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Walgreens’ approach to growth evolves

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DEERFIELD, Ill. — Walgreen Co. grew from about 1,300 outlets in 1986 to more than 4,000 in 2003, all without making any major acquisitions.


Before that Walgreens had used the purchase of small and midsize drug store chains as part of its growth strategy.

That approach culminated in the purchase of 66 Medi Mart units in New Jersey, New York, Connecticut, Massachusetts and New Hampshire from Stop & Shop Cos. in 1986. The transaction, Walgreens’ biggest up to that time, ended an era of acquisition for the company, with the exception of the purchase of the nine-store, New England-based Lee Drug in 1990.

That shift in strategy was deliberate. “I don’t see us making a single acquisition in the next year or five years,” then president Dan Jorndt told shareholders at Walgreens’ annual meeting in 1993. “Frankly I don’t see it happening at all.”

The main reason for the change was that Walgreens had shifted to a strategy of operating freestanding stores and was no longer interested in buying outlets in strip centers or malls. Why buy locations that another company was abandoning when it could start fresh with sites at major intersections that had plenty of parking?

Walgreens’ strategy began to shift again in 2003, when the company agreed to buy 11 stores and five pharmacy files from Vancouver, Wash.-based Hi-School Pharmacy. “Acquisitions are very rare for us,” Walgreens chairman and chief executive officer Dave Bernauer said then. “But [Hi-School’s] operation pre­sents a wonderful opportunity to strengthen our position in a high-growth market.”

Since then Walgreens has used acquisitions to build its presence in other key markets.
In the fall of 2005, Walgreens bought the 23-unit Medic Drug chain. It acquired Newark, Del.-based Happy Harry’s Inc. for what was said to be between $225 million and $250 million in June 2006.

“Happy Harry’s is one of the strongest regional chains in the drug store industry, with a great following in a market where we have little presence,” Bernauer said when the deal was announced. Happy Harry’s operated 76 stores in Delaware and parts of New Jersey and Pennsylvania.

Then, in February 2007, the company announced plans to acquire most of the assets of Farmington, Conn.-based Familymeds Group Inc. for about $60 million, picking up another 53 pharmacies in 11 states.

Walgreens’ more recent acquisitions have included about half the stores operated by Farmacias El Amal in Puerto Rico, 12 Rite Aid Corp. outlets in San Francisco and Idaho, Snyders Drug Stores’ 25 company-owned stores in Minnesota, 12 Eaton Apothecary pharmacies in the Boston area and 31 Drug Fair stores in New Jersey.


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