Food channel positions pharmacy up front

Drug Store News,  April 19, 2004  by Barbara Murray

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Savvy grocers put the pharmacy right up front when they build new stores or remodel because they know that the pharmacy shopper spends up to 30 percent more than the average supermarket customer. Emphasis is placed on pharmacy adjacencies and in promoting pharmacy services as an added value, as the consumer movement has swung toward personal care from food.

Even though the rate of growth in sales of prescription drugs in supermarket pharmacies slowed last year, the channel still accounts for a little more than 12 percent of total prescription sales in the United States, according to the National Association of Chain Drug Stores. Total retail pharmacy sales in the United States last year reached $203 billion, including mail order. Supermarkets' slice was $25.1 billion.

"It continues to be a growing business," said Rich Savner, director of public affairs for Carteret, N.J.-based Pathmark Stores. Pathmark operates 142 stores, 131 with pharmacies. The chain introduced online prescription refills in February, providing a refill within two hours if the medication is on hand and within 24 hours otherwise, Savner said.

Channel blurring makes a supermarket pharmacy almost a necessity. "It's a convenience for our customers and something we are including in our future store locations, where it makes sense, which is most of them, depending on the size of the footprint. It's definitely a great service to our customers," said Kathy Lussier, director of communications for Jacksonville, Fla.-based Winn-Dixie. Of Winn-Dixie's 1,073 supermarkets, 701 have pharmacies.

Many chains put a health and wellness section near the pharmacy, merchandising supplements, natural food, medicinal teas or personal care items within easy view of the pharmacy. For instance, over the past year, Kroger has increased its pharmacies to 1,860, and 1,255 of them have full-line natural food departments. Safeway has 1,223 pharmacies, out of a total of 1,817 stores. Giant Eagle, based in Pittsburgh, opened 13 pharmacies in the past year and has a total of 178 of them in its 222 stores.

"In-store pharmacies play a key strategic role in our ability to offer customers a more convenient and efficient shopping experience," said Brian Frey, marketing assistant for corporate communications for the chain. "To help our customers live a healthy lifestyle, we offer a variety of in-store pharmacy programs," including flu clinics, free wellness screenings and senior-specific health programs that allow customers to ask pharmacists questions about their health, Frey added.

Grocers also note that pharmacy customers are loyal and provide repeat business, building trade.

Supermarket pharmacies did 12.3 percent of the prescription drug sales in the United States last year, up 8.5 percent, according to NACDS. Still, supermarket pharmacy growth slowed quite a bit from the 16.6 percent rate it had from 2001 to 2002, which was faster growth than traditional drug store chains experienced.

Total U.S. dollar sales of prescription drugs for 2003, including mail order, were $203 billion, up 11.2 percent over 2002's $182.7 billion. Total prescriptions dispensed were 3.2 billion, up 2.4 percent over the year before.

Traditional drug chains dispensed 1.5 billion prescriptions, up 1.4 percent over 2002, while supermarkets filled 462 million, a 4 percent increase.

The location of Winn-Dixie's pharmacies varies from store to store, but it's always a strong presence, Lussier told Drug Store News. Adjacencies include health and beauty care items and over-the-counter remedies, blood-pressure monitors and other health and wellness products.

Drive-through pharmacies are a bit of an exception because customers driving by to pick up their prescriptions are outside the store, not strolling the HBA aisles. Supermarket operators who have drive-through pharmacies figure they're an added convenience that will build loyalty. Wegman's Food Markets designed its new store in Sterling, Va., with a drive-through pharmacy.

Giant Eagle continues to experiment with placing pharmacies on a perimeter wall to allow for face-to-face drive-through services, Frey said. "This layout is consistently well-received by our customers."

People could be satisfying their needs at a drug retailer, but grocery stores have the most frequent traffic, so it's natural to try to leverage that with other products, said consultant Don Stuart, a partner at Wilton, Conn.-based Cannondale Associates. Chronic use or an illness like diabetes can draw people back to the same store on a regular basis.

"There are some highly valuable customers whose needs are not being met if the store does not have a pharmacy," Stuart said.

Cannondale Associates' research indicates the annual worth of a consumer who satisfies her pharmacy needs is up to 30 percent higher than the average consumer in a grocery store. This means she is spending $3,700 a year in the supermarket, compared with the average of $2,800, he said, based on data through December.