Walgreen Co. is slated to pilot a fresh food offering in select stores this fall, according to a published report.

Walgreens, fresh food, meal, Duane Reade, DR Delish, Delish, Dow Jones, Jim Jensen, Greg Wasson, Russell Redman, food, drug store, Bill Dreher, Deutsche Bank Securities

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Report: Walgreens readies fresh food test

July 7th, 2010

DEERFIELD, Ill. – Walgreen Co. is slated to pilot a fresh food offering in select stores this fall, according to a published report.

Plans call for Walgreens to test chilled foods in as many as 12 stores, Dow Jones reported. The report cited a Walgreens spokeswoman saying that the retailer may sell such items as sandwiches, fresh cut fruit, soups and wraps and that the retailer hopes to be seen as a destination for convenient meal solutions.

Other sources also indicated that the test may involve about 50 locations in the Chicago area in September, according to Dow Jones.

In January, Walgreens confirmed that it hired a divisional merchandise manager of fresh foods, supermarket and convenience store veteran Jim Jensen, to lead a new effort to market fresh food and ready-to-eat items. Jensen joined Walgreens from Fresh & Easy Markets, a U.S. supermarket unit of British food retailer Tesco, where he was director of fresh foods. Before joining Fresh & Easy in 2006, he served in the fresh food division of 7-Eleven Inc. for 14 years.

At the time, published reports said Walgreens was looking to roll out a selection of freshly made foods such as salads, sandwiches, cut fruit and pizza.

Walgreens has begun looking to boost its food and beverage offerings as a way to spur customer visits and enlarge the shopping basket.

In the company's third-quarter earnings report, chief executive Greg Wasson said Walgreens has added beer and wine in over 3,600 stores, up from around 1,600 stores as of late January. And Deutsche Bank Securities analyst Bill Dreher noted in a research report that Walgreens plans to have beer and wine in more than 5,000 stores by the end of this year.

Walgreens executives have made it no secret that a big attraction in the company's acquisition of Duane Reade was the metropolitan New York drug store chain's recently revamped food offering, including to-go foods and snacks as well as a new private-label line called DR Delish.

In early March, for example, Duane Reade opened a 15,000-square-foot store in Manhattan's Chelsea district in which the food section comprises about 40% of the space, including a greatly expanded fresh food and grocery offering.

And later this summer, Walgreens plans to give its customers a taste of Duane Reade's private label program. Beginning in August, Walgreens stores chainwide will offer an initial selection of Duane Reade's Delish private brand consumables, Wasson said in a conference call with analysts on third-quarter results.

Walgreens declined to provide additional details about the plan. However, a company spokesman noted that Duane Reade's DR Delish private brand was a key draw for Walgreens when it announced its acquisition of the 258-store metropolitan New York drug chain in February. The nearly $1.1 billion deal closed in April.

Duane Reade launched the upscale DR Delish brand late last September with 25 food and beverage items, including juice, tea, trail mix, baked potato crisps, multigrain snacks, brownie snacks and cookies. Since then the retailer has expanded the brand to include such items as premium packaged coffee, seltzer, chocolate, crackers, French sodas, macaroni and cheese, popcorn, organic salsa, gluten-free ginger snaps, granola-and-nut urban trail mix, and organic lollipops.

Walgreens rival CVS Caremark Corp. also has recently given more emphasis to food. CVS has devoted more space and a more prominent presentation to food in some stores and has touted "hundreds of new grocery items" and "our newly expanded food selection" in marketing materials.