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Walgreens has received a lot of well-deserved attention related to the opening of its latest flagship stores, in Hollywood, Calif., and the Bucktown/Wicker Park section of Chicago, but the most significant development at the company remains its burgeoning relationship with Alliance Boots, one that is all but certain to see the two organizations merge within the next two and a half years.
Three of the Walgreens executives closely involved in the integration recently met with a group of consumer products manufacturers to talk about what the leaders of the two companies envision and how the combination is likely to affect the global retail and health care businesses.
Among the wealth of insights provided, the most pertinent to the members of the audience was this: The coming together of Walgreens and Alliance Boots is a major opportunity for consumer products suppliers.
“The strategy is to build off our core strengths, capabilities and assets,” said Wade Miquelon, Walgreens’ chief financial officer and president of its international business, who played a catalytic role in making the partnership a reality. “We want you to help us make our assets work harder so we can be more productive, more relevant and more contemporary, and drive more volume through what is fundamentally a very robust operational structure.
“This isn’t about squeezing the supplier because we have more buying power. It’s about working together to create win-win-win situations. Wins where we can provide better products at better costs. Wins where you can create value through a deeper relationship with your customers and higher volume. Wins where the consumer has more choice and the best value proposition in our stores. That’s really the sweet spot.”
Executives at Walgreens and Alliance Boots are currently spending a lot of time getting to know one another better, identifying best practices and determining how those tactics can be profitably applied to existing operations, with an eye toward making the ultimate merger as seamless as possible.
“One of the things that we’re excited about is giving our vendors an opportunity to have a great platform for product launches on a much more international scale,” noted Rachel Bishop, vice president of global merchandising and own brand expansion at Walgreens. “Being able to bring things forward in an integrated way is one of the big assets that we possess.
“We’re also very excited about improving the customer experience. We’re dedicated to putting together an offer that’s exciting and compelling to the customer every day.”
To that end, pairs of executives have been assigned to work together to identify opportunities in six key parts of the business.
For Walgreens and Alliance Boots, respectively, they are Bishop and Gordon Farquhar, front-store growth; Bill Wafford and Ken Murphy, branded front-end products; Wafford and Karl Graham, own brands and general merchandising; Gerry Gleeson and John Kallend, branded medications; Jeff Berkowitz and Tony Foreman, generics; and Don Huonker and Patrick Dunne, goods not for resale.
As the two companies move forward, one of the challenges they will have to deal with is striking the right balance between national and store brands, an issue of some concern to CPG makers.
“For us as a retailer, the goal of driving our own brands is to have products that are unique to Walgreens or unique to Boots,” said Miquelon. “It’s one way to make sure that we don’t wind up like Circuit City vs. Best Buy. That’s going to be key for any retailer that wants to survive in the future.”
The objective of the merger is to enable Walgreens and Alliance Boots to do much more than simply survive.
“If we fast forward two and a half years and we have just bolted together two companies that are what they are today, we will have failed,” noted Robert Zimmerman, senior vice president, global, and international chief administration officer at Walgreens. “Our absolute goal is to make the whole significantly greater than the parts. That’s where we’re heading.”
