Inside This Issue - Opinion
A year of big changes in chain drug industry
November 21st, 2011
by David Pinto
This has been a stunning year for chain drug retailing, a period punctuated by dramatic changes in both direction and personnel.
Here, in no particular order, are some of the things that happened:
• Tom Ryan stepped aside as chief executive officer of CVS Caremark, after a brilliant career marked by the longest continuous period of unparalleled growth and prosperity yet recorded by a U.S. drug chain. When Ryan was named CVS’ CEO in 1994 he assumed control of a $4.33 billion drug chain. At his departure, CVS Caremark, hovering at $100 billion in sales, was the 21st largest U.S. company.
• Mary Sammons relinquished her role as chief executive officer at Rite Aid. At her departure, the nation’s No. 3 drug chain was emerging from its second prolonged period of indifferent financial results. Since then Rite Aid has shown some very encouraging signs of renewed vigor, propelled by a series of innovative initiatives put in place by Sammons and her successor (see following paragraph).
• John Standley replaced Sammons as Rite Aid’s CEO, with surprisingly strong results. In his first months heading up the Camp Hill, Pa., drug chain, he has launched several promising programs, foremost among them a new emphasis on health and wellness to which customers have responded very positively. Most encouraging, the retailer is once again recording monthly sales increases, which had all but evaporated in the recent past. In any event, Standley’s first few months at the helm of Rite Aid must be counted a huge success, especially in light of the dire predictions regarding the drug chain’s future that until recently dominated conversations about Rite Aid.
• Larry Merlo replaced Tom Ryan as chief executive officer at CVS Caremark. His first months in that role were punctuated by several significant personnel changes. Foremost among them, former Macy’s and Sears executive Mark Cosby joined the company as president of the CVS drug store unit. His appointment marked the first time in chain drug annals that an outsider had been brought into the industry at so high a level. Today, two months after he assumed his new duties, he remains a largely unknown personality, though this promises to change very quickly as 2011 gives way to 2012. Determining how he will perform in his new role will require more time.
• Mike Bloom left CVS, where, in his merchandising and supply chain roles, he was among the dominant executives both at CVS and in chain drug retailing, to take the job as president of Family Dollar. Named to replace Bloom in the head merchandising role was Judy Sansone, veteran CVS merchant and highly regarded industry figure. Internally, the Sansone promotion was met with universal approval, while in the wider chain drug community it was both anticipated and warmly greeted. Still to be determined, however, is how quickly, effectively and decisively she will fill the role that Bloom handled so well for so long.
• Joe Magnacca joined Walgreens as that drug chain’s senior merchant, having come to the retailer along with its Duane Reade acquisition. As he did at Duane Reade, Magnacca quickly made his presence felt, shifting personnel at a drug chain where personnel changes have not always been made so quickly, when they’ve been made at all. As well, Magnacca has already brought to Walgreens some of the merchandising initiatives that have worked so well at Duane Reade in revitalizing that once-moribund drug chain. Finally, he has already answered the most persistently asked question in the aftermath of his arrival at Walgreens: How well would he work with Bryan Pugh, who has been Walgreens’ key merchant since his arrival in 2009. The answer: Very well indeed — to the surprise and delight of industry people, many of whom had predicted otherwise.
• At midyear Duane Reade opened a 21,000-square-foot “daily living” drug store on Wall Street in Manhattan. Though the store was a Duane Reade initiative, it was largely a Walgreens undertaking, even adopting the Walgreens brand in its health care departments. From its opening, the store has been an unqualified success, and plans are already afoot to bring various components of the concept to other Walgreens locations.
Largely overlooked amid these developments have been the exciting new stores unveiled by Bartell Drug and Lewis Drug, though the latter opened late in 2010.
Overlooked as well was the stunning announcement that the National Association of Chain Drug Stores would, in 2013, move its annual Marketplace Conference from early summer to late summer, merge it with its annual pharmacy conference, and add some compelling new elements in an effort to broaden its appeal and attendance. The initial response to the new initiative was strongly positive, though many questions remain to be answered.
Those are just some of the changes that have already made 2011 significant in chain drug retailing. And it’s only November.