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Kroger merges four pension funds

BY Michael Johnsen

CINCINNATI — Kroger on Thursday announced that four of the UFCW/multi-employer pension funds to which the company contributes will merge into a new fund, effective Jan. 1. This new arrangement is expected to reduce Kroger’s annual pension contribution expense and will secure the pension benefits of more than 65,000 Kroger associates.

“Given the challenging environment that exists for pension plans today, we are pleased to have reached an agreement that provides a meaningful future benefit for Kroger associates who participate in these plans,” stated Mike Schlotman, Kroger’s CFO. “The unique characteristics of these plans, coupled with our strong financial position and today’s low interest rate environment, give us the ability to contribute to the new fund in a manner that we expect to produce significant future savings.”

Pending market conditions, favorable discussions with the rating agencies and the approval of three remaining UFCW locals, Kroger expects to contribute approximately $650 million to the new fund in January 2012. The plans cover more than 65,000 Kroger associates from 14 UFCW local unions. Kroger associates represent 92% of the total active participants in the four funds, which was a key factor that facilitated this arrangement, Kroger stated.

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Wellness+ enhancements, flu immunizations contribute to strong third quarter for RAD

BY Alaric DeArment

CAMP HILL, Pa. — Rite Aid experienced stronger sales in third quarter 2012 as it expanded its Wellness+ loyalty card program and saw continued growth in flu immunizations and the Wellness store format, the company said Thursday.

There is little doubt that Rite Aid is getting its biggest bang from its more engaged loyalty card users. Wellness+ members had significantly larger basket rings than nonmembers, with Silver members showing basket sizes 49% larger than nonmembers and Gold members showing basket sizes 120% larger, while Gold and Silver members — those with 1,000 points and 500 points, respectively — accounted for 61% of scripts and 52% of front-end sales within the program. The program now has 47 million members, up from 44 million in second quarter 2012. In addition, 74% of members used their cards within the last 26 weeks, with 50% using them more than once and almost 50% of Gold and Silver members shopping at Rite Aid stores every week. A new Bronze tier has been created for customers who have accumulated 250 points as an incentive for membership.

Wellness+ lately has seen some enhancements as well. More than 90,000 people have enrolled in Wellness+ for Diabetes, and there were more than 200,000 unique visitors to Rite Aid’s section of WebMD, which is partnering with Rite Aid in the program. In addition, the company has plans to roll out Load2Card on Jan. 1, 2012, allowing members to download coupons directly to their cards, while Silver members — those who have accumulated 500 points — will be able to choose “wellness rewards,” such as gym memberships and subscriptions to health and fitness magazines.

“We believe that Wellness+ is the strongest rewards program in our industry,” president and CEO John Standley said in a conference call with investment bank analysts, adding that it was part of the 4,679-store chain’s goal of “finding ways to deliver more value to our most loyal customers” and that he expected enhancements to the program to add “significant value” to it.

Other diabetes initiatives included the 30-city Rite Track Diabetes Tour, a partnership with Johnson & Johnson division LifeScan that kicked off on Nov. 1 in New York with a cooking demonstration by celebrity chef and Type 1 diabetic Sam Talbot. The company also is a member of UnitedHealthcare’s Diabetes Prevention and Control Alliance, which Standley said had expanded in the Washington, D.C., and Baltimore areas.

Rite Aid’s partnership with OptumHealth in the Detroit area, which allows online interaction in the store between a customer and a doctor or nurse, has gained some traction as well. While the program is still in its early stages, the company is considering expanding it.

While its Wellness+ loyalty card program continues to gain traction, the company is perhaps less enthused with results from the new store format that bears the same name. While the Wellness stores show some promise, it appears management is looking for better results from that investment.

The chain has 159 Wellness stores in operation, having completed 119 remodels during the quarter, and is in the process of staffing them with Wellness Ambassadors, specially trained members of the staff who walk the aisles with iPads to answer customers’ questions about medications and other health products and services. It plans to have 300 remodels finished by the end of the fiscal year. Standley said the company would continue to assess the results from the stores and that overall, their comps were “in line” with the rest of the chain, though results from earlier in the fiscal year had shown the Wellness stores tracking somewhat ahead of the other stores. Standley said the stores had higher sales in product categories that were added and lower sales in categories with fewer items.

“They’re not doing terrible — that’s the good news; they’re not where we want them to be on the top line — that’s the bad news,” Standley said, adding that the program, which the company launched this summer, was still in its early stages. “I believe the stores with the Wellness Ambassadors are doing better than the ones without.”

The company closed 18 stores during the quarter and operated a total of 4,679 stores, compared with 4,731 at the end of third quarter 2011.

While saying that the company did not expect a benefit from the ongoing dispute between Walgreens and Express Scripts, it would seek to draw customers from it. “Our goal is to get our fair share of what might come to market if that dispute continues,” Standley said, adding that one-third of Rite Aid’s stores were within a mile of a Walgreens.

A major contributor to pharmacy comps in the quarter was the chain’s flu immunization program, which includes more than 11,000 pharmacists certified to deliver vaccinations. So far, it has immunized 1.4 million customers and expects to immunize 1.5 million this season, more than twice the number of people immunized last year, though Standley said immunizations as well as weather could be a factor in softer cough-cold sales on the front end.

Sales for the quarter were $6.3 billion, a 1.8% increase over third quarter 2011, while the company posted a net loss of $52 million, compared with $79.1 million during the same period last year. Most of the increase came as a result of an increase in same-store sales, which increased by 2% over third quarter 2011. Front-end comps were flat when compared with the same period last year, while pharmacy comps increased by 2.9%. The company expects total sales of $25.85 to $26 billion for fiscal 2012 and a net loss of $325 to $440 million.

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CVS Caremark receives Logistics Best Practice Award

BY Antoinette Alexander

WOONSOCKET, R.I. — CVS Caremark has been awarded the 2011 Supply Chain Distinction Award North America in the Logistics Best Practice category, which recognizes companies that drive logistics excellence throughout the organization through the development of efficient, sustainable and cost-effective strategies.

The awards were announced last week at the annual Supply Chain Logistics Summit held in Dallas, Texas.

"Our 7,300 CVS/pharmacy stores serve more than 4 million customers daily, so it is critical that our distribution network operates at best-in-class efficiency to ensure that the products our customers want are delivered to our stores in a timely manner," CVS Caremark SVP supply chain and logistics Ron Link said. "Receiving the Logistics Best Practice Award is a testament to the outstanding and innovative work accomplished by our logistics team, our suppliers and transportation providers, and our colleagues from around the company."

CVS Caremark received this year’s award for a multi-year process improvement and technology integration program across its entire distribution network that significantly reduced the cost of operations while improving productivity and customer service.

Central to the CVS Caremark Logistics organization’s success was a cultural and change management framework called Personal Responsibility in Delivering Excellence (PRIDE) that accompanied the implementation of several process and technology improvements over a four-year period. This included the integration of a new warehouse management system for inventory and workflow, a labor management system for performance measurement and employee incentives, a route optimization program for managing store delivery schedules and routes, and an inbound freight appointment and visibility system.

CVS Caremark’s implementation of PRIDE and supporting processes and technologies across 18 distribution centers involving more than 7,000 associates resulted in significant productivity improvements, a reduction in costs and inbound transit times, and improved on-time store delivery performance, the company said.

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