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Peapod makes its home in the Windy City

BY Michael Johnsen

CHICAGO — Chicago Mayor Rahm Emanuel on Wednesday joined Peapod to announce the company is relocating its headquarters to downtown Chicago at 300 S. Riverside Plaza.

"Peapod is a national leader in both the food and tech industries and will be a strong addition to Chicago's thriving innovation community," Emanuel shared during a press conference. "In Chicago, the company can continue to expand, create new jobs and contribute to our growing economy."

"Over the last 28 years, Peapod has revolutionized the way people across the nation shop for groceries," said Illinois Gov. Bruce Rauner.  "My administration is proud to work with companies that embrace innovation and push our economy forward. I will continue to work hard to support great companies and make our state an even better place to do business."

"Since Peapod was founded in Chicago in 1989 as the country's first online grocer, we have always considered this city our home," Walt Lentz, acting president of Peapod said. "Moving our headquarters downtown will allow us to become a bigger part of the Chicago business community and invest in the city's diverse pool of talent while also growing our business throughout the country."

The new location is expected to be complete in the spring of 2018, at which time the headquarters will transfer from the current Skokie, Ill. location. All employees at Peapod's current Skokie headquarters will be relocating to the new Chicago headquarters.

With the move Peapod joins a number of other food industry leaders that have relocated to Chicago, including McDonald's, Conagra Brands, ADM, Mead Johnson, Beam Suntory, Kraft Heinz and Oscar Mayer.
 

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CVS Pharmacy, Walgreens to anchor CVS Health’s new performance-based network

BY DSN STAFF

WOONSOCKET, R.I. — A new performance-based network from CVS Health will bring together its CVS Pharmacy banner, Walgreens and roughly 10,000 independent pharmacies. The 30,000-store network, announced Tuesday, is aimed at reducing costs for members of CVS Caremark’s pharmacy benefit manager clients and improve health outcomes, the company said.

“Steadily increasing drug costs, and the current transition in health care from volume to value, require us to continually develop and implement innovative solutions to help our clients manage pharmacy costs while improving health outcomes,” CVS Health COO Jon Roberts said. “This partnership with Walgreens, CVS Pharmacy and independent pharmacies enables us to offer a new kind of pharmacy network that provides our clients with opportunities to improve health outcomes and lower overall health care costs, along with comprehensive, nationwide access to medications for their patients.”

Performance measures participating pharmacies will be evaluated on will include demonstrated medication adherence for such chronic conditions as diabetes, hypertension, behavioral health and respiratory conditions. The participating pharmacies are encouraged to implement proprietary processes and programs to deliver the results for measures being tracked.

“Walgreens is pleased to advance our commitment to improving patient care and health outcomes through improved medication adherence by participating in this new performance pharmacy network,” Walgreens Boots Alliance co-COO and Walgreens president Alex Gourlay said. “This network recognizes that pharmacists do more than dispense medications – they are key members of the patient care teams and add value by helping and encouraging patients to take their medications as instructed, improving overall health and wellness while lowering costs for patients and payers. Tracking performance provides additional accountability and incentive to achieve measurable outcomes.”

CVS Caremark will make the network available for eligible PBM clients for implementation starting in March 2018, the company said.

“At CVS Pharmacy we know pharmacists play an important role in providing our patients with timely and relevant information about their prescription medications,” CVS Pharmacy president Helena Foulkes said. “Given that our pharmacists are on the frontlines of health care in their role as a trusted healthcare provider, their interventions can help patients take their medications as directed by their physicians, ultimately improving outcomes and managing overall health care costs.”

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WBA executives bullish on new year’s promise following strong 2017

BY Michael Johnsen

DEERFIELD, Ill. — Walgreens Boots Alliance on Wednesday exceeded analyst expectations with results that came in slighlty north of the company's year-end projections thanks, in part, to the company's commitment to a fluid go-to-market strategy that is constantly evaluating customer behavior.

"We have a lot of pilots and tests in the marketplace," Alex Gourlay, co-COO Walgreens Boots Alliance, shared with analysts Wednesday morning. "[We're] really testing, at this stage, consumer behavior. Can we get consumers and patients to see us differently and use these services that we're now providing." Some examples cited by Gourlay included WBA's partnership with LabCorp, which makes lab testing accessible at retail. Gourlay also mentioned the company's interest in parlaying its heritage in the optical business in the U.K., and leveraging its global partnerships there toward the creation of a U.S. solution.

Similarly, hearing care, Gourlay added. "Hearing care, again, we have a successful business in the U.K. We understand the model very well and we're bringing that here to the U.S. in a test-and-trial [pilot] as well. That's happening just after Christmas," he said. "Using our physical, convenient locations, using our healthcare brand, working in partnerships to gain access to our customers [are] all part of what we're doing right now in terms of developing new business models in the healthcare space."

Of course, the margins associated with retail pharmacy are under increasing pressure from declining reimbursement rates, and one way to combat that is to galvanize the front-end of the store where profit margins are both larger and more elastic. Analysts have suggested it's a business model imported from the U.K. and WGA's Boots operations. "If you look at the pharmacy [market] in the U.K., it has been under pressure for decades," added Stefano Pessina, executive vice chairman and CEO, Walgreens Boots Alliance. "The reason why we have developed the stores overseas – increasing margin across the front of the store [and] creating a completely new [retail] model – it's because over time we had to cope with the margin in the pharmacy, which was initially very good, but shrunk over time," he said. "In the U.S., the margin of the pharmacy [business] is still decent. It's under pressure, yes, but we have so many levers to compensate that we are not particularly worried. But in the meantime, we are trying to create a new model that will allow us to keep the profit of the company overall at the level we believe is satisfactory."

The front-end of the future will be predicated on convenience, Gourlay added. "The model we're developing is to really understand how customers will shop today and in the future from a convenience location," he said. "Job No. 1 is to simplify the offer so they can find the product really quickly at good value. [It's] a combination of convenience, quality of products, uniqueness of products and also price. We believe we can do that really well in healthcare and OTC [and] we're doing it better in beauty." In terms of other categories, Goulray pointed to the successful relaunch of its Nice own brand. "The packaging is fantastic and it's doing really well early on," he said.

"What's really important to the customer of the future is the app, and how we can join forces of a convenient store with a mega-app," Gourlay said. "We have a mature platform there that more and more we are connecting to the store," he said. "Since we've combined all of our e-commerce assets under Walgreens.com, we have seen huge volume of growth, in particular in health and beauty."

In addition to its continual monitoring of the front-end strategy, Walgreens will be onboarding its acquisition of 1,932 Rite Aid stores over the next three years at an estimated cost of approximately $750 million. The first few Rite Aid stores have been acquired in the past week, Walgreens reported. Ownership of the remaining stores is expected to be transferred in phases, with the goal being to complete the store transfers in spring 2018.

Walgreens Boots Alliance noted it would be rationalizing some 600 stores, mostly Rite Aid locations within one mile of an existing Walgreens operation.

In addition to the $750 million in transfer costs, the company plans to invest approximately $500 million of capital on store conversions and related activities.

In response to what best practices Walgreens Boots Alliance will take from its acquired Rite Aid stores, Gourlay identified both the high caliber of personnel tied to those stores, as well as the discipline those store teams have in executing a lower-cost and lower-volume front-end model. "We started our journey with the 1,500 lower-volume stores in the summer and look forward to really understanding how we can apply their thinking to our model going forward," he said. "[And] we're getting a lot of great people. We're getting the operational teams who have run that business and understand the drug store channel. I'm sure within that we will find talent that will improve the great talent we have in Walgreens [stores]."

The Rite Aid deal extends the Walgreens brand into additional communities and affords greater access to more customers.

Walgreens Boots Alliance posted adjusted fiscal 2017 fourth quarter net earnings of $1.4 billion, representing an increase of 18.8 compared with the same quarter a year ago. Adjusted diluted net earnings per share for the quarter were $1.31, up 22.4% on an actual and constant currency basis, compared with the same quarter a year ago.

Sales in the fourth quarter were $30.1 billion, an increase of 5.3% from the year-ago quarter, and an increase of 6.4% on a constant currency basis.

For the fiscal year 2017, which ended 31 August 2017, sales increased 0.7% to $118.2 billion compared with the prior year. On a constant currency basis, sales increased 3.3%. Adjusted net earnings attributable to Walgreens Boots Alliance in fiscal 2017 increased 9.9% to $5.5 billion, up 11.6% on a constant currency basis, compared with the prior year. Adjusted diluted net earnings per share in the fiscal year increased 11.1% to $5.10, up 12.9% on a constant currency basis, compared with the prior year.

WBA's Retail Pharmacy USA division posted fourth quarter sales of $22.3 billion, an increase of 7.5% over the year-ago quarter. Sales in comparable stores increased 3.1% compared with the same quarter a year ago.

Pharmacy sales, which accounted for 72.1% of the division’s sales in the quarter, increased 12.6% compared with the year-ago quarter, primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime.

Comparable pharmacy sales increased 5.6%, primarily due to higher volume. Reimbursement pressure and generics had a negative impact on comparable pharmacy sales growth, which was partially offset by brand inflation. The division filled 250.2 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 9% over the year-ago quarter.

Prescriptions filled in comparable stores increased 8.7% compared with the same quarter a year ago, primarily due to Medicare Part D growth and volume growth from previously announced strategic pharmacy partnerships. The division’s retail prescription market share on a 30-day adjusted basis in the fourth quarter increased approximately 120 basis points over the year-ago quarter to 20.5%, as reported by IMS Health.

This was the division's highest reported quarterly retail prescription market share in the U.S., for a second consecutive quarter.

Retail sales decreased 3.9% in the fourth quarter compared with the year-ago period, which includes the impact of the previously announced closure of certain e-commerce operations. Comparable retail sales were down 2.1% in the quarter, partly due to changes in promotional plans. Declines in the consumables and general merchandise category and in the personal care category were partially offset by growth in the beauty category and in the health and wellness category.

The company today introduced guidance of $5.40 to $5.70 for fiscal year 2018 adjusted diluted net earnings per share. This guidance assumes current exchange rates for the rest of the fiscal year, and continuation of the company's normal anti-dilutive share buyback program.

On Tuesday Walgreens Boots Alliance declared a regular quarterly dividend of 40 cents per share, an increase of 6.7% over the year-ago period. Walgreens Boots Alliance and its predecessor company, Walgreen Co., have paid a dividend in 340 straight quarters (or 85 years) and have raised the dividend for 42 consecutive years.

The dividend is payable Dec. 12 to stockholders of record Nov. 13.

 

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