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Wasson: Walgreens' strategy 'blurs retail channels'
January 9th, 2013
The nation's largest drug chain is positioning itself as a "health and daily living" destination.
DEERFIELD, Ill. – With a much-publicized PBM battle now behind it, Walgreen Co. is locked in on expanding its "Well Experience" health and daily living strategy across its stores and other channels, president and chief executive officer Greg Wasson told attendees at the company's annual shareholder meeting.
Wasson, who along with other company leaders addressed more than 2,000 stockholders here Wednesday, noted that "with many of last year's headwinds becoming this year's tailwinds," Walgreens is set to drive growth and profitability in fiscal 2013 and beyond.
After rejoining the network of pharmacy benefit manager Express Scripts in mid-September and reaching agreements with Optum Health and other PBMs, Walgreens is targeting three areas of opportunity: delivering the Well Experience by transforming the customer experience across all of the drug chain's touch points, channels and formats; reshaping community pharmacy's role in health care by expanding access to quality, affordable health and wellness services; and developing an "unprecedented" global platform through its partnership with Alliance Boots.
"We are taking a multi-pronged approach to delivering the Well Experience," Wasson stated. "We are combining leading-edge design with enhanced products and services, increased engagement with team members and customers, and an omni-channel approach that blends our brick-and-mortar stores with e-commerce and mobile commerce.
"We are deliberately blurring many retail channels to fit how consumers shop today," he pointed out.
The nation's biggest chain drug retailer is already well along in those efforts and is primed to keep going, according to company executives. Key initiatives include the following:
• A larger offering of groceries and fresh food in stores for on-the-go consumers with quick, convenient pickup, and a growing assortment of healthy food choices, especially in underserved "food desert" communities.
• Strong investment in private brands, including the Walgreens, Delish, Nice! and many other labels. This has resulted in a two-percentage-point gain in private-brand penetration year-over-year to 22%, the retailer said.
• Enhanced beauty departments that now include an array of niche and prestige brands not found in traditional drug stores, including the debut of the Boots No7 brand.
• More capabilities for mobile consumers, which in the past year has included prescription refills and transfers by scanning the pill bottle; QuickPrints, an application that enables users to print photos right from their devices to any Walgreens store; and in-store maps that enable customers to use a digital shopping list to map and locate items in a store.
In its pharmacies, Walgreens is promoting community pharmacy's potential in health care by putting its pharmacists at the forefront, whom executives noted are increasingly seen by patients as health care partners.
"Walgreens pharmacists have administered more than 5 million flu shots in each of the past four years," Wasson stated, "and today we are the largest retail provider of immunizations and vaccinations in the country, which validates that the public appreciates, wants and values what community pharmacy can do to support their health."
To that end, Walgreens is expanding its menu of services at its pharmacies and Take Care Clinics to include more immunizations, chronic care management, primary care, Medicare wellness visits and member assessments, and health testing.
Wasson explained that Walgreens is among the community pharmacy operators that is helping to close a gap in the availability of high-quality, affordable health care.
"With nearly 70% of the U.S. population either without a primary care physician or not utilizing one, and more than 30 million people gaining insurance coverage in 2014 under health care reform, we are well-positioned to fill the void in care," he told shareholders.
The company aims to drive its health and daily living strategy well into the future — and realize new synergies — through its landmark partnership with global health and beauty retailer and drug distributor Alliance Boots, according to Wasson.
"We are bringing together two iconic brands with a lot in common," he explained. "Boots is to Europe as Walgreens is to the U.S. In addition, with Alliance Boots bringing an integrated wholesale business to the table, we believe there is significant opportunity for supply chain efficiencies. The global pharmaceutical market continues to grow, particularly in emerging markets where there is increased demand for vaccines and self-medications. Together, we are well-positioned for growth as we create the first global pharmacy-led, health and well-being enterprise.”
During the meeting, Walgreens executives also reviewed highlights and milestones over the past year. The drug chain said it generated record cash flow from operations of $4.4 billion and returned $1.9 billion to shareholders in the form of dividends and stock buybacks. That included the largest quarterly dividend in the company's history and the 37th straight year in which the company has raised its dividend.
In addition, Walgreens also acquired regional drug chain USA Drug; opened its 8,000th store with a new location in Hollywood, Calif.; and launched its Balance Rewards loyalty program, which has seen more than 50 million people enroll since its introduction this fall.
"During the last several years, we have worked to transform the company from the great foundation that our predecessors gave us. With our three strategic growth objectives in place, Walgreens is now positioned extremely well for long-term growth," Wasson commented.
With the Alliance Boots deal, Walgreens chairman Jim Skinner extended greetings to two new board members. "I also want to welcome our two newest members, Stefano Pessina and Dominic Murphy, who joined our board following the launch of the strategic partnership between Walgreens and Alliance Boots," Skinner stated.
Pessina is executive chairman of Alliance Boots. Dominic Murphy is a director and member of the investment firm Kohlberg, Kravis Roberts & Co. (KKR), a large stakeholder in Alliance Boots.