Ahold recognizes the pharmacy advantage

Chain Drug Review, August 20, 2007

QUINCY, Mass. -- Ahold USA Inc. believes that having pharmacies in the stores operated by its supermarket chains in the United States puts the stores at an advantage over competitors.

The retailer focuses on health and wellness issues throughout the store, and linking food marketing and pharmacy drives prescription drug sales, according to Ahold senior vice president of pharmacy John Fegan.

The company strengthens pharmacy margins by supporting increased use of generic medications. Not only do generics offer substantial savings for the consumer, but they also improve profitability for retailers, says Fegan.

The retailer bills itself as "a full-service pharmacy where you shop for your food."

"Our knowledgeable pharmacists are at consumers' service seven days a week to fill prescriptions, answer questions and help in any way they can," says Fegan.

He asserts that one-stop access to health, nutrition and dietary goods and services not only differentiates Ahold's Stop & Shop and Giant Food stores (the Giant-Landover division) from competitors, but helps in recruiting pharmacists as well.

"For pharmacists interested in patient counseling, disease management and wellness programs, the convenience of being located within a full-service food store becomes a valuable asset," says Fegan. "A vast array of resources to assist pharmacists in treating the whole health of consumers is fight at their fingertips."

The importance of American chains to Amsterdam-based Ahold is significant: They contribute more than 60% of the parent company's retail sales and nearly 40% of total sales. They also contribute nearly 63% of total retail operating profits.

Late in 2006 the company revealed a strategy for profitable growth that includes major initiatives to improve overall results and the American retail performance in particular.

Ahold put its U.S. Foodservice Inc. division up for sale as part of a decision to focus on its European and North American retail businesses. And soon after deciding to rid itself of underperforming Tops Markets stores in northeast Ohio, Ahold followed up by putting the remaining Tops stores up for sale.

Meanwhile, the Giant-Landover division was made the focus of an initiative Ahold called the Value Improvement Program (VIP).

Borrowing lessons from the repositioning of Ahold chains in the Netherlands and Sweden, VIP consists of three main components:

* Improving product and service offerings on a category-by-category basis.

* Improving price positioning by reducing promotional activity to a targeted group of products and lowering prices across a range of items while simplifying the pricing structure.

* Reducing costs, which includes what executives term "significant head count reductions across all support functions."

AHOLD USA RETAIL

** HEADQUARTERS

1385 Hancock St.

Quincy, Mass. 02169

Key pharmacy executive: John Fegan, Senior Vice President of Pharmacy

Phone: (781) 380-8000

Fax: (617) 770-8190

Web site: ahold.com

** TRADE CLASS--Supermarket

** PHARMACY RANK--15 in sales, 14 in pharmacies

*** Full-year results (12/31/06)

Pharmacy sales: $2.29 million*

Overall sales: $22.4 billion

*** Number of stores--795

*** Number of pharmacies--696

*** Number of states operating--17 plus District of Columbia

* CDR estimate.