In a bid to accelerate its product strategy, Walgreens Boots Alliance plans to outsource private-label and owned-brand manufacturing to Fareva.
Fareva submitted a binding offer for 10 years to manufacture Walgreens’ owned-beauty brands and private-label products, the company said Tuesday. The idea is that Fareva would take ownership of Walgreens’ contract manufacturing business, which operates in the U.K., France and Germany, to help Walgreens accelerate its global product strategy.
Fareva manufactures in 11 countries, including the U.S., and has research and development capabilities. The business specializes in household, cosmetics and pharmaceutical manufacturing. The deal, which is subject to regulatory approval, is expected to close by the end of 2017.
The agreement comes as Walgreens works to get approval for a new deal with Rite Aid, which was changed after the original proposal struggled to get approval from the Federal Trade Commission. The new agreement would give Walgreens a heavier focus on the Northeast U.S. — the company plans to buy 2,186 Rite Aid stores, three distribution centers and related inventory for $5.18 billion, and assume some related real estate leases and liabilities.
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In beauty, Walgreens has been working to improve its experience, rolling out upgraded beauty offerings in 3,000 U.S. doors by the end of the year. As of April, Walgreens-owned brands made up about 15 percent of beauty sales, and Botanics (also owned by the business) was planning on moving into more doors. The company owns Soap & Glory, No. 7 and Liz Earle.
“The growth we have seen in the health and wellness and beauty sales…is encouraging,” said Walgreens chief executive officer Stefano Pessina during the company’s fiscal second-quarter earnings call. “Based on the latest Nielsen data [for the 13 weeks ended Feb. 15], we gained share in the health and wellness, beauty and personal-care categories,” said George Fairweather, executive vice president and global chief financial officer.