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Competitive Watch: CVS Expanding Grocery Aisles

WOONSOCKET, R.I. -- CVS is the latest drug store chain trying to stake a claim for a bigger piece of the nation's trillion-dollar food budget. The company, based here, will double the size of food sections in 3,000 of its 7,000 stores by year's end. So far, at least a dozen CVS stores have been converted in the Boston area, according to a report by The Patriot Ledger.

Retail consultants said this is yet another example of "channel blurring" -- the growing multiplicity of product categories being sold in stores. Just as supermarkets have expanded pharmacy, and health and beauty sections in the past decade, drug stores are retaliating by putting food products in the forefront, the report stated.

"It's retailers' anarchy and everybody's trying to fill a void in new spaces," Michael Tesler, president of Retail Concepts in Norwell, told the newspaper.

Two CVS stores in Quincy, Mass., already showcase the expanded food sections, which CVS promotes with new signs proclaiming, "What you want, when you want it." CVS' Gold Emblem private-label pasta and sauce sit side-by-side with name brands such as Barilla and Bertolli. Stores also sell CVS and name-brand fruit juice and canned vegetables, snacks, soups, cereal and frozen foods. There's also an expanded line of ethnic products, such as noodle dishes from Annie Chung's, and Simply Asia and Soy Vay marinades.

Beefing up grocery sections is a defensive strategy for drugstores that have been losing some of their health and beauty business to dollar stores, said Robert Sheehan, vice president of research for KeyPoint Partners of Burlington.

"It's just another thing to get them in the store," Sheehan said. Drugstores also can tap into time-pressed consumers' demand for quicker shopping trips than visiting a supermarket. "Smart retailers are bringing the merchandise that people need on an everyday basis in a much more convenient way to customers," he said.

CVS this spring also began adding salads and sandwiches to the 20 percent of its stores in urban areas. The changes are designed to tap into customers' desire for quick shopping trips, CVS president and COO Larry Merlo said during a conference call last month.

"Both of these initiatives are designed to increase the number of trips to our stores, and the pilot results have been very encouraging," Merlo said.

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