Holland & Barrett CFO on capturing £10bn health and wellness market

When you see a Holland & Barrett shop on a high street, you might be forgiven for not appreciating the huge ambition behind the healthcare brand. After all, most of the stores in the chain feature old-fashioned fascias, offering little clue to the huge recent investment made in the group.

The business that was acquired two years ago by investor L1 Capital for £1.8bn has been set a challenge of capturing the £10bn health and wellness market. It’s a target that would seem extraordinary if you hadn’t encountered the management team running the show.

CEO Peter Aldis and CFO Chris Keen played a key role in building the business under previous owner private equity giant Carlyle Group and having stayed on, continue where they left off- driving growth with an omni-channel approach.

The business has 1,077 stores in Western Europe (700 are in in the UK) and 97 franchise partnerships and 432 concessions in the EMEA region and Asia.

In the year to November 2018 the group made a pre-tax profit of around £152m, up 1.3% from the previous year, on revenues of £702m, up 7%, from engaging consumers in shops and online simultaneously. “It’s not just about the website, it’s about bringing digital into the store and interacting on social media. Customers might start in shops and online, or they might start online, go into a store and come back. Click and collect is 20% of our online sales”, says Keen, who joined Holland & Barrett as CFO in 2012.

Developing the skill set

Keen’s background has provided him with a powerful combination of experiences from two of the UK’s best-known retail giants and private equity-owned pub and restaurant groups.

A degree in maths with computer science at Royal Holloway, part of the University of London, gave him a valuable insight into how IT helps drive businesses. This was followed by an accountancy qualification with Grant Thornton which supported an MBA at Cranfield University.

Then he “did the classic thing everyone does with an MBA, I started a business with some other guys. It was a computer company where I did everything from the book-keeping to the installs and engineering,” he reveals.

From there to Morley Stores, he moved to gain retail experience at the firm that sold school fliptop desks, where he became finance director but also did his first deal acquiring a rival. From there it was on to retail giant Argos as systems accountant, interacting with all departments, up until it was acquired by Home Retail Group.

At fast-growing high street chemist chain Boots he worked in commercial finance and marketing, learning “a lot about how to do the trading side of the business”, as it grew to a £4bn company. But then his entrepreneurial streak kicked in when he left after six years to join pub group private equity-backed Spirit that had acquired a set of pubs from Scottish & Newcastle.

What made him do it? “It was a combination of greed and personal development. If I’m not constantly learning and developing, then I get bored,” he says. By the time it was sold to rival Punch he had become finance director of the group, but his time in the pub industry was far from over.

He moved on to Laurel Pub Company as CFO, which after a ‘pre-pack’ administration split into Bay Restaurant Group and Town & City Pub Company, which he continued working at. In the five-year period up to 2012, Keen undertook a number of deals at Stonegate Pub Company as head of finance, before briefly advising RBS on its ownership of pub group Bramwell, often having to address a whole syndicate of banks where “everyone is self-interested,” he remarks.

 Best kept secret

The rough and tumble of the pub sector prepared him well for whatever role came next, especially if there was a big commercial element to the role. “I had done pre-packs, restructurings, acquisitions, disposals, I wanted to take all that and build on that,” he says.

When he came across Holland & Barrett, the iconic store group owned with US vitamin-maker Nature’s Bounty Co. (NBTY) by Carlyle Group, he decided the firm was the “best kept secret on the high street,” and joined as CFO in 2012.

What Holland & Barrett, which began life 1870 as a grocery store in Bishop’s Stortford founded by Alfred Slapps Barrett and Major William Holland, was a chance for Keen to build on his accountancy qualification and MBA, as well as industry experience. “Argos, Boots, Spirit, Laurel Pub Company are all experiences you learn something from. You can apply all of those at Holland & Barrett but just differently because we’re an incredibly fluid company,” he says.

Keen sees his role as not only about running finance but “also extending the CEO’s influence on stuff because you have to do everything”, reflecting his willingness to delve into commercial aspects of the group. “This is where you become a bit chameleon-like as a CFO. I can do statutory accounts, accounts payable, accounts receivable, I’ve done all of those jobs in my career, and I can also negotiate with suppliers,” he says.

In one category area he explains how he had to remove one company from its supplier list: “I had them all in one-by-one, beat them up and delisted one of them. It’s that sort of thing where you’re CFO but you’ve stepped into somebody else’s shoes. Then I’m back on statutory accounts. It’s a complete spectrum of work, going from detail to strategy, to working in commercial, to what the hell is going on with the loyalty card,” he adds.

Digital evolution

“I’m learning massively about digital, and digital transformation and how digital isn’t just about taking sales from the store and putting them online, digital is about bringing digital into the store, about giving ease of supply to customers, meeting those customers’ needs,” he says.

The model Holland & Barrett is developing is in response to changing expectations. “What we don’t want is a digital experience that takes customers to outer space, that nobody can reach, you want the digital experience that really strikes a chord with the consumer, that gives them all the ease they expect, and all the information that they expect as they go along,” he adds.

“The High Street is not dead, its evolving” says Keen. “If you look at the stores of tomorrow they look like Made.com, they are very experiential but very digital in the interaction they have with customers, or they probably have a coffee shop like Waterstone’s. The experience and touch points with the customer are changing digital,” he adds.

New ownership

In June 2017, Holland & Barrett was bought by L1 Capital, retail arm of the Letter One fund headed up by Russian oil billionaire Mikhail Fridman. At the time Stephan DuCharme, L1’s Retail managing partner said Holland & Barrett had “attractive growth positions in other European and international markets..We believe that the company is well positioned to benefit from structural growth in the growing £10bn health and wellness market and has multiple levers for long-term growth and value creation.”

Keen says the investor saw the potential to develop the group’s technology. “We hadn’t taken the next leap to digital experience and become a digitally led champion of well-being,” he says. A McKinsey-developed strategy focused on seven pillars for digital/international growth has been added. “At the heart of this is how do you tie the customer mission to how you can deliver that with ease through digital engagement?”

Keen is also personally involved in deal-making, having recently acquired a business in Belgium. “We’ve got 20 stores and growing in Belgium and we’ve just put a management team into it to expand the website- which is growing at something like 20%. I did the same in Sweden, bought a business there, we’re setting up in Singapore. Holland & Barrett now sells in 16 countries.”

The company is now in major European economies with over 300 stores in mainland Europe and through pharmacy groups such as Apollo in India and AS Watson in Hong Kong. One big omission is the American market. “We looked and in our opinion the US is over-shopped,  over there everything’s genetically modified, which doesn’t fit with Holland & Barrett,” he says.

One challenge is managing the group’s vast estate where a combination of 10-year leases with 5-year breaks is the norm, and average lease length is 3.7 years. “I have to churn that estate because parts  are not necessarily fit to be digitally-led stores,” he explains.

Keen says he is still ambitious for himself and the group, especially taking a private-equity owned  business into its new owner. “I feel that I can still add value as the CFO and I can still push the boundaries with the business going forward. I’ve never stayed at a business 2nd generation before,” he reveals.

“I put some skin in the game and I stayed because I am convinced Letter One have a vision of where they can take it. They said: ‘We didn’t buy this business for its history, we bought it for the potential of what we think it can do’,” he adds.

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