Walgreens to acquire Duane Reade

BY Antoinette Alexander

DEERFIELD, Ill. Speculation has been spreading throughout the industry for some time, and now it’s official: Walgreens has reached an agreement to acquire Manhattan-based retailer Duane Reade in a cash deal valued at nearly $1.1 billion.

The transaction, which is subject to regulatory approvals, will include all 257 Duane Reade stores located in the New York City metro area, as well as the corporate office and two distribution centers. Walgreens expects the deal to close in its current fiscal year, which ends Aug. 31.

For the latest 12-month period ended Dec. 26, 2009, Duane Reade generated unaudited net sales of $1.8 billion.


“Duane Reade is a compelling strategic acquisition that will immediately provide Walgreens with a leading position in the largest drug store market in the United States,” stated Walgreens president and CEO Greg Wasson. “In addition, Duane Reade’s recent initiatives in urban retailing, customer loyalty and private brand products support and accelerate Walgreens strategy to enhance the customer experience in our network of more than 7,100 stores across the country.”

Walgreens currently operates 70 stores in the New York City metro area.


 Walgreens expects to retain Duane Reade’s stores, pharmacy and distribution center employees and many members of Duane Reade’s senor management team. Over time, consolidation of core functions at the corporate offices will occur.

According to Walgreens executives, Duane Reade, which was founded in 1960 and is part of New York City’s fabric with its convenient locations and convenience items, will continue to operate its under its brand name after the deal closes. While New Yorkers may not see much change initially, Walgreens said that decisions would be made over time as to how best harmonize the Walgreens and Duane Reade brands.

“We are pleased that Walgreens shares our commitment to finding new and innovative ways to serve local communities, and we look forward to seeing our customers benefit from Walgreens’ unparalleled pharmacy and operational expertise as we continue with our ongoing transformation,” stated John Lederer, a former Loblaw executive who joined Duane Reade as chairman and CEO in April 2008.

Since taking the helm at Duane Reade, Lederer, and his new management team, has set in motion a significant brand transformation strategy aimed at improving pharmacy, fixing the customer experience and developing a relative, urban drug store box.


The transformation, based upon extensive market research, involves rebranding its stores with new signage, a new logo and a new brand mantra: “Duane Reade equals New York living made easy.” The mantra’s goal: to articulate its desire to become the destination of choice for beauty, wellness and convenience needs. These core offerings are being supported by a new concept segmentation that is sub-branded: “How I look, how I feel and what I need now.”

Improvements include new store designs with wide aisles and contemporary decor; a pharmacy featuring lower service counters; in-store health care clinics; and a store-within-a-store prestige beauty concept called “Look Boutique,” which elevates the merchandising of cosmetics and skin care products and features many prestige brands.

To date, Duane Reade has opened or converted 30 stores to the new format and has plans for up to 30 more new or remodeled stores in 2010. The continued roll out of “Look Boutique” is also planned for a growing number of stores across the network.

In addition, Duane Reade recently launched a new expanded customer loyalty program, dubbed FlexRewards, and a new private label offering under the DR Delish name.


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Praise the Lord and pass the clinics

BY Rob Eder

“Moreover, low-cost, convenient clinics offer the best solution for improving access to care for the uninsured, individuals without primary care physicians and workers in need of routine care.” That’s how National Center for Policy Analysis senior fellow Devon Herrick concluded his recent white paper, dated Jan. 14, 2010, “Retail Clinics: Convenient and Affordable Care.”

Hallelujah—someone in Washington finally gets it.

The other NCPA—a nonprofit, nonpartisan think tank, whose self-described mission is “to provide private sector, free-market solutions to public policy problems”—counts the Roth IRA and health savings accounts among its key policy achievements.

According to Herrick’s research, of 119 million emergency-room visits each year, 55% of them are for non-emergencies. Further, a 2006 survey of California hospitals reported that 46% of ER patients thought they could have been treated by their primary physician if they could have gotten an apppointment.

Herrick also pointed to a recent analysis from Minnesota health officials, which measured providers in the state on the appropriateness and quality of care in the treatment of two of the most common ailments in children: colds and sore throats; MinuteClinic NPs outscored primary care physicians 91% to 86%.

The NCPA holds a lot of hope in the ability of retail clinics to lower costs and improve health care; among its policy positions, the group believes retail clinics should be included in HSAs.

Herrick’s white paper came out too soon to include the recent results of the Take Care Health/Gallup patient engagement study. Drug Store News is the first media outlet to publish the results. Two key takeaways from the story that starts on page 1: Take Care, according to the Gallup study, “strongly engages” 3-out-of-4 of its customers, while the typical Gallup client scores only 1-out-of-5; Take Care’s same-clinic patient counts are up 60% versus last year.

The complete Take Care/Gallup white paper will appear in its entirety in the March edition of The Drug Store News Group’s Retail Clinician magazine.


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Reporters Notebook


Supplier News

Unilever’s Dove brand dove into the men’s grooming segment with its new Dove Men+Care collection available at retail in December 2009. The collection includes three varieties of body and face wash:

Clean Comfort, which is a cleansing gel that easily rinses off with a mild formula;

Extra Fresh, which is a cleansing gel that easily rinses off, with a touch of menthol for a cooling sensation; and

Deep Clean, which is a deep-cleansing gel that easily rinses off with purifying grains.

There also is a body and face bar in the Extra Fresh and Deep Clean variants, and an Active Clean shower tool. The body and face wash have a suggested retail price of $4.99 each, and the body and face bars have a SRP of $3.19 (two bars) and $7.49 (six bars). The Active Clean shower tool has a SRP of $3.99.

Eucerin, a Beiersdorf brand, has unveiled its new Eucerin Daily Skin Balance skin-fortifying body lotion and hand cream. The formula promises to strengthen skin’s protective barrier and natural defenses, while providing 24-hour moisturization to help balance the skin’s natural pH level. The products will be available beginning in April.

Japan-based cosmetics company Shiseido is looking to acquire Bare Escentuals, a maker of mineral-based makeup, for about $1.7 billion in an all-cash deal. The transaction is expected to close in first quarter 2010. Bare Escentuals’ business will operate as a separate division of Shiseido, and its brands will continue to be managed by the current leadership team.

“This looks to be a good operational fit for both companies. Bare’s growth over the next few years was largely expected to come outside the United States, particularly in Japan,” stated SunTrust Robinson Humphrey analyst William Chappell in a research note. “The merger with Shiseido should help accelerate this growth.”


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