Dis-Chem is buying Baby City for R430 million

Dis-Chem says it is buying baby care products retailer Baby City, from its founder shareholders, the Aronoff family, for R430 million.

The pharmacy group has entered into inter-conditional agreements in terms of which it will acquire 100% of the issued share capital of Fairy Tales Boutiques, and Somerset Baby Hyper, which make up Baby City.

Michel Aronoff, who conceptualised and strategised Baby City’s direction, will continue to serve as managing director of Baby City following closure of the transaction, and current staff will be retained, Dis-Chem said.

Baby City is a specialist destination baby retailer who operates a network of 33 stores across South Africa.  For the 12 months to February 2020, it generated revenue of R855 million.

“It has continued to trade well relative to the Covid-19 lockdown environment demonstrating both the resilient nature of the industry and the inherent brand equity of the retailer,” Dis-Chem said.

“Dis-Chem recognises that the characteristics of the baby product sector align with the those of the pharmacy sector. Both sectors are extremely resilient with perpetual new entrants – the baby sector sees approximately 900,000 new babies annually. Dis-Chem’s current offering is very focused on the FMCG and basic essentials categories which are extremely sensitive to price and promotion.

“To deliver both a destination baby experience to the first time parent and allow growth into the more specialised baby categories such as baby gear (prams, car seats, swings, bouncers and other nursery equipment), clothing, developmental toys, amongst other categories, Dis-Chem required a standalone baby destination store network whose brand positioning aligned with its own brand,” it said by way of rationale for the purchase.

The Baby City retail stores will be integrated into Dis-Chem’s current supply chain and serviced by CJ Distribution.

Baby City stores will see the inclusion of a Dis-Chem branded clinic, which will offer ante and post-natal clinic services aimed at babies and toddlers.

“These services will enhance the destination store status of the brand and in turn allow the Dis-Chem clinic infrastructure within its own stores, which currently offer these services, to handle the growth it is seeing in primary care clinics services volume,” Dis-Chem said.

Currently, Baby City does not have a loyalty offering. “Extending the Dis-Chem loyalty and partner offering, currently comprising of 4,5 million members and numerous value-enhancing partners, to Baby City customers will drive increased
shopper frequency and bigger customer baskets, Dis-Chem said.

It said it will also extend private label brands into the Baby City stores.

The pharmacy group said that as part of the due diligence, a white space exercise was concluded based on the relationship between geographic baby density and baby retail store density. It identified the potential for approximately 30 additional sites for well traded Baby City outlets.

Read: Dis-Chem faces Competition Tribunal for hiking prices during coronavirus pandemic

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Dis-Chem is buying Baby City for R430 million