Walgreens has really helped to transform why consumers shop a drug store with its position in healthier-for-you foods and fresh produce. That’s not just thinking outside of the box for traditional retail pharmacy operators; that’s throwing out the box altogether and replacing it with an in-store food pyramid.
And they brought in the right executive to realize this vision for fresh — Steve Broughton, VP and GMM of food, beverage and household consumables at Walgreens. Broughton joined the company from Walmart, where he was in charge of its food offering at a time when Walmart had traditional supermarkets on its heels. That experience gave him the opportunity to transform a retail experience. “Greg [Wasson] enabled us to be change agents,” Broughton said, speaking to why, as a food executive, he made the transition to a pure-play drug store.
Walgreens’ focus on fresh is central to its mission to transform from a retail pharmacy into a health and daily living destination because some of the urban residents shopping its stores — whether in challenged communities, where Walgreens doubles as the neighborhood grocer, or in busy downtown areas where healthier lunch selections are available for nearby office workers — aren’t there just to buy food. They are there to improve their lives, and so “what I eat” is as important to total wellness as “how I feel” or “how I look” or “what I need now.”
Walgreens is able to take “fresh” to a whole new level in its flagship stores in major cities like New York, San Francisco and Chicago, where it tests new concepts that continue to push the envelope on selling food in a drug store. For nearby office workers, Walgreens has successfully brought in fresh sushi made on-site, baristas, fresh-baked goods, smoothie bars and frozen yogurt stations, all of which reflect a little of the local flavor.
And it’s not just the products that are helping to recreate the shopping experience — there are other less tangible dimensions of the experience that these concepts brings to its stores. “Those aromas of …coffee and fresh baked bread add to the experience,” Broughton said. “And the customers are telling us with their words, their wallets and with the lines around meal times that they are very open to a drug store carrying these types of products.”
That commitment to offering both fresher foods and healthier-for-you options has also transformed how Walgreens brings products to market in its stores that go long on fresh. “The sandwiches and the wraps and the cut fruits and salads, we source those products locally,” Broughton said. “It’s a little more difficult because we have to be closer to it, but we can reflect the taste and the flavor profiles that are significantly different by market, and we have it closer to our stores, so there is less transit time,” he said.
There are two major challenges, however: logistics and technology.
Walgreens solved its logistics challenge through facilities called consolidated distribution centers in place of direct store deliveries. Couple that with the company’s technology solution — a system that helps manage first-in, first-out product rotation with expiration dates — and you have most of the ingredients for success in driving a fresh-food business that is meaningful and relevant at the local level.
Other tools Walgreens uses to help ensure the return on investment for any store featuring fresh is tight shrink control and keeping a close eye on what sells when, and what doesn’t. “We have the ability to tweak the assortment as frequently as we need,” Broughton said. “As soon as we sell through a product … the next day it can be something different.”
However, it takes about the same amount of time to set up an item for one store as it does for 8,000 stores, so Walgreens has recently instituted a team responsible for making assortment decisions at the local level. Under the direction of VP inventory strategy Mark Scharbo, who came to Walgreens by way of Duane Reade, the team will help manage localization and inventory strategy. “He’ll help us to manage those exceptions a little bit better and [be] more narrowly focused geographically so that we can offer the correct assortment.”
In addition to Scharbo, the divisional merchandise managers that really make fresh come to life in Walgreens stores, in the many forms it takes, are Jim Jensen, who manages fresh produce; Dex McCreary, who oversees candy, beer, wine and spirits; and Chris Serbin, who’s in charge of center-store food offerings. More and more, Walgreens designates a portion of its food assortments among local brands that are relevant to shoppers in those stores. To do this, you need boots on the ground to identify those brands (for more, see page 86).
The Nuts on Clark brand available at the State and Randolph store in Chicago is a perfect example of tapping into the local flavor of the market, Broughton said. Nuts on Clark (located on Clark Street) is locally famous in downtown Chicago for its popcorn and nut varieties. The only place you can buy Nuts on Clark outside of their own shop is at Walgreens. It’s just one example of how fresh is enabling Walgreens to be different.
Colby Red is another interesting story, Broughton noted, and really brings home how food — in this case, wine — can help personify Walgreens’ larger mission to provide solutions for consumers to get, stay and live well. Daryl Groom, a winemaker, created a red wine named for his son Colby, who was born with a heart defect, to help support heart research. For the first two years, the wine was only sold in retail at Walgreens. To date, Walgreens and the Groom family together have helped raise more than $200,000 to support charities that promote heart health.