In a statement yesterday, Boots said sales of its products were in line with expectations, but Sainsbury's disputed this claim.
The joint venture deal was announced in October 2001 and at one stage led to speculation that there might be a merger of the supermarket group and the chemist. This was even hinted at by Sainsbury chief executive, Sir Peter Davis.
In an interview at the time Sir Peter, a former member of the Boots board, indicated that if the recently signed deal between the two companies was successful, then there was the possibility of a bigger deal. He said that they would know within a year if the arrangement with Boots is working.
The deal saw the creation of a "store within a store" in nine of its out-of-town stores; these will now revert back to Sainsbury's own format.
In a statement, Sir Peter said: "Sainsbury's has learned a lot from this trial but we have been unable to agree commercial terms for rollout. We have been trialling our own health and beauty offer separately and will now expand this range via a mixture of new own-label and international brands. The five trial stores [for Sainsbury's new range] have seen significant sales increases, which show that we can create sufficient value by operating our own extended health and beauty department."
According to reports, Sainsbury's became increasingly unhappy with its partner Boots, particularly with problems within the chemist's senior management, which led to problems in forward planning.
One Sainsbury's insider quoted by the Daily Telegraph said: "They couldn't organise a piss-up in a brewery. We never knew who we were dealing with. Everyone kept leaving the company."
Boots has lost a string of senior executives in recent years including strategic marketing director Barry Clare, retail marketing manager Amanda Jenkins and executive Steve Russell.
However, a spokesman for Boots insisted that it was Boots that took the decision to end the deal. "It was Boots that took the decision and communicated it to Sainsbury's on Friday. The performance has been very satisfactory, but we could not agree terms with Sainsbury's."
The UK health and beauty market is worth £6bn a year and supermarkets have a 48% share.
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