Accelerating population prompts continual store growth: the Raleigh-Durham-Chapel Hill region has drawn a slew of top-drawer pharmacy competitors into the drug store arena. Among them: Brooks, CVS, Kerr Drug and Walgreens

Drug Store News, June 6, 2005 by James Frederick

For bare-knuckled competition among top pharmacy competitors, it's hard to beat the show going on in Raleigh, N.C.

Selected by Money as one of the nation's most livable cities and tapped by the U.S. Census Bureau as one of the fastest-growing areas of the country with some 1.3 million total residents in 2000, the Raleigh-Durham-Chapel Hill region has drawn a slew of top-drawer pharmacy competitors into the drug store arena. Among them: market leader Brooks, via its purchase last year of Eckerd's North Carolina stores; CVS, which has a strong second-place presence; locally based Kerr Drug, one of the industry's top regional drug chains; and Walgreen Co., the market's newest superpower entrant. Raleigh also is host to pharmacies operated by Wal-Mart, Target, Kmart and BJ's Wholesale Club, as well as more than a dozen strong independents.

"It's a very competitive market," agreed Tony Civello, chairman, president and chief executive officer of Raleigh-based Kerr Drug, which operates 106 stores overall and 26 in the Raleigh-Durham-Cary, N.C., market. "There are four chains operating here--CVS, Eckerd, Walgreens and Kerr--and there is continual growth on all parts ... with additional stores.

"It's based primarily on this accelerated growth rate in the population. North Carolina as a whole, and the Raleigh [Research] Triangle area, has become very popular with Northeasterners who move midway between the snow in the Northeast and the heat of Florida. It's one of the fastest-growing areas of the country--therefore, lots of [new] rooftops, both residential and commercial."

As for Kerr Drug, said Civello, "We have the good fortune of having the Kerr name, and even though we're a different management group, the Kerr name has been here since 1951," when Banks Kerr opened his first drug store in the region.

Civello said Kerr's managers saw the coming growth trend in Raleigh-Durham in the late 1990s, after assuming control of the chain in a leveraged buyout. And, he said, they've done their best to gear up for it.

"To prepare for the onslaught of continual competitive growth and the entry of Walgreens, we touched every store in the marketplace," with the exception of one or two Kerr units still undergoing renovation, Civello told Drug Store News. That means either a relocation or full remodeling, he added, as well as the addition of Kerr Health Care centers.

Even "in light of the competitive nature of the market," Civello added, "our stores in this market are updated and fresh, with new merchandising concepts on the health side of the business. And we really did all that in preparing for new competition coming to the market. And No. 2 is the continual growth of residential rooftops in this market."

Kerr's newest bid to differentiate itself as Raleigh's homegrown drug chain came in late May with the opening of clinical weight-loss centers, operated by Medifast, in one of its drug stores in Raleigh and one in Greensboro, N.C. The Hi-Energy Weight Control Centers are the first clinical weight-loss centers in a regional chain drug store under a pharmacy program, according to Medifast.

Under the new program, Medifast counselors will work with Kerr patients on weight-loss efforts and meal plans.

While the area is going through a major revival, there was a time a couple of decades ago when investing in Raleigh-Durham may have seemed a bit more visionary--and certainly more risky--than it is today. The Raleigh-Durham region suffered through a sweeping and painful shift in its economic underpinnings in the 1980s and 1990s with the loss of thousands of jobs in bedrock North Carolina industries, such as textiles and furniture. But the rise of computer chip making, pharmaceuticals, biotech and other high-tech industries--fueled by big investments in science and research and the growth of the Research Triangle Park that lies among Raleigh, Durham and Chapel Hill--helped restore prosperity for a time.

Employing some 40,000 people, the 6,800-acre park draws on the research capabilities, faculty and graduates of three major universities: the University of North Carolina in Chapel Hill, which also houses a major school of pharmacy; Duke University in Durham; and North Carolina State University in Raleigh.

But like other areas that depend on high tech for jobs and growth, the Raleigh market suffered through a long downturn in technology spending after Sept. 11 and the bursting of the tech bubble in the late 1990s. Still, signs of recovery are apparent.

"A long-awaited rebound in the region's economy, even in the battered tech sector, has led to an increase in activity" among industries moving to or growing in the Raleigh area, noted a recent report from real estate development firm Grubb & Ellis. Indeed, noted the firm, high-tech companies are again snapping up office space in both Research Triangle Park and at the newer Keystone Tech Park.

The resurgence in the business cycle mirrors the strong population growth. And, said one market observer, that growth tide may be strong enough for the next few years to float all boats in the drug store marketplace.