In Uncertain Times, Supermarkets Hold Their Own by JIM FREDERICK United States, and 10 of the Top 25
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In uncertain times, supermarkets hold their own BY JIM FREDERICK United States, and 10 of the top 25. derive “a tremendous halo effect from FMI, “41 percent of [supermarket] “Pharmacy is a major contributor to the pharmacist being there.” shoppers who say their diets could be In times of uncertainty and econom- the supermarket’s bottom line,” the One indication of the growing re- a lot healthier would be very interested ic turmoil, Americans still have to eat Food Marketing Institute noted. cognition by supermarket industry in information related to disease pre- and take their medicines. “Prescription sales make up 9.5 per- leaders of pharmacy’s importance to vention and management.” That essential marketplace truism cent of total store sales.” their long-term survival was the hir- According to the food-store indus- isn’t lost on supermarket pharmacy “Consumers are demanding both ing, one year ago, of pharmacy veteran try’s newest research, contained in the operators. Trading on the enormous nutritional advice,” said FMI president Cathy Polley as FMI’s first vice presi- Supermarket Pharmacy Trends 2008 appeal of one-stop shopping conven- and chief executive officer Tim dent of pharmacy services. Polley, who report released by FMI in July, super- ience, growing demands among con- Hammonds, “and pharmacists who has served in high-level pharmacy market pharmacies dispensed an aver- sumers for healthier eating alterna- can bridge the gap in the supermarket management positions for the Na- age of 126 prescriptions per day in tives, and their own growing ability to between medicinal counseling and tional Association of Chain Drug 2007, basically the same number dis- merge the health and prevention nutritionally-driven wellness pro- Stores, the American Pharmacists pensed the previous year. The average expertise of their pharmacy staff with grams.” And growing awareness of Association, Kmart Corp. and other food-store pharmacy generated week- the nutritional benefits offered in the nutritional issues, wellness and pre- organizations, has called pharmacies ly prescription sales of $46,000, up food aisles, food-store operators con- ventive health among consumers, he “strategically essential to food retail- roughly 9 percent over 2006. tinue to elevate the role their pharma- said, has handed the supermarket ers,” adding that food-store pharma- On a broader level, “supermarkets cy departments play in overall store industry a golden opportunity to build cies serve as the anchor for “the health- are managing reasonably well through performance. stronger ties to the U.S. population— and-wellness initiatives that many a challenging macro [retail environ- Indeed, supermarket chains, led by and to strengthen its long-term busi- supermarkets emphasize.” ment] and to a large degree, are faring Kroger Co., now account for three of the ness model. What’s more, FMI noted, food-store better than discretionary retail sec- 10 largest pharmacy retailers in the “Health and wellness … is a space pharmacies are “positioned to bring in tors,” according to Goldman Sachs that supermarkets can own,” even more revenue,” with “more than retail analyst John Heinbockel. For the complete Drug Store News Hammonds said. “This is a great half of all supermarket pharmacies Given the current state of the econo- Power50 rankings of the top retail phar- opportunity … connecting the dots [offering] in-store programs to turn my, some price inflation could be macy operators in America, including between health and wellness.” shoppers into pharmacy customers.” expected, however, Heinbockel noted, food, drug, mass and independents, log Supermarkets that contain in-store Those pharmacies have plenty of fears of a dramatic drop in the nation’s onto www.drugstorenews.com pharmacies, Hammonds added, also opportunity to do so. According to supermarket business are overblown. Powerhouse Kroger maintains strong lead in Rx Question: which retail chain wig, retail analyst with Citi Fry’s Marketplace, centered in Headquarters: Cincinnati has risen to become the nation’s Investment Research. Arizona; QFC or Quality Food sixth-largest pharmacy opera- John Heinbockel, a retail Stores in Washington and 2007 sales: $70.2 billion tor, with nearly 2,000 prescrip- analyst with Goldman Sachs, Oregon; and Indiana-based % change vs. 2006: 6.2% Kroger tion centers, coast-to-coast mar- also likes Kroger’s prospects. Jay C Food Stores. No. of stores: 2,486 ket penetration and $7 billion in The company, he noted in a All told, roughly 8-out-of- No. of stores with Rx: 1,940 pharmacy revenues? Sept. 14 report, has “by far the every-10 of Kroger’s roughly The answer, of course, is strongest momentum” among 2,500 supermarkets contain Avg. store size: 2,500, 57,000, 65,000 and 145,000 square feet Kroger Co., one of the indus- its supermarket competitors. pharmacies, and more than try’s most innovative practi- Kroger’s expanding empire 600 of those pharmacies Rx sales: $6.9 billion tioners of pharmacy-based of in-store pharmacies comes include drive-through win- % of sales from Rx: 9.8% patient-care initiatives. Kroger under many retail banners. dows. Its pharmacists will Source: Company reports, Drug Store News truly can be called a national Besides its Cincinnati-based likely dispense some 125 mil- power in food and pharmacy Kroger-brand flagship stores, lion prescriptions this year. programs, such as immuniza- education programs. In addi- retailing, with stores in every the company offers pharmacy Those numbers highlight tions, obesity management, tion, the company noted, region of the United States services through a slew of the company’s commitment diabetic care, cholesterol “Many pharmacists … have except the Northeast and local subsidiaries including: to pharmacy, which account- screening, emergency contra- received various certifications parts of the upper Midwest Utah-based Smith’s Food & ed for 9.8 percent of total store ception and more,” noted one in disease-state management, and Central-West region. Drug Stores; Dillons, which revenues of $70.2 billion in fis- company report. including NIPCO certifica- “We believe Kroger will operates in Kansas, Missouri, cal 2007. So, too, does Kroger’s Kroger also continues to tion programs, APhA’s continue to benefit due to its Arkansas and Nebraska; ongoing determination to add Kroger Patient Care Cen- Immunization Delivery train- lower prices versus supermar- Ralphs and Food 4 Less in develop and field clinical serv- ters in some stores, and to ing, and Cooper/Clayton ket competitors, strong traffic California; King Soopers and ices for patients, in-store provide—often through clini- smoking-cessation facilita- trends, sales-driving initia- City Market in Colorado; Fred health outreach offerings and cal pharmacists or pharmacy tor’s training. Current pro- tives … and investments in Meyer, based in Oregon and residency programs through- residents—such mobile serv- grams include smoking-ces- the overall shopping experi- also operating in Washington, out its divisions. “Special ices as diabetes screenings, sation, respiratory care and ence,” noted Deborah Weins- Idaho and Alaska; Fry’s and emphasis is on pharmacy care immunizations and wellness- adult immunizations.” Drug Store News www.drugstorenews.com October 2008 • 1 Safeway: New healthcare division not a PBM BY MIKE DUFF Beyond that assertion, Sachs conference that design- Safeway is keeping a lid on its ing a healthcare plan based on Safeway made a splash a plans, and the entire dimen- providing incentives for be- Headquarters: Pleasanton, Calif. month ago when Steve Burd, sion of the effort might not be havioral change could win 2007 sales: $42.3 billion Safeway chairman, president and fully conceived. “There’s real- positive participant response. % change vs. 2006: 5.2% chief executive officer, told ly nothing much more we can Burd asserted that the Safe- No. of stores: 1,738 the Goldman Sachs Global say because we’re in the plan- way program could cut a com- Retailing Conference that ning stages,” Massingill said. pany’s pharmacy costs by 30 No. of stores with Rx: 1,300 the company would launch The healthcare division’s percent in 12 weeks. Avg. store size: 45,000 square feet a healthcare services con- roots originate from In the company’s second- Rx sales: $3.7 billion sulting division. While some Safeway’s efforts to rational- quarter conference call, Burd % of sales from Rx: 8.7% indications are that he made ize costs in healthcare for its said, “One of the things that Source: Drug Store News the announcement a bit own non-union employees we are focused on is health before the company was pre- and provide incentives for care. When you look at the pared to respond to the workers to better manage benefits side of the equation, among the 10 largest in the the generics shift,” Burd said. storm of questions that fol- their health and select there are huge benefits there. United States with more “It is also challenged, as I am lowed, the company has said cheaper options for care. In We’ve embedded in our con- than $3 billion in sales, has sure you know, by a shift in one thing in no uncertain recent negotiations between tract and in our approach here been hit by the shift to mail order. It remains a good terms: Safeway isn’t plan- major supermarket opera- the notion of personal respon- generics, but it is increas- business for us and some of ning to become a pharmacy tors and union workers in sibility and making lifestyle ing services, including the the sales building strategies benefit manager. California, Burd and changes, and that affects costs. addition of in-store vacci- that we’ve put in place are in “We’re in the beginning Safeway took the lead, rais- Had we not taken a leadership nations for seasonal ail- fact focused on pharmacy. phases of this healthcare divi- ing pay levels in return for position in health care, we ments including shingles.