As 2017 dawns, several important questions remain to be resolved, a few of which could determine the direction that chain drug retailing pursues in the period ahead. These mostly revolve around the nature of the industry and the role its dominant retailers play as time progresses.
Perhaps foremost among them is the ultimate outcome of Walgreens Boots Alliance’s attempt to absorb Rite Aid, a deal that was announced 14 months ago.
Federal Trade Commission approval is still pending, but last month’s decision to sell 865 Rite Aid stores to Fred’s should go a long way toward addressing the concerns of federal regulators.
Most industry people and observers believe the deal will ultimately proceed as planned. If that happens, Walgreens will have taken yet another step toward consolidating its role as the chain drug industry’s No. 1 retailer. Additionally, it will clear the way for future arrangements of this type. If the industry’s No. 1 and No. 3 retailers can effect such a transaction, the thinking is, any other transaction is possible.
If, on the other hand, the deal hits a permanent roadblock, then Walgreens — and likely CVS as well — may have to find alternate ways to grow — and the character of the industry will begin to change.
Speaking of Walgreens and CVS, these two drug chains, it is widely believed, must continue to raise their already high standards if they are to compete for leadership in the broader mass retailing business through the end of this decade. What’s needed here, the thinking goes, is some further personnel additions to round out their strong executive and second-tier management teams.
Walgreens is currently led by Stefano Pessina, an entrepreneur approaching his mid-70s, who shows no sign or inclination of slowing down or stepping back. The company also has two impressive individuals, Ornella Barra and Alex Gourlay, as co-chief executive officers. But the demands of running a far-flung global empire, one with a major presence in pharmaceutical wholesaling as well as retailing, require a lot of time and talent, and WBA’s management ranks could be further augmented.
CVS faces a similar challenge. Like Walgreens, its senior management team, led by Larry Merlo and Helena Foulkes, is robust. The question is, in this hypercompetitive environment, what do they need to do to ensure the company keeps moving forward?
And what of Rite Aid? Should its acquisition by WBA fall through, can the retailer pull itself together and start fresh? Or will another acquirer step up before very long? The answer to that question will determine, to a large degree, the future lineup of chain drug retailing in America.
Looking outside the chain drug industry, the questions for Walmart and Target arise. Each is recovering from a bumpy period, while trying to integrate new faces into the existing framework, one they’ve successfully operated with for more than two decades. The question: Are they through staffing up for the future, or are some valuable pieces still missing? This seems a more acute question where Target is concerned, a retailer that, despite new leadership, at times still appears somewhat tentative — and whose results have not completely lived up to expectations.
In grocery retailing, the challenges are not so daunting. But the major one concerns the future of the Albertsons combination that emerged, as though overnight, in the aftermath of several false starts and missed opportunities.
On paper, this grocer is among the deepest and most powerful in the nation, with representation in many of America’s largest markets. In leadership, too, Albertsons appears well stocked with capable, experienced executives, foremost among them Bob Miller, who comes to this assignment with a range of experience that is the envy of his peers.
Here, too, there are questions. Indeed, so complex is this retailer that even the questions defy easy understanding. The answers, however, won’t be long in coming — and they will influence the nature of the grocery market — and, by extension, the mass retailing community on into the next decade — at least.