Inside This Issue - Opinion
The ideal choice to run the CVS drug chain
December 16th, 2013
by David Pinto
It’s not that Mark Cosby, the departing president of the CVS drug chain, was not respected. After all, here was an executive with an extensive retailing background, most notably at Sears and Macy’s. The drawback was that Cosby was not a chain drug retailer.
As such, he lacked several of the requisites for leadership in the chain drug industry, such as an acute knowledge of the role of pharmacy, which accounts for some 70% of sales in a typical chain drug store. As well, he came late to the idea that, while 80% of department store sales are done on promotion, the figure in the chain drug industry is directly opposite, with promotions accounting for a minority of the business.
This lack of familiarity with chain drug retailing certainly hurt Cosby as he rushed to gain traction and involvement in a business of which he knew little. But the bigger lesson here is not the sometimes tough fit Cosby found as he attempted to integrate himself into the chain drug industry. Rather, it is the complexity of the industry itself, a retailing segment that often baffles outsiders who mistake the apparent simplicity of this small-store format for a simplicity of the industry itself, when in fact the converse is true: Chain drug retailing is a multifaceted and often complex business that requires years of study and involvement to master. Even with that commitment, total mastery escapes all but a talented few.
Which leads us to Helena Foulkes, the person CVS Caremark CEO Larry Merlo has tapped to replace Cosby as CVS/pharmacy president. The Foulkes appointment, even at this early date, is being hailed throughout the chain drug industry as a brilliant choice, simply because she is the most qualified candidate within the organization. Certainly, an executive not now working in chain drug retailing may have a stronger resume, but just as certainly that resume will lack chain drug experience. And as many executives have learned through the years, bringing a outsider into an organization at the most senior level is fraught with dangerous possibilities.
Foulkes is the ideal choice to run CVS for many reasons. She’s a veteran of the organization, having worked at CVS for 21 years. She has excelled in a variety of capacities, most recently emerging as the public face of this organization in the aftermath of Tom Ryan’s retirement as CVS Caremark CEO two and a half years ago. She was instrumental in developing CVS’ ExtraCare loyalty program, one that remains the industry standard. She’s touched and influenced virtually every aspect of the CVS organization, though she does lack hands-on merchandising and operational experience. But she has people to do those jobs.
What CVS needs now is leadership, and Foulkes can furnish that quality in ample abundance.
Should Foulkes have been named president two years ago, when Cosby was tapped instead? Probably not. By her own admission, she was not yet ready for that assignment in 2011. Now she is.
A word about Larry Merlo, who made the decision to name Foulkes to her new job. The choice had nothing to do with the fact that Foulkes is a woman. That’s incidental to the job. The fact that Foulkes becomes the only woman now running a major U.S. drug chain is also incidental to this promotion. Fact is, she is the most qualified candidate. Merlo, recognizing that, has given her the chance to succeed.
The stakes are high. Though CVS is performing well, the retailer faces some serious issues at store level that need to be quickly addressed. As well, many in the supplier community have voiced their view that CVS is no longer the go-to drug chain. That designation can now be more rightly claimed by Walgreens, by virtue on its partnership with Alliance Boots and AmerisourceBergen, and the unveiling of a group of exciting new prototype drug stores. The good news for CVS is that Foulkes in aware of these challenges — and is certainly capable of meeting them.
So this is a time for chain drug industry advocates to rejoice at the selection of Helena Foulkes to run CVS/pharmacy. It is also a time for industry observers to once again marvel at the industry’s resilience, its elasticity, its depth of management talent and its willingness to make difficult decisions when difficult decisions are called for — and to make those decisions work.