CVS gets down to ‘Just the Basics’

WOONSOCKET, R.I. —CVS Caremark has been heavily focused on the healthcare arena, leveraging its various points of care to improve medication outcomes and lower healthcare costs—but that’s not to say that the front end has fallen by the wayside. In fact, the retailer is in the midst of writing a prescription for front-end growth that involves a new store brand and new beauty innovations.

Speaking to analysts during the retailer’s 2010 analyst meeting on Oct. 8 in New York, Mike Bloom, EVP merchandising and supply chain, took the wraps off several initiatives aimed at further bolstering the company’s $18 billion front-end business. “While CVS continues to outpace the competition in just about all metrics, and our acquisitions are clearly on track for further growth, the consumer is still facing very challenging times,” Bloom told analysts. “The economy and unemployment rates continue to be a challenge. The consumer is time-starved, saving money wherever she can and always looking for value. So knowing this, we continue to develop strategies to ensure we [meet] her current needs and continue to drive trips to CVS.”

Among the strategies is a new store brand called Just the Basics, which will launch in February 2011 with more than 100 items. “The first thing we did is we conducted customer focus groups where we identified the need for an opening price-point value brand. We then defined that the brand would consist of everyday essential products that would help get her through her day,” Bloom explained.

Enter Just The Basics. What is significant is that the brand is not a national brand equivalent-type execution, but rather, more of a basic entry point, low-price alternative. “Now, while many retailers are stuck in the brand-follower mode of the 1980s, we have evolved to a leadership role,” Bloom said.

By design, the CVS name will not be on any Just The Basics products. As a key part of defining CVS’ new brand portfolio, the company has established the CVS brand as a “healthcare expertise” brand; therefore, current products in its portfolio, as well as any new brands launched in the future, such as Just The Basics, that do not meet this criteria will be re-branded over the next 18 to 24 months.

Bloom noted that private-label penetration at CVS is expected to grow from 17% to more than 20% in the next two to three years—a move that reflects a larger industry trend.

Turning to beauty—a $3 billion business within CVS—the company is leveraging the success of its Healthy Skincare Center concept, which currently is in more than 800 stores, with a new mini-format pilot in 120 stores that will enable the company to expand the concept to more store locations.

With regard to its high-end Beauty360 format, CVS currently has 25 locations and continues to seek out premium-brand partners. “We continue to gain learnings from the [Beauty360] pilot to validate that this is the right strategy. Our ExtraCare data confirms that 20% of the customers shopping Beauty360 are new to CVS, and a whopping 50% of the customers shopping Beauty360 are new to the beauty category at CVS,” Bloom said.

It addition, CVS will launch in January an ExtraCare Beauty Club, under which customers will receive a 10% “shopping pass” for signing up, $5 in Extra Bucks for each $50 spent on beauty and $3 in Extra Bucks on the cardholder’s birthday.

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