Suburban sprawl promotes competition in Twin Cities: No. 1 ranked Target and the area's third-largest company, Best Buy, have set their sites on expanding in the world of pharmacy and health-related retailing

Drug Store News, June 6, 2005 by Laura Heller

Minneapolis may not be the sexiest of cities--although the likes of Prince and Janet Jackson may disagree--but it has given rise to many of this country's largest companies, with world-class retailers among them. It's no wonder, then, that the area's consumers are savvy shoppers strong loyalties, traits that are playing out in the store arena even as new players are poised for entry.

Statistically, the region ties with Atlanta as the ninth-largest in the United States. But Minneapolis also has a young population base--the average age is just 35--and a high per-capita income, thanks to a family-friendly community and booming business environment. Residents of the Twin Cities boast an average household income of more than $73,000 and a low cost of living that allows those households approximately $48,000 of disposable income a year.

The Twin Cities play host to some of the nation's biggest corporations, including General Mills, Northwest Airlines, U.S. Bancorp and 3M, making the region a magnet for recent college graduates in the upper Midwest and young executives willing to relocate for solid job opportunities.

Of the top five companies with headquarters in the region, two of them--Target and Best Buy--are retailers. Another one, SuperValu, is a supplier to the retail industry. Health care provider United Health Care ranks as the second-largest company in the area, according to the Minneapolis Chamber of Commerce. And while the region's fourth-largest company, SuperValu, plays only a supporting role in the retail world as a distributor, No. 1 ranked Target and the area's third-largest company, Best Buy, have set their sights on expanding in the world of pharmacy and health-related retailing.

The Minneapolis drug store business is dominated by national chains with Walgreens as the market leader, controlling a 37.2 percent share of the prescription market. Of the company's 97 stores in Minnesota, 77 are located in or near the Twin Cities. And while Walgreens has long had a major presence here with a store on practically every corner, the company has continued to open stores and remain fiercely competitive, adding nine new units and increasing front-end and total market share by more than 3 percentage points in the past year.

While the Twin Cities might be Target town in a broader retail sense, Walgreens' pharmacy sales track about seven times higher than Target's generated from only twice as many pharmacy counters in the market, according to Chain Store Guides data.

Said Mindy Thompson of Simply Retail, a health care retail consultancy: "Do people here fill their prescriptions at Target? Yes. Do they use their pharmacy? Yes."

And given some recent initiatives, it's clear that the chain aims to capture even more share, both locally and nationally. "We view it as an initiative with a large potential," said Target Stores president Gregg Steinhafel. "Recent feedback has been positive from both consumers and the surgeon general."

In April, Target launched Clear Rx, a new packaging style that not only changed prescription bottles to the company's signature red, but implemented colored ring tabs that allow families to differentiate medications easily, as well as dispensers for easier administration of children's liquid medicine.

It's an initiative that will play especially well in the company's hometown, where families reign supreme and often are overlooked by an industry steeped in tradition and largely focused on an aging population. And by partnering with MinuteClinic, another local business, Target is adding even more value for its core shopper: women with children.

MinuteClinic operates in seven local Target stores (and three Cub Foods outlets) and expanded to eight additional Target locations in Maryland this year. The onsite service helps consumers to diagnose and prescribe for common ailments and infections, alleviating costly and time-consuming visits to the doctor.

"They are tapping into the ultimate trend right now," said Thompson. "Who is really focusing on chronic diseases and compound health problems for women? Target and MinuteClinic have really tapped into the working, busy mom. What's better than going into Target and getting your ears checked with your groceries?"

MinuteClinic recently announced it would open three facilities inside CVS stores, as well, with two of them Minneapolis. CVS currently has just 10 stores in the greater Minneapolis-St. Paul area, but has identified the market as one with growth potential, vowing to add 25 to 30 new stores there in the next year.

Still, despite Target's heightened focus on pharmacy and CVS' recent entry into the area, Snyder's Drug Stores has retained its lock as the No. 2 pharmacy provider in the market with 56 stores and an 18.5 percent share of local pharmacy sales.

The trend of providing on-site health services at retail locations is gaining momentum, particularly Park Nicollet Health Services, one of a handful of small local chains that continue to grow pharmacy share. Park Nicollet, which still controls about 3.5 percent of the Twin Cities pharmacy market--half a percentage point more than it had a year ago--has partnered with large corporations to provide on-site services and health counseling and has a strong presence in one of the industry's most talked about new concepts in the drug channel: Best Buy's eq-life store.