Inside This Issue - Opinion
Global market will test big U.S. drug chains
February 25th, 2013
Recent events reinforce the commitment by the top two American drug chains to participate in the ongoing globalization of mass market retailing.
After pondering its international options for several years, CVS Caremark entered the fray earlier this month by purchasing Drogaria Onofre, a 44-store retailer based in São Paulo, Brazil. The acquisition of that country’s eighth-biggest drug chain represents the incremental approach to overseas markets long promised by Larry Merlo, CVS Caremark’s president and chief executive officer.
That strategy contrasts strikingly with the thinking of Walgreens, which last year took a 45% ownership interest in Alliance Boots, a pharmacy retail and wholesale operation with a presence in more than 25 countries, and has the option to buy the balance of the company within two and a half years. Walgreens president and CEO Greg Wasson reiterated management’s belief in the transformative nature of the venture at an analysts meeting in London (where Alliance Boots is based) two weeks ago, saying, “This combination ... provides a platform for global expansion beyond the U.S. and Europe into new markets around the world.”
While chain drug retailing is certain to have an international dimension going forward, the success of individual ventures isn’t assured. The Jean Coutu Group, the No. 1 pharmacy chain in Quebec, faltered when it attempted to establish a major player in the United States. In 2004 it expanded its small presence here with the acquisition of most of the much larger Eckerd chain, an experiment that didn’t go well and eventually led to its retreat into Canada. Years earlier Boots, under previous management, made an ill-fated foray into Canada. Despite that country’s considerable cultural affinities with Great Britain, Boots was never able to fully understand and connect with the Canadian consumer.
The experience of Coutu and Boots (further examples in other trade classes abound) demonstrates that even retailers with an excellent track record sometimes founder outside their home markets.
On the other hand, Walmart, Carrefour, Alliance Boots and others have shown that mass retailers can, indeed, adapt to different cultures and flourish in nations around the world. It will be interesting to see where CVS Caremark and Walgreens wind up on that spectrum.