Inside This Issue - Opinion
Chain drug retailing’s events of the year
November 24th, 2009
by David Pinto
With 2009 winding down, the time has come to list the most memorable events of the year in chain drug retailing.
Herewith, seven such events:
• The remaking of Walgreens. Seldom in the annals of chain drug retailing has a retailer apparently at or near the top of its game so drastically and dramatically reversed direction. But that’s just what Walgreens has done, adopting a new approach to chain drug retailing at a time when the old approach, though occasionally flawed, appeared to be working.
Out of the decision to change direction has come Customer-Centric Retailing, SKU rationalization, the POWER pharmacy program, the complete transformation of the retailer’s top management staff and a range of programs designed, over time, to create a brand-new drug chain from the ashes of the old. Never has so dramatic a transformation been attempted — and, supplier grumbling to the contrary, never has so bold a gamble shown such early promise of success.
• The appointment of Greg Wasson as Walgreens’ chief executive officer. Two years ago, few in the chain drug industry had even heard of Wasson. Now he heads the largest drug store chain in America.
More than that, he has shown, early on, all the qualities that leadership demands — intelligence, boldness, a charismatic personality and a confidence that comes with experience, judgment and the conviction that the drug chain he heads is on the right track and that his brand of leadership will keep it there.
• The arrival of Bryan Pugh at Walgreens. Last February, Pugh, furnishing a retail résumé rich in experience but virtually absent chain drug qualifications, joined the company in a nebulous role that charged him with designing Walgreens’ drug store of tomorrow. Shortly thereafter, he was named the retailer’s chief merchant.
It is certainly the most challenging test he has faced in a retailing career that has seen him travel from Wal-Mart to Tesco, from the United States to Asia and back again. Should he succeed, and the feeling here is that he will, that success will rank as one of most dramatic and game-changing performances chain drug retailing has seen.
• The trial of Caremark. The chain drug community was shocked recently when CVS Caremark CEO Tom Ryan announced in an earnings call that Caremark, the retailer’s PBM unit, had lost $4.8 billion in contracts for 2010. Most shocking in all this was that it happened to a Ryan-led business, a fate befalling an executive who had, through a combination of unquestioned ability, charismatic leadership, perspicacious thinking and a willingness to take risks, unerringly brought CVS to the pinnacle of mass retailing in America.
Even in publicly addressing this setback, Ryan was his masterful self, vowing the retailer would do what’s needed to be done to correct the situation and bring Caremark’s business back to where he believes it should be. Anyone who knows and respects Tom Ryan — and that group includes virtually anyone who has had contact with him over these past 10 years — knows better than to doubt his ability to do so.
• The departure of Chuck Fehlig. While not technically a chain drug matter, Fehlig’s decision last spring to step down as Wal-Mart’s O-T-C drug point man, after a 27-year career with the retailer, has left a personal and professional void within both the retailer and supplier communities.
Personally, no merchant in mass retailing had earned the trust, respect and affection that had come to Fehlig. Though a tough negotiator in the Wal-Mart tradition, he was unfailingly fair — and suppliers throughout the O-T-C spectrum had learned to respect his judgment and only rarely question his decisions. Why? Because professionally, those decisions were invariably grounded in what was best for Wal-Mart.
Though Fehlig is still an industry fixture — he has signed on with Blue Ocean, a consulting firm formed by two other former Wal-Mart executives — he is missed at Wal-Mart even by those who only knew him socially. And though he has been replaced by a personable and capable merchant, those who know Fehlig best know that it’s not the same — and never will be.
• The survival of Rite Aid. A year ago, those who claimed to know best were predicting Rite Aid’s demise. Today, the retailer is very much in business, thanks to a patient supplier community and the addition of several senior managers who have combined to institute some new programs and chart some innovative initiatives that have collectively returned Rite Aid to a measure of respectability.
Behind it all, of course, is Mary Sammons, in her seventh year as Rite Aid CEO. Now one of chain drug retailing’s most senior executives, she has won the respect and admiration of the entire chain drug community, for both her tenacity in facing down a difficult situation not of her own making and her determination not to allow outside influences, like the lure of a young granddaughter on the West Coast, to interfere with her stated mission of returning Rite Aid to some measure of the luster it once enjoyed in the chain drug industry.
• The reemergence of Duane Reade. As recently as a year ago, Duane Reade was the drug store New Yorkers had to pass on their way to Walgreens, CVS or Rite Aid. No longer.
Under the leadership of CEO John Lederer and chief merchandising officer Joe Magnacca, Duane Reade has emerged as America’s most exciting drug chain. A new look, new merchandising programs, new merchandise categories and presentations, a new promotional emphasis, a new advertising campaign, and a new sense of what it might mean to become New York City’s dominant drug chain — all have combined to make Duane Reade the drug store New Yorkers have come to think of first when they think of drug store shopping.
In listing the key events of 2009, honorable mention status should be accorded Tony Civello, the CEO of Kerr Drug, who remains the industry leader when it comes to recognizing that the core category in a chain drug store is pharmacy, and that for pharmacy to work most effectively to attract traffic and sales, it must be positioned professionally before it is positioned as a sales generator.
Finally, the entire chain drug industry has led the mass retailing community in positioning pharmacy as the indispensable retail segment when it comes to providing such professional services as the availability of the flu vaccine and other health care offerings. Indeed, no other segment even comes close.