50 or so that we can fit Boots into. The problem in Hong Kong is the scarcity of space."

Reid added that there were no immediate plans to open a freestanding Boots shop. "Certainly some of the big landlords are very interested in us bringing Boots stores to Hong Kong, and we’re not ruling anything in or out."

Although neither party would divulge expected sales, both intimated that Boots’ progress would be reviewed at the beginning of 2003. "We have a six-months projection and we think we can do it," Reid commented.

Part of their confidence comes from Hong Kong’s track record with cosmetics purchasing. There is an annual turnover of more than $1 billion worth of cosmetics and toiletries in the territory, of which about 30 percent transpires through Watsons. All figures are converted from the Hong Kong dollar to the U.S. dollar at the current rate of exchange.

To tap into this lucrative market, Boots is bringing 850 products across four product categories and 12 brands to Hong Kong. Among them are Toni & Guy’s hair care products, Botanics’ aromatherapy range, and No. 7 cosmetics, which is the UK’s top-selling color cosmetics brand. Products developed specifically for Asia have also been added to the mix. Said Waters, "Skin care regimes in Asia are different from those in North America or the UK. The biggest issue is whitening. About 30 percent of the market here is in whitening. So we have created products in whitening and added foundations in colors more suitable to Asian skin."In this one-time British colony, such effort to appeal to local consumers will be key to Boots’ success in Hong Kong. Further down the road will be discussions about taking the brand to mainland China. "When we really understand Hong Kong, then we’ll have the confidence to move on to other places. I’m not in a bursting hurry to get us into China," Waters said. "Still, one of the great things about our partnership with Watsons is their strength in Asia."

Watsons has 3,200 stores worldwide, including the newly acquired Kruidvat Group. There are 136 stores in Hong Kong. Worldwide, Boots has 1,400 retail outlets.

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