Shoppers to add retail space, new concepts

BY Jim Frederick

TORONTO —Pushing back forcefully against an economy still struggling to regain its momentum—and capitalizing on the steep drop in real-estate prices spawned by that struggle—Canada’s largest chain drug store brand aggressively is building, expanding and relocating drug stores.

The expansion campaign marks a bold bid by Shoppers Drug Mart to position itself for the eventual recovery that will come to Canada, which has been hard-hit by the worldwide recession. Shoppers president and CEO Jürgen Schreiber outlined the company’s plans at a retail investment conference sponsored by Scotia Capital Sept. 22.

Shoppers will expand or relocate more than 60 stores in 2009, Schreiber said, and another 71 next year. The chain also will continue to build new stores, with a particular focus on western Canada and Quebec province, both of which he said are “under-represented” by the Shoppers brand.

The company also will continue to dense up in the nation’s top 10 urban markets, Schreiber told analysts. Noting the company’s “strong balance sheet and cash flow,” the CEO said the store-construction and acquisition campaign would be “largely financed with operating cash flow.”

As of the end of the second quarter, Shoppers’ sales were up 8.5% year-to-date, with same-store pharmacy sales growing 5.7% and revenues up 4% at the front end. In spite of the recession, Shoppers also grew its net earnings 6.9% over the same period last year, to $243 million Canadian.

Shoppers has worked steadily to boost both its store count across Canada and the size of its stores. Since 2002, the company has grown from 844 drug stores averaging 6,900 sq. ft. to 1,119 stores at the end of 2008, averaging 9,400 sq. ft. As of September, Shoppers operated 1,191 drug stores and 66 home healthcare outlets coast to coast, easily making it the nation’s largest single drug store chain. (Katz Group Canada owns more than 1,800 drug stores across Canada, but it operates under a variety of banners.)

Underscoring Shoppers’ determination to position itself for the next economic recovery, Schreiber pointed to an accelerating growth rate in retail square footage. In 2008, the chain grew its square footage by 11.9%, compared with a growth rate of 6.4% in 2002.

The chain also is pursuing new formats. Among them: Murale, a new beauty store concept featuring what the company described as “an unprecedented assortment of luxury, dermatological, fragrance and niche brands from around the world.”

“Murale is unlike any other beauty offering in North America with its unique combination of leading beauty and dermatological products, and professional, expert services and consultation,” Schreiber said.

Shoppers has opened three of the new-concept beauty stores, including its newest unit, which opened in Toronto Sept. 4. The concept is “performing in line with expectations,” Schreiber said, and four more Murale stores will open this fall.

The company also has unveiled another new concept, Shoppers Simply Pharmacy, which company representative Tammy Smitham described as “a 1,000-sq.-ft. format located within medical buildings and adjacent to medical clinics.” Shoppers now licenses or owns more than 32 of the medical clinic pharmacies, with more on the way.

Shoppers also is ramping up in other ways. More than 400 of its units across Canada are now open to midnight or 24 hours, and full-scale convenience foods departments are now offered in more than 600 Shoppers stores. Nearly 600 stores also provide postal service.

Responding to what Schreiber acknowledged is a “flat” market for in-store photo services and the continuing need to upgrade the stores’ appeal, Shoppers also is embarking on a program to transform the photo departments in its stores to a “services corner” that features a broader array of customer services, the executive said.

“Shoppers is about service, and service areas are winners,” Schreiber said. Such ancillary categories as cameras, batteries, games and accessories continue to perform well at the photo department, he added.

Schreiber sees plenty to like in Shoppers’ future. Among the company’s strengths driving sales, he told analysts:

Shoppers is “uniquely positioned in the marketplace” with a “core offering focused on health, beauty and convenience. We continue to gain share in a growing market,” he noted.

The chain’s Optimum shopper loyalty card has enrolled 9.7 million active cardholders and added a new, co-branded credit card offering in partnership with MasterCard. Optimum now accounts for 65% of all scanned customer transactions, according to the company, and cardholders are growing their shopping baskets at a faster rate than those not participating in the Optimum program, Schreiber said.

Like their American counterparts, Canadian consumers have been hit hard by the recession. But they’re stocking up on Shoppers brand products and treating themselves to “small luxuries” in the stores, Schreiber said, adding that the dismal economy has been “good for private label,” as consumers have become “price-sensitive and promotion-driven.” What’s more, he added, the consumer “loves Optimum more than ever.”

Shoppers has expanded its lineup of prestige beauty and skin care products, with the addition of 15 more prestige brands in 2009, bringing to 117 the total number of high-end items in the beauty and dermatology departments of the store. Shoppers now operates Beauty Boutique departments in more than 200 of its drug stores, with 30 more planned by the end of the year. That gives the chain “more points of distribution than department stores combined” in Canada, Shoppers’ CEO said.

The company’s stake in the total Canadian pharmacy market continues to climb, IMS Health reported, from slightly more than 18% of total prescriptions sold in 2003, to nearly 20.3% as of July 2009.

Shoppers’ market share also has grown steadily for categories sold at the front of the store, according to AC Nielsen, with the chain now accounting for a 14.9% share of total market.

Canada’s population continues to age as more baby boomers enter the years of high prescription drug utilization. The number of Canadian seniors ages 60 to 79 is projected to rise from 5.1 million in 2008 to 8.7 million by 2026, Schreiber said.

By 2011, Canada’s total retail prescription sales are projected to rise to $25.1 billion from $21.5 billion in 2008, according to Shoppers’ president.


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Late-stage clinical trial results: MS drug is effective

BY Alaric DeArment

ALISO VIEJO, Calif. Patients taking an investigational drug for multiple sclerosis fared better than those taking placebo, according to late-stage clinical results presented Friday at a neurology conference.

Avanir Pharmaceuticals said MS patients taking Zenvia (dextromethorphan and quinidine) in 30 mg/10 mg doses experienced a 11.9% greater reduction in pseudobulbar effect – an MS-related condition also known as PBA that causes sudden, uncontrollable episodes of laughter, crying and other emotional outbursts – than those taking placebo in a 12-week phase 3 trial, results of which the company presented at the 3rd World Congress on Controversies in Neurology in Prague, Czech Republic. Patients taking the 20 mg/10 mg dose did not do better than the placebo group.

“PBA represents an area of high, unmet medical need with no FDA-approved treatments currently available,” study presenter and trial steering committee member Daniel Wynn of the Consultants in Neurology Multiple Sclerosis Center stated. “Although the involuntary emotional outbursts of PBA cause considerable impairment for millions of individuals in the United States, it is under-recognized and commonly misdiagnosed.”


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New report projects 12.6% increase of probiotics market


NEW YORK The two takeaways from this story are “the [U.S.] market is expected to grow at a rate of almost 14%” and “the early movers in the industry will benefit in terms of market share.”


That about describes the opportunity in a probiotic nutshell.



The rising interest in probiotics can be credited in part to Dannon’s Activia brand, a line of yogurts and yogurt drinks, which has been heavily advertised to the American consumer with the message that not all bacteria is bad for you — and in fact some bacteria taken on a regular basis can impart some pretty significant health benefits. That advertising message — that probiotics can be an important piece in a healthier-for-you diet — has been all the more reinforced as Bayer supports its probiotic Phillips Colon Health, and as Procter & Gamble rolls out its Align probiotic.



And the consumers already are core drug store shoppers. The ratio of women to men in search of a product delivering digestive benefits is about 2-to-1, according to industry experts. When women hit their 30s and 40s, that’s the point in their lives when they’re looking for a strategy in life to help them manage their digestive issues.



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