Walgreen Co.’s loss has been CVS Caremark Corp.’s gain. The latter has fully capitalized on Walgreens’ contract impasse with Express Scripts Inc., according to CVS/pharmacy president Mark Cosby.

CVS Caremark, Mark Cosby, CVS/pharmacy, Walgreens, Express Scripts, Jefferies Group Inc. Global Consumer Conference, drug stores, ExtraCare, ambassadors, digital advertising, digital commerce, mobile app, My CVS, private label, store brands, CVS, CVS pharmacists, Geoff Walden

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Inside This Issue - News

Cosby gives look at CVS' direction

July 16th, 2012

NANTUCKET, Mass. – Walgreen Co.’s loss has been CVS Caremark Corp.’s gain. The latter has fully capitalized on Walgreens’ contract impasse with Express Scripts Inc., according to CVS/pharmacy president Mark Cosby.

New pharmacy business from the standoff boosted CVS Caremark’s first quarter earnings 3 cents per share, Cosby said, and is expected to add up to 4 cents in the second quarter.

The “unprecedented industry-driven opportunity” from the impasse has given CVS “tremendous market share from our biggest competitor,” Cosby said at the Jefferies Group Inc. Global Consumer Conference here last month.

CVS stood to benefit extensively from the standoff because of the overlap of its drug stores with Walgreens units, and it implemented an action plan to make the most of the opportunity. As a result it picked up more scripts than it expected to at the end of last year, adding 5.7 million to 6.5 million incremental prescriptions in the first quarter.

The action plan has included an aggressive TV campaign and a welcome message in circulars to Express Scripts members. CVS also enlisted Express Scripts members in the ExtraCare frequent shopper program to entice them to buy front-end products and create long-term loyalty.

Moreover, the chain added “ambassadors” in high-volume stores to sell benefits including ExtraCare, e-mail discounts and its text message program. Inventory and staffing were added to outlets with the biggest sales opportunities.

Many stores garnered a 20% boost in sales, and some reaped a gain of up to 50%, Cosby said. “We handled that volume extraordinarily well.”

Aside from taking advantage of the Express Scripts situation, CVS is well positioned for the future on a number of fronts, he added. To take ExtraCare to the next level, the retailer will optimize promotions from a sales and profit perspective, refine and enhance its beauty club, and pilot a “health rewards” program providing added incentives to drive script volume.

The chain is also working on personalized digital advertising. The medium for the customized ads will be an online ExtraCare “dashboard” with customers’ prescription and reward status, and tailored offers based on their shopping history.

To enhance its digital commerce capabilities, cvs.com will feature an “endless aisle” selling products that are not available in stores, including contact lenses and durable medical equipment.

An aggressive mobile plan will include a mobile wallet program, real-time inventory checking capabilities, a drug interaction checker and the rollout of a “mobile personalized circular.” The company also has introduced a well-received mobile app for Android and Apple devices.

On the brick-and-mortar front, CVS will continue to roll out stores in various clusters under its My CVS initiative. Based on the success of its food/convenience and urban outlets, it will test Hispanic, high-end, low-end, top pharmacy and top beauty units.

“We are very bullish on this My CVS program, and we believe that it is one of the big differentiators that will drive volume for us in the long term,” Cosby commented.

Store brands will be another major component of growth. Private label products already account for 17.5% of total sales and 32% of growth. To get an even greater benefit the chain is rolling out 800 to 1,000 store brand items per year.

At the prescription counter, CVS pharmacists’ 150 million interventions since 2008 have produced the chain pharmacy industry’s best medication adherence rate for diabetes, dyslipidemia and hypertension.

“Clearly, this is a results driver for our customers and for us,” Cosby said.