Walmart works to narrow the pharmacy gap
Walmart’s pharmacy footprint is poised for its most meaningful expansion in decades, thanks to shifting capital expenditure priorities that have begun to favor more aggressive expansion of smaller stores.
The move is significant because ever since the advent of the Walmart Supercenter, net increases in pharmacy count have been minimal, as Walmart swapped discount stores with pharmacies for supercenters with pharmacies. That kept a lid on the type of gains in pharmacy count chains like Walgreens and CVS experienced, due to the combination of organic growth and acquisitions. Now it appears Walmart could be looking to narrow the pharmacy gap by opening its smaller Neighborhood Market stores at a faster pace, while continuing to experiment with an even smaller Walmart Express concept as the supercenter conversion cycle decelerates over time.
“Supercenters remain our primary driver of growth and returns,” Walmart U.S. president and CEO Bill Simon said recently during Walmart’s annual investor conference. “Because we see increased momentum in comp and total sales and traffic performance, we will continue to accelerate the rollout of Neighborhood Markets.”
Walmart expects to add between 15 million and 17 million sq. ft. of U.S. selling space next year, compared to a projected 14 million to 15 million by the end of the current fiscal year. Virtually all of the increase in planned square footage growth is attributable to an acceleration of smaller format stores like the approximately 45,000-sq.-ft. Neighborhood Market, and to a lesser extent, the approximately 15,000-sq.-ft. Walmart Express. Walmart plans to open 125 supercenters next year, roughly the same as last year, with most coming from conversions or expansion. However, the company is planning to add between 95 and 115 smaller format stores, primarily Neighborhood Markets, compared to about 80 that will be opened during the current year. While that is a relatively modest acceleration from the current year total, Walmart went on to say it expects to have 500 of the Neighborhood Market food-and-drug combination stores operational by 2015, and these stores are expected to generate annual sales of approximately $10 billion.
From a productivity standpoint, that equates to average annual sales of $20 million per unit and sales per square foot in the vicinity of $450, assuming an average store size of 45,000 sq. ft.
Productivity of the smaller stores has long been the impediment to expansion, but company executives more recently have indicated that the smaller stores now generate returns on par with larger stores. They are also a lot easier to open, since suitable locations are more abundant. The same is true of the small Express concept, but Walmart has indicated the returns are not yet high enough to warrant a more aggressive rollout.
Report outlines challenges in pharma industry through 2020
NEW YORK — Spurred by health reform and other factors, a "golden era" could be approaching for drug companies as they reinvent themselves, according to a new report by PwC.
The report, "Pharma 2020: From Vision to Decision," said that the industry was on the verge of an era of renewed productivity and prosperity, but its success was not guaranteed.
"A healthy, vibrant and responsive pharma industry is vital to society for the development of new medicines," PwC global pharmaceutical and life sciences advisory leader and report author Steve Arlington said. "More needs to be done to support and encourage long-term investment in the discovery and development of medicines to treat serious disease. We need to all work together to improve the well-being of populations."
The report said that health reform is accelerating the need for big changes in the drug industry and its response to rising demand for medicines, major scientific and technological advances, economic pressures and sociodemographic shifts — in both developed and growing markets around the world. It found that while the industry could experience "unprecedented" global growth in the future, its prevailing business model and management culture were ill-suited to capitalize on the opportunities over the next decade. Drug companies that make it through the next few years can prosper if they can prune their pipelines, address rising consumer expectations and poor scientific productivity and cultural barriers, the report said.
Among the challenges the industry faces is rising healthcare costs. Demand for medicines could result in global drug sales increasing by 40% to $1.6 trillion by 2020; but with economic difficulties and rising costs, the industry has to be in a position to be a part of the solution, the report said, and it’s faced with a choice: Offer more value without charging more or justify premium pricing by proving it can remove costs from another part of the healthcare system.
The report also suggested tailoring pipelines to meet demands in the market and also increase collaboration, noting that the culture in the pharmaceutical industry has changed little over the past few decades.
Lupin CEO wins Ernst & Young award
BALTIMORE — The head of Lupin Pharmaceuticals has received an award from accounting firm Ernst & Young.
Ernst & Young announced Thursday that it had named Lupin CEO Vinita Gupta the inaugural Ernst & Young U.S. 2012 Family Business Award of Excellence winner at its 2012 Strategic Growth Forum in Palm Springs, Calif.
"Gupta’s father, Desh Bandhu Gupta, founded India’s Lupin in 1968, and as a teenager, she accompanied him on business trips around the world, giving her a taste of global diplomacy and negotiation strategy," Ernst & Young Americas director for Entrepreneur of the Year Bryan Pearce said. "Through these early valuable experiences with her father, and her continued education in business, education and pharmaceuticals, Vinita has come to be a great leader who will continue to take Lupin Pharmaceuticals to new heights."