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Chain Drug Retailer of the Decade: Tom Ryan, CVS

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Tom Ryan, chairman, president and chief executive officer of CVS Caremark Corp., is being recognized as Chain Drug Retailer of the Decade by the editors of Chain Drug Review.

With a series of bold, innovative and carefully calculated strategic maneuvers, Ryan over the last decade strengthened the appeal of the CVS drug store, broadened that appeal geographically and transformed what had been America's No. 2 drug store chain into the nation's leading pharmacy health care provider.

WOONSOCKET, R.I. — The editors of Chain Drug Review have named Tom Ryan, chairman, president and chief executive officer of CVS Caremark Corp., the publication’s Chain Drug Retailer of the Decade.

The choice was not a difficult one to make. Indeed, the decade that began on January 1, 2000, and ended five weeks ago produced the most dramatic sustained performance of any chain drug retailer in the industry’s annals, a history that extends back more than a century.

At the start of the last decade, the company operated 4,129 drug stores in 31 states and the District of Columbia, while recording annual sales of $20.1 billion and earnings of $746 million.

By decade’s end, CVS Caremark had emerged as America’s leading pharmacy health care provider, operating over 7,000 drug stores in 41 states, plus the District of Columbia, with earnings that reached $3.34 billion in 2008, as well as retail sales of $48.99 billion.

In all of mass retailing in America, only five retailers could claim higher sales and just one could point to greater earnings.

Behind this unprecedented transformation was one man: Tom Ryan. With a series of bold, brilliantly innovative yet carefully calculated strategic thrusts, Ryan at once strengthened the appeal of the CVS drug store, broadened that appeal geographically and finally transformed what had been America’s No. 2 drug store chain into the nation’s leading pharmacy health care provider (see timeline chart at end of article).

Strategically, the 2007 merger between CVS Corp. and Caremark Rx Inc., one of America’s two largest pharmacy benefits managers, was perhaps Ryan’s most dramatic and clairvoyant production.

As he himself commented recently: “That merger produced the biggest change at CVS. It transformed the company from a pure retailer to a pharmacy-based health care provider. It changed our go-to-market strategy and growth trajectory.”

Critical as the CVS/Caremark merger has been to the company’s emergence as the nation’s premier pharmacy-anchored health care provider, it was the retailer’s aggressive strategy during the first years of the 21st century that enabled the merger. Specifically, Ryan orchestrated two major acquisitions that made the merger a viable direction for the drug chain and an irresistible opportunity for the PBM.

The first of those was the 2004 acquisition of 1,268 Eckerd drug stores, the majority of them in rapidly growing markets in Florida and the Southwest.

“Acquiring those stores put us into such Sun Belt states as Florida and Texas overnight,” says Ryan.

Following that was the 2006 acquisition of 700 Osco and Sav-on drug stores previously under the umbrella of the Albertsons supermarket chain, a retailer that had recently found itself in play, ultimately being bought by Minneapolis-based grocery retailer/wholesaler Supervalu.

“Adding the Osco and Sav-on drug stores strengthened our position in key Midwest markets and provided an immediate leadership position in southern California markets,” says Ryan.

Its third game-changing acquisition in the last 10 years was the Longs Drug Stores chain in 2008. “That acquisition gave us instant penetration into northern and central California,” Ryan says. “Had we chosen to grow organically in those markets, it would have taken us 10 years to reach the level of penetration we gained overnight with that deal."

But if Tom Ryan was busy acquiring and merging during the past decade, that doesn’t mean to imply that he or his people were neglecting their core business, the CVS drug store.

During the first decade of the 21st century, the retailer’s ExtraCare frequent-shopper program, launched chainwide in 2001, caught on, giving customers one more important reason to shop a CVS drug store.

“It was a game-changer,” says Ryan, “changing how we go to market, how we attract consumers and how we interact with suppliers.”

ExtraCare is today the No. 1 retail loyalty program in America, with approximately 60 million cardholders.

Along the way, the CVS drug store was redesigned, with the customer-friendly Life Store format replacing the sometimes illogical array of departments, categories, merchandise and signage that had previously defined a CVS drug store.

At the same time the retailer set out to sharpen and upgrade its core business, pharmacy services. The result was P.S.I. (Pharmacy Services Initiative), a program that, according to Ryan, “was transformational both for the consumer and for our pharmacist colleagues, improving service for our customers and the quality of life for our working pharmacists.”

To further broaden CVS’ appeal to its customers, in 2005 the retailer initiated a relationship with MinuteClinic, the Minneapolis-based immediate-care medical chain, initially by contracting with the company to open MinuteClinic installations within CVS drug stores.

A year later, the drug chain increased its commitment to the immediate-care concept by buying MinuteClinic.

“We were two or three years ahead of our time in identifying the value of the concept,” says Ryan. “But in embracing the concept early, and in realizing that this is personalized, smart medicine, we made health care more accessible and more meaningful to more people — both for our company and for our industry.”

Finally, as the decade ended, CVS acquired 521-unit Longs, a move that catapulted CVS, overnight, into the leadership position in both northern California and Hawaii.

“What made that acquisition particularly challenging,” says Ryan, “is that we did it while we were integrating the Caremark merger. We threaded the needle.”

Withal, perhaps Ryan’s greatest claim to being honored as Chain Drug Retailer of the Decade is the plain fact that CVS is a better-run and better-managed company today than it was a decade ago.

Even the company’s CEO acknowledges that “we’ve come together as a company — with one mission, one goal, one set of values.”

And as every smart senior manager invariably sees fit to add, he shrewdly observes that “everyone sells what we sell. The difference is our people.”

Has everything been perfect for Tom Ryan in the decade that just ended? By no means.

“Earlier in the decade, we recognized that we needed to go faster in developing and cross-pollinating our people, both for their own personal growth and for the growth of our business,” he says, adding that the company is more effective at cross-pollination today than had previously been the case.

As well, he believes CVS today is more effective at integrating home-grown and outside talent. “During the last two years, we have filled the CFO [chief financial officer] and HR [human resources] positions internally, while hiring three senior-level Caremark people from outside the company.”

As well, Ryan believes CVS became a more diverse company in terms of race and gender as the decade progressed.

And what of the second decade of the 21st century?

Ryan believes that his company and his industry are ideally situated in the health care continuum.

“Health care will continue to evolve, and there will be more health care providers,” he says. “But we’re perfectly positioned, as an industry and at CVS Caremark, to exert an impact on the lives of patients.”

And every indication points to the conclusion that Tom Ryan intends to be a vital part of that evolution — and that impact.

TIMELINE: CVS Caremark, 1999 to 2009

1999 — Tom Ryan is named chairman of CVS Corp., succeeding company cofounder Stanley Goldstein. The company announces its intentions to enter Florida. CVS/pharmacy launches CVS.com, the first fully integrated online pharmacy in the United States.
2000 — CVS/pharmacy announces plans to enter the Chicago market and continue expansion in Florida. The company acquires Stadtlander Pharmacy, making CVS ProCare the largest specialty pharmacy in the U.S. at the time.
2001 — CVS/pharmacy introduces the ExtraCare card, becoming the first national pharmacy retailer to launch a loyalty card program. CVS/pharmacy records annual sales exceeding $22 billion and continues to expand into diverse, high-growth markets in central and South Florida.
2002 — CVS/pharmacy continues to expand, announcing plans to enter Texas with stores targeted for such high-population-growth markets as Dallas and Houston. The company’s first locations in Phoenix and Las Vegas are also in the works.
2003 — CVS celebrates its 40th anniversary and announces its planned entry into the Minneapolis/St. Paul market. The company’s ExtraCare loyalty card program closes out the year with more than 44 million cardholders.
2004 — CVS completes its acquisition of 1,268 Eckerd stores and Eckerd Health Services, that company’s PBM/mail-order pharmacy business, increasing its store count to more than 5,000 locations and becoming America’s leading pharmacy retailer. CVS/pharmacy announces its entry into California. CVS ProCare becomes part of PharmaCare.
2005 — CVS/pharmacy ends the year as the largest pharmacy retailer in America, with more than 5,400 locations in 34 states and Washington, D.C. The company partners with MinuteClinic, announcing plans to open three clinics in CVS/pharmacy stores.
2006 — CVS acquires 700 stand-alone Sav-on and Osco drug stores from Albertsons, making CVS/pharmacy the No. 1 drug chain in fast-growing southern California and enhancing its presence in key Midwest markets. CVS acquires MinuteClinic, the nation’s leading operator of in-store health clinics.
2007 — CVS Corp. and Caremark Rx Inc. merge, creating CVS Caremark, the nation’s premier integrated pharmacy services provider.
2008 — CVS Caremark acquires 541 Longs Drug Stores units in California, Hawaii, Nevada and Arizona, giving CVS/pharmacy immediate market leadership in northern and central California, as well as three distribution centers and Longs’ PBM subsidiary, RxAmerica.
2009 — The company celebrates the opening of its 7,000th CVS/pharmacy, located in Little Canada, Minn.




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