Competition intensifies in coveted Bay area

Drug Store News, Dec 16, 2002 by Mike Troy

TAMPA, Fla.--With an attractive combination of warm winters, affordable housing, no state income tax, 1,000 golf courses and more miles of shoreline than California, it is no wonder Florida's population surged 24 percent during the past decade.

As the Sunshine State was adding 3 million new residents during the '90s, retailers of all types built hundreds of new stores to keep ahead of the demand. While much of the growth occurred in south Florida suburbs around Miami and Fort Lauderdale and in central Florida near Orlando, the state's unsung growth hot spot was the Tampa Bay area. This conglomeration of cities and towns, collectively dubbed Tampa Bay after the body of water they surround, has experienced some of the state's fastest growth and is poised to continue doing so. It already is the most populous and affluent area in the state and the largest television market, according to the Tampa Bay Convention and Visitors Bureau.

Approximately, 2.3 million people live in the three counties, Hillsborough, Pinellas and Pasco, that surround Tampa Bay, representing roughly 15 percent of the state's total population. The population of Hillsborough County, which is the largest geographically and includes the city of Tampa, increased by 20 percent to roughly 1 million. The population of Pinellas County, a peninsular landmass that dangles in the Gulf of Mexico and comprises the cities of St. Petersburg and Clearwater, increased just 8.2 percent to 921,000. The population of Pasco County, which shares a border with the northern edge of Pinellas and Hillsborough counties, increased 22.6 percent to 344,000.

This kind of population growth alone would be enough to make the Tampa Bay area attractive to chain pharmacy retailers, but the area also is one of those unique markets where growth is accompanied by population trends that are especially favorable to chain pharmacy. Those over the age of 65 represent 17.6 percent of the state's population; however, in some areas of Tampa Bay, the concentration is even higher.

In Pinellas County, 22.5 percent of the population is older than 65, and in Pasco County, the ratio is even higher at nearly 27 percent. In Hillsborough County, the percentage of elderly is more consistent with national levels at 12 percent.

A decade of considerable growth and favorable demographics have made Tampa Bay an attractive and intensely competitive market for chain pharmacy retailers. Drug stores, supermarkets, discount stores, supercenters and warehouse clubs all are looking for a share of the prescription drug dollar, and their actions are characteristic of the competitive battles being waged nationally.

Entrenched leaders, such as Eckerd and Walgreens, dominate the market, and both have followed a similar development pattern of opening new stores while relocating older strip center stores to freestanding locations. On any given day, a Walgreens or Eckerd store is under construction somewhere in Tampa Bay.

This situation has made it particularly challenging for CVS to enter the market. The first of its 14 stores debuted two years ago, and, in several cases, getting the locations the chain wanted meant tearing down an existing building. On State Road 60 in Brandon, Fla., CVS had to raze a gas station it bought across from an Eckerd before it could build a store. In a more residential area north of Tampa on Bearrs Avenue, CVS had to tear down a small strip center it bought to make room for its store. At a location near downtown St. Petersburg, CVS performed extensive renovation work on the historic building it acquired in order to convert it to a drug store.

With increased three-way drug store competition shaping up, it is easy to overlook another significant competitor. Publix Supermarkets, based in nearby Lakeland, Fla. Publix is predominantly a Florida grocer with 533 of its 684 stores located throughout the state. Even so, the company enjoys a national reputation of excellence, and virtually all of its stores contain a pharmacy. Its strategy is to dominate the markets in which it operates, resuiting in stores that are very close together. This situation is evident along County Road 581. Known locally as Bruce B. Downs Boulevard, the road extends northeast from Tampa into a rapidly growing area of single-family homes and apartments. As the population in this area surged, Publix added new stores, and with the opening of its newest store in October, the chain now has four stores spaced approximately two and a half miles from each other over a distance of 10 miles. By comparison, there are only three drug stores in the same corridor: two Walgreens and one Eckerd.

Customers living along these 10 miles not only have four Publix supermarkets and three drug stores from which to choose when having a prescription filled, a Wal-Mart supercenter and SuperTarget opened within a half mile of each other roughly within the past two years. It was Target's first SuperTarget in the Tampa area, and for Wal-Mart, it was the closest supercenter to Tampa.