Food is an important business for the drug channel; National Association of Chain Drug Stores estimates suggested the category represents nearly 20% of front-end sales. While drug chains have steadily expanded their shelf-stable, refrigerated and frozen sections, they have largely stayed away from perishables, leaving the challenges of daily delivery of fresh-food products to other channels.
Now a few innovative chains are testing the waters in the fresh-food category. New York City-based Duane Reade has significantly expanded food at its 16th Street and 8th Avenue location in Manhattan. Food now comprises about 40% of the 15,000-sq.ft., two-level store. Offerings include fresh sandwiches, single-serve entrees, baked goods, freshly packed deli meats, freshly packed salads and vegetables, and self-serve Starbucks coffee.
The frozen food section also has been expanded in the store to 500 SKUs of frozen convenience foods—from frozen burgers and frozen chicken breasts to frozen vegetables and appetizers. A front-of-store island contains fresh sandwiches, microwavable pasta, macaroni and cheese, soups, bagged salads, packaged celery and carrot sticks, and fresh fruit. The soups and ready-to-eat entrees carry Duane Reade’s DR Delish brand label, which has been vastly expanded this past year
The fresh-food section also contains such fresh-baked goods as croissants and muffins, and produce that is delivered every day to the store. That’s easy to do in such a concentrated market area as New York City. At least 10 stores have extended food departments, and the chain plans to roll out the concept to more locations based on market demographics.
Walgreens, which recently purchased Duane Reade, will be carefully studying the strategy as it plans its own fresh-food expansion. Earlier this year, Walgreens hired grocery and convenience- store veteran Jim Jensen as its divisional merchandise manager for fresh foods. “We’re looking to add convenience for our customers,” said Walgreens spokeswoman Tiffani Washington. “Currently, a few hundred of our stores offer meal-to-go options, such as fresh fruit and salads, and we will be looking at rolling that out to more stores.”
Washington said that under Jensen’s direction, the chain would be looking at where expanded offerings make sense. “It has to be managed on a very local level, and selections will not always be the same from market to market. Duane Reade has done very well with fresh food in the ultimate urban market, and we can learn a lot from their experience,” she said.