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Walgreens: Roaring out of the gate

BY Jim Frederick

WHAT IT MEANS AND WHY IT’S IMPORTANT The “hedgehog” has evolved. It’s now more like a lion on the prowl.

(THE NEWS: Walgreens to acquire pharmacy business, other assets from Memphis USA Drug stores. For the full story, click here)

Walgreens’ leaders used to proudly describe the company’s operating strategy as the kind of approach used by a hedgehog: Stick close to the basics of pharmacy retailing and drug store merchandising, avoid most retail acquisitions like the plague, and grow the business from the ground up by building lots of stores in carefully selected locations.

Clearly, that strategy no longer is enough.

For well over a decade, beginning in the late 1980s or early 1990s, Walgreens pursued an organic growth strategy that rejected the whole idea of growth through the acquisition of other drug chains. It didn’t fit with the hedgehog strategy, company leaders asserted time and again, because most of the regional drug store operators out there simply weren’t considered a good fit for Walgreens’ retail philosophy or mission. Far better, they insisted, to move into new markets and dense up in established ones by locking up the best “Main and Main” locations and building stand-alone stores from the ground up, with plenty of parking and exhaustive analyses of everything from traffic flow to local customer demographics.

For years, the organic growth approach worked like a charm, yielding year after year of record sales and profits. But Walgreens’ leaders and strategists have clearly shifted with the times. Flush with cash and impatient with the long development time and high costs of growing their way to market leadership one new store at a time, management has concluded that seizing ripe opportunities by snapping up the assets of its best-run or strategically important competitors will pay bigger, faster dividends.

The deal to buy 17 Memphis-area Ike’s and Super D drug stores from Arkansas-based USA Drug is the latest nail in the hedgehog’s coffin. It follows by just a month Walgreens’ agreement to buy New York drug store powerhouse Duane Reade — its biggest acquisition in its 109-year history — and puts another exclamation point on a spate of regional-drug takeovers in the past few years.

Nothing signals Walgreens’ change in strategy like the jubilant statement made by president and CEO Greg Wasson last month, after the Duane Reade deal was announced. “We have a proven record,” Wasson noted with pride, “of successfully completing and integrating retail acquisitions, including Happy Harry’s, Drug Fair and El Amal Pharmacies in Puerto Rico.”

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Rite Aid accepting EBT cards, food stamps at stores

BY Michael Johnsen

CAMP HILL, Pa. Rite Aid on Thursday announced that all Rite Aid pharmacies now accept EBT (electronic benefit transfer) cards and food stamps provided through the Supplemental Nutrition Assistance Program.

“One-in-eight Americans are receiving food assistance through SNAP, according to the USDA,” stated Brian Fiala, Rite Aid EVP store operations. “With nearly 4,800 Rite Aid stores nationwide offering assorted groceries, accepting EBT cards is just another convenience we can offer to our customers and help make their lives a little easier.”

SNAP, formerly known as the Food Stamp Program, is administered by the USDA and offers families and individuals at certain income levels financial assistance in purchasing food and beverages. Electronic Benefits Transfer is the electronic system that allows a SNAP recipient to authorize transfer of their government benefits from a federal account to a retailer account to pay for products received. SNAP benefit recipients are issued EBT cards that look like debit cards.

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Report: Food Lion pulls plug on Bloom stores expansion

BY Allison Cerra

RALEIGH, N.C. Food Lion has pulled its plans to bring four Bloom stores to the North Carolina market, according to local reports.

The four stores, which currently are under construction, will become Food Lions instead. Spokeswoman Christy Phillips-Brown said the company will focus on increasing the number of Bloom stores in existing markets rather than expanding into new ones.

The Bloom chain, which was introduced in 2004, has 66 stores, including one opening in Charlotte this week. The stores are known for such tech-savvy features as scanner guns and recipe kiosks.

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