LINCOLNSHIRE, Ill. — As Walgreen Co. continues to revamp its merchandising department the company’s executives say the front end will take on a new look in the coming years.

Speaking at the 2011 Walgreens Vendor Summit here last month, executives told representatives from the hundreds of companies that supply it with branded and private label products the details of its merchandising and marketing strategies going forward.
A cornerstone of these efforts, they said, will be store brands.

“Walgreens is brand proud,” vice president of retail brands and global sourcing Moe Alkemade told the vendors. “Consumers expect us to provide private brands. They are a critical part of our business.”

In the coming years, he stressed, store brands will play an even greater role and become much more prominent. Alkemade said in the next five to seven years Walgreens expects to double its current $4 billion in private label sales.

The push in store brands, he said, comes at a time when consumers are becoming more comfortable with these products.

For example, Alkemade noted, a recent poll of shoppers found that 80% feel that store brands are as good as or better than national brands. A decade ago that number stood at 70%.

“Private brands are no longer the cheap option,” he said. “They are the smart option.”
Walgreens executives explained that going forward the company expects to pare back the number of different store brands it offers, with such brands as W being discontinued and other brands being extended into new categories.

The company will consolidate its store brands into three tiers, they say — differentiated brands, price and value brands, and opening price point brands.

The differentiated brands will be unique to Walgreens and will include such lines as Walgreens brand health care, Delish consumable and a host of as-yet-unnamed brands across such categories as household products and photo.

Price and value brands will consist of high-quality national brand equivalents and will include such labels as Nice!, Studio Beauty and Patriot Candles.

The opening price point brands, Walgreens executives said, will provide shoppers with a value option and will be offered in only a handful of categories. The brand under which these products will be offered does not have a name. Rather, Walgreens will distinguish these items with what it is calling a “sunny smile” logo.

Unlike most other retailers, Walgreens executives say the chain will invest significant marketing muscle behind its store brands and will promote them heavily in its weekly circulars as well as on radio and television.

Bolstering the front end, they say, is the key to Walgreens growth and a centerpiece of its plan to set itself apart from its competitors.

“We really want to make a difference and leave our competition behind,” president of daily living products and services Joe Magnacca remarked as he urged those at the forum to join Walgreens in this effort.

“We know we are not perfect, but neither are you,” he said, noting that cooperation between the retailer and vendors would benefit both sides.

“Too often we dig in our heels and are seen as immovable,” Magnacca said. “That has to stop.”

The changes that Walgreens is planning for its front end come on the heels of the chain’s successful transformation of its pharmacy operation.