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Pessina on road ahead for WBA

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Stefano Pessina

NEW YORK — Walgreens Boots Alliance executive vice chairman and chief executive officer Stefano Pessina urged analysts not to think they can see the future of Walgreens simply by visiting the company’s new pilot stores in Gainesville, Fla.

“Let’s be clear,” Pessina said during a sell-side analyst event in New York last month. “Gainesville today is not a blueprint for the future of Walgreens. It is not even the full suite of concepts that we want to trial.”

The 17 Walgreens stores in the Gainesville area are testing a new pricing program, which involves lowering everyday prices on more than 5,000 health and beauty, grocery and household products. The company has also introduced a new membership program in the market, called Walgreens Plus, which promises an additional 20% savings on nearly all prices in the store every day, along with other benefits.

Those programs will be evaluated for the next year before possibly being rolled out to other markets.

Pessina said that the Gainesville market offered a unique opportunity, because all the Walgreens stores in the market could be converted to the new pilot concept, which would then compete against other retailers in the market, and not against other Walgreens stores that use a different pricing model.

But Pessina emphasized that there are a variety of other services and concepts Walgreens is developing that will receive trials of their own over time, along with new joint ventures and partnerships.

As a result, according to Pessina, the Gainesville stores do not represent a prototype for Walgreens’ store of the future so much as they provide a controlled environment where the company can conduct experiments and more effectively evaluate the results.

“Gainesville gives us a testing ground to try ideas and fine-tune concepts, out of which we hope our development of the blueprint for future Walgreens offerings will come,” Pessina explained. “This work is important. But it is only a relatively small part of what we are doing to transform our business and drive future growth.”

Pessina also urged analysts not to think of WBA as a single business, operating under a single business model. Instead the company effectively functions as a portfolio of different businesses, operating in different geographical areas, even though they are related to some degree, which allows for synergies among them.

“At any given time, elements of our business will be in transition,” he said. “Elements will be in transformation, and elements will be facing commercial or competitive challenges. And as our businesses go through their natural business cycles, and natural renewals and reinventions, we will see periods where our growth is more organic, periods where it is more acquisition based, and periods where it comes more from the synergies and efficiencies that each of these activities subsequently create.”

Pessina also explained WBA’s underlying approach to the business.

“The main points of our strategy are to drive growth and consolidate volume through organic growth, partnership or acquisition, and use this volume to buy best-in-class, and most importantly, significantly better than our competitors,” he said.

Other elements of the strategy include controlling costs, optimizing financial efficiency and leveraging the company’s financial strength.


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