Not in recent — or even distant — memory has a mass retailer tapped an outsider to head up its executive ranks. Yet that’s what is about to happen, on October 1, when Mark Cosby officially becomes president of the CVS/pharmacy unit of CVS Caremark.

Mark Cosby, CVS/pharmacy, CVS Caremark, David Pinto, CVS, chain drug retailer, Macy's, Larry Merlo, CVS drug chain, drug stores, mass retailing, Mary Sammons, John Standely, Rite Aid, Duncan Mac Naughton, Walmart, Joe Magnacca, Duane Reade, Walgreens, Shoppers Drug Mart, Loblaws, Tony Montini, chain drug retailing

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Inside This Issue - Opinion

Cosby will bring change to CVS/pharmacy

September 26th, 2011
by David Pinto

Not in recent — or even distant — memory has a mass retailer tapped an outsider to head up its executive ranks. Yet that’s what is about to happen, on October 1, when Mark Cosby officially becomes president of the CVS/pharmacy unit of CVS Caremark.

It is a daunting assignment. Depending on how one calculates these things, CVS is either America’s — and the world’s — largest or second-largest chain drug retailer.

Some 7,200 drug stores in 44 states, the District of Columbia and Puerto Rico carry the CVS banner, where they combined to produce $57.35 billion in sales in the fiscal year that ended on December 31, 2010. Along the way, those 7,200 drug stores combined to dispense 636 million prescriptions, which translated into $39.87 billion in Rx volume. If CVS/pharmacy’s sales were separated from those of its parent, the drug chain would be the seventh-largest U.S. retailer, the country’s 44th-biggest company.

In other words, Cosby assumes ownership of a major corporation.

If a precedent exists for an outside appointment at this level, it is not easy to recall. John Standley recently replaced Mary Sammons as chief executive of Rite Aid, but he had previously worked for the Camp Hill, Pa., drug chain. Additionally, he came to his assignment with an extensive mass retailing resume.

Other outsiders come to mind, though not at the CEO level. Duncan Mac Naughton, who was brought to Bentonville, Ark., a year ago to head up merchandising for Walmart, brought with him an extensive merchandising background, one that included, most recently, a stint at Walmart’s Canadian unit. Joe Magnacca assumed leadership of merchandising at Walgreens after occupying similar positions at Shoppers Drug Mart and Duane Reade, as well as Loblaws, Canada’s largest grocery chain. The names of other executives brought in at senior levels are hard to come by, though Tony Montini’s appointment at Rite Aid must be included.

Several things about Cosby are clear at the outset. The first is that very little is known about him. He comes to CVS from Macy’s, a very different kind of retailer. He comes to CVS with an operating, rather than a merchandising, background. Clearly then, Larry Merlo, the chief executive at CVS Caremark, perceives an operational, rather than a merchandising, need in bringing Cosby to the CVS drug chain.

Just as clearly, it is apparent to anyone who follows CVS that the drug chain could benefit from an outside presence. It is both a strength and a potential weakness that CVS boasts one of the most long-tenured senior management teams chain drug retailing has seen. Most of the senior managers at the drug chain have been at the company for close to two decades.

These people have grown up with CVS, have been integral to the drug chain’s success, and must share the blame for its occasional stumbles. They have set the tone for the retailer’s approach to its customers — and for the quality of its relations with its suppliers. Most significant, they are set in their ways, and in the ways in which they deal with their various ­constituencies.

That is about to change. Despite his operational background, Cosby will surely bring change throughout the CVS organization — at least if he is to justify the confidence Merlo has indicated by hiring him, after an extensive, thorough and very professional talent search. Still to be determined are the nature of those changes and their cumulative effect on both CVS and the chain drug industry.

Those changes will not come quickly. The best senior executives never act at once, preferring to figure things out before changing them. So the industry will have to wait until 2012 to gauge Cosby’s initial impact on the organization and the ­industry.

In all likelihood, however, chain drug retailing will not have to wait nearly that long to get to know Mark Cosby. Though he will likely spend the first few months of his tenure learning the workings of the organization, he must also find time to get to know the industry in which he works — and the people who make that industry work. Thus, our initial indication of the quality of Merlo’s appointee will be gauged by how quickly, easily, productively and effectively he navigates the industry between now and the end of the year.

It is an industry that is eager to introduce itself to Mark Cosby. The hope here is that Cosby is just as eager to introduce himself to the chain drug ­community.