Albertsons-Rite Aid merger deal seen as a ‘win-win’

Rite Aid chairman and CEO John Standley and president and COO Kermit Crawford

CAMP HILL, Pa. — The merger of Albertsons Cos. and Rite Aid Corp. will create a “truly differentiated” player in the food, health and wellness space, John Standley, chairman and chief executive officer of Rite Aid, said when the deal was announced late last month.

The proposed merger will transform Rite Aid through the addition of 1,800 Albertsons Cos. pharmacies and access to the supermarketer’s front-end expertise, especially in private label, said Standley, who will be CEO of the new company. Al-bertsons’ capabilities in organic/natural foods, with brands like its private label O Organics line, will be especially beneficial for Rite Aid, he added. Such brands will push the drug chain “further into the wellness space,” he told Chain Drug Review.

The Albertsons-Rite Aid merger deal is a win-win, according to Diana Sheehan, director of research and insights at Kantar Consulting.

“Albertsons has a history in the pharmacy space, and this acquisition gives them an interesting opportunity to play with their footprint, since Rite Aid sits in many markets Albertsons doesn’t and vice versa,” Sheehan said. “It expands reach and audience. This would also give Albertsons another way to test small-box concepts and ideas, even while it pilots a unique c-store concept in Boise [Idaho].”

Combined, Albertsons-Rite Aid would generate pro forma sales of about $83 billion and operate about 4,900 stores, 4,350 pharmacies and 320 in-store health clinics across 38 states and Washington, D.C., serving more than 40 million customers per week.

After the completion of its sale of 1,932 stores and three distribution centers to Walgreens Boots Alliance — expected this spring — Rite Aid will have 2,569 drug stores served by six distribution centers. Its subsidiaries include EnvisionRxOptions, a provider of PBM and other pharmacy products and services; RediClinic, an in-store clinic operation; and Health Dialog, a health analytics and management specialist.

Rite Aid president and chief operating officer Kermit Crawford told CDR that Albertsons’ private label penetration of 23% compares favorably with Rite Aid’s 18% to 19%, and the merger should accelerate the drug chain’s rollout of store brands, especially of natural food products, as part of its wellness focus.

Rite Aid’s store count, Standley added, will be boosted in existing markets and extended to new ones. The ability to add pharmacies to Shaw’s and Acme supermarkets in the East is especially attractive, he said.

Introducing a stand-alone drug store in a new market would be “very challenging” under other circumstances, Crawford noted. “But if you add a pharmacy in an Albertsons store and then follow up with a freestanding Rite Aid, that makes a lot of sense.”

The grocer’s capabilities naturally complement Rite Aid’s strategy of being “a health care company managing the entire patient,” noted Crawford. He especially looks forward to tapping Albertsons’ delivery capabilities through services like Instacart and its Plated meal kit service.

The combined company will offer a holistic approach to health care, Crawford emphasized, with everything from Rite Aid’s drive-through pharmacies to Albertsons’ diverse choice of nutritious food.

Asked about the benefits of the deal for Albertsons, Standley said the grocer gets Rite Aid’s pharmacy capabilities and trusted brand. And both retailers will gain from merging loyalty programs with a combined 25 million members. The combination will be a tremendous asset for the merged entity’s marketing, he said.

Crawford said the deal gives Albertsons “instant pharmacy credibility and expertise,” citing Rite Aid’s capabilities in immunizations, as well as RediClinic, EnvisionRxOptions and Health Dialog.

Standley said he and Albertsons Cos. chairman and CEO Bob Miller, who will be chairman of the new entity, work well together and look forward to the opportunities the proposed merger creates for their companies.

“The combined capabilities are really going to differentiate us in the marketplace,” Standley said.

Said Miller: “We have always put our customers first, and our combination with Rite Aid will enable us to even better serve the valuable pharmacy customer by providing a fully integrated one-stop shop for our customers’ food, health and wellness needs.”