Drug Emporium corporate aim is to "dominate" its major markets

Drug Store News, Sept 30, 1991 by James Frederick

Drug Emporium corporate aim is to "dominate" its major markets

COLUMBUS, Ohio - Drug Emporium will mark two big expansion events on opposite sides of the country this month. One is the opening of its first store in New England, in Bedford, N.H. not far from Boston. The other, early in September, was the opening of its first corporate-owned store in San Diego.

Those two events belie the company's recent plans to cut its expansion pace. The slowdown came after unexpected snags with its inventory reporting system led Drug Emporium to cut its gross margin estimates and its rosy outlook for store growth in 1991. The problem, reported in the Aug. 26 edition of Drug Store News, upset the company's plans to open another 25 to 30 units this year, and sliced that projected growth roughly in half.

Nevertheless, the nation's first national deep-discount drug store chain is likely to finish the year with more than 220 stores and total sales of roughly $1.5 billion. Corporate-owned stores will account for more than half the total in both sales and store count.

What's more, the chain's growth slowdown looks more like a bump in the road than a major detour when measured against its 14-year history. Its store totals have more than doubled in less than five years, and sales have tripled. Its penetration now extends to 13 major markets coast-to-coast, and it is a powerful force in big markets like Atlanta, Philadelphia, Cincinnati, Phoenix, Baltimore/ Washington, D.C., and Columbus. The chain has carved out significant chunks of the drug store market in other major cities, as well, including St. Louis, Dallas, Seattle, Norfolk, Va. and Kansas City.

Near-term, the company's biggest market target is Baltimore/ Washington, where store count has nearly tripled in two years to more than 20 units.

Also in the crosshairs for Drug Emporium is the San Francisco Bay Area, where the first unit is slated for a fall opening (a single franchised unit operates in nearby Sacramento). Southern California will also get major attention now that 13 of the 14 stores in the region are under corporate ownership - including the chain's single best-performing store in Redondo Beach. Wilber said Southern California has the potential to host more than 60 chain units.

The Wilbers insist Drug Emporium's aggressive growth plans aren't a store-count numbers game, but rather a definite market strategy. The chain has abandoned franchising as a growth vehicle and has opted almost totally for corporate-owned stores, which in most cases yield far better returns.

"We're not selling new ones," ceo Gary Wilber told Drug Store News in late June. Meanwhile, the company has bought back its franchise operations in Minneapolis, St. Louis, Southern California, Charleston, S.C./Augusta, Ga., Indianapolis, Cincinnati, Dayton and elsewhere over the past three years, and has closed its five unprofitable Jacksonville, Fla., franchised units.

The company's other 98 franchised stores are generally doing better. Said Wilber, those in the Pacific Northwest are "tremendously successful." Some non-corporate units in Texas, Phoenix and elsewhere are also doing well.