The chain drug industry has entered a period that can best be characterized by three absolutes: stability, change and the emergence of new leadership.


chain drug industry, Walgreens, David Pinto, Editor, Duane Reade, CVS Caremark, Rite Aid, Save-A-Lot, John Standley, Kerr Drug, Mark Griffin, Bartell Drug, Kinney Drugs, Larry Merlo, Joe Magnacca, Tom Ryan, Mary Sammons, Greg Wasson, Tony Civello, Bob Loeffler














































































































































































INSIDE THIS ISSUE
News
Opinion
Other Services
Reprints / E-Prints
Submit News
White Papers

Inside This Issue - Opinion

A time of change and stability

April 18th, 2011
by David Pinto, Editor

The chain drug industry has entered a period that can best be characterized by three absolutes: stability, change and the emergence of new leadership.

Walgreens’ acquisition of Duane Reade in 2009 — and its just-announced acquisition of drugstore.com, an event with game-changing possibilities — notwithstanding, the industry has resolved itself into three clear and separate components: the competition between Walgreens and CVS Caremark for industry supremacy, Rite Aid’s ongoing battle for respectability, and the emerging influence of America’s regional drug chains.

About the first, too much has already been written. America’s largest drug store markets are unfailingly punctuated by the competition between CVS and Walgreens, a tug of war that pits two of America’s very best retailers against each other. In the end, regardless of who leads in individual markets, each will win by challenging the other to become a better, more creative, more diverse and more accomplished retailer. Where these two drug chains are concerned, the aphorism above the Nike store in Chicago applies: "There is no finish line."

As for Rite Aid, its prospects look brighter than its performance in recent years would have led one to expect. The drug chain’s experiment in South Carolina with food retailer Save-A-Lot has thus far been a rousing success, with initial results outpacing even the most optimistic predictions. Several other new initiatives — a prescription drug delivery service comes to mind — look promising, at least initially. And John Standley, the retailer’s new chief executive, is now firmly in command. Though problems remain — too many underperforming stores in underrepresented markets, too many head-to-head confrontations with still-superior rivals Walgreens and CVS — the outlook is brighter than it’s been in some time.

As for America’s regional drug chains, they form a remarkably strong group. By now, those observers with even the remotest interest in chain drug retailing have journeyed to Raleigh, N.C., to witness firsthand the Kerr Drug experiment in pharmacy care and patient involvement and interaction. Fewer industry people have been to Sioux Falls, S.D., to study Lewis Drugs’ latest store, one that takes merchandising in a chain drug context to new levels of creativity and excitement in a stunning example of what can be sold in a chain drug store. Those willing to make the trip — it’s best undertaken between late spring and early fall — need only call Mark Griffin in advance to have him waiting at the airport.

As well, this would be a perfect summer to journey to Seattle to sample the exciting stores that Bartell Drug is opening, stores that, though firmly based in a drug store merchandise assortment, nonetheless sell all manner of products to Seattle’s consumers. No matter which other retailers operate in the Pacific Northwest — it is, after all, Costco’s headquarters — Bartell is the retailer that locals think of first when they think of a hometown chain.

Those sentiments apply equally well to upstate New York, where Kinney Drugs has carved out a presence and market share that competitors can only envy. As with Bartell, Kinney is the local drug chain that succeeds because it’s the local drug chain — and, as such, understands its market and its customers to a degree larger drug chains can’t begin to ­duplicate.

Other regional drug chains are emerging as well — too many to point to in this space. However, one thing is clear: Today’s regional drug chains are more exciting merchants and more efficient operators by far than those of a generation ago, the generation that preceded this one and formed the core of the chain drug industry in its halcyon days.

As for change, it is concentrated between America’s two largest retailers — and, again, too much has already been written about it, though it needs to be said that the feeling here is that Walgreens’ purchase of drugstore.com is a brilliant move.

Briefly, the Larry Merlo era is beginning at CVS, while the addition of Joe Magnacca to Walgreens’ already powerful merchandising staff marks the dawn of a new day at that drug chain. Both these alterations bode well for chain drug ­retailing.

Which brings up the final point. Seldom in the annals of chain drug retailing — even with the departure of Tom Ryan from CVS and Mary Sammons from Rite Aid — has the industry been the recipient of more strong leaders. Merlo and Walgreens CEO Greg Wasson have already proven their worth. Leaders like Kerr Drug’s Tony Civello, Lewis Drugs’ Mark Griffin and the heads of several other regional drug chains belong in that group. H-E-B’s Bob Loeffler, the incoming chairman of the National Association of Chain Drug Stores, will bring a new dimension and some new thinking to that prestigious position — in addition to contributing a disarming personality and a striking intelligence.

In short, this is both a time of change and a time of stability for chain drug retailing — the best of combinations.

Advertisement