Drugstores Finding New Inroads

JERSEY CITY, N.J. -- In the June 2010 issue of Convenience Store News, just a few months after the Walgreens chain agreed to buy the 257-store Duane Reade Holdings Co. for $623 million, a Duane Reade spokesperson gave CSNews' readers a glimpse inside the New York-metro drugstore chain's fresh and prepared foods pilot.

At the time, Duane Reade's goal was to provide New Yorkers easy access to tasty, quality food including bagged salad, produce and other fresh products. Since then, Walgreens stores have leveraged Duane Reade's innovative take on food-to-go and the two banner companies, plus rival CVS, have expanded their fresh and prepared food offerings.

Last fall, Walgreens took a cue from Duane Reade and piloted the sale of fresh foods in some Chicago and New York Walgreens stores, adding fruit, vegetables and packaged meals to these locations. Mangoes, yogurt parfaits and spicy tuna roles were just a few of the items for sale. According to reports, Walgreens expanded the space devoted to fresh fruits, vegetables, frozen meats, fish and dinner ingredients, such as eggs, cheese, milk and bread, by 150 square feet.

This January, Walgreens took another step, announcing plans to expand its fresh food offerings to 400 stores over the next few years. CEO Greg Wasson told shareholders the retailer was planning to evolve from a "retail drugstore to a retail health and daily living store."

In Chicago, specifically, Walgreens recently said it intends to quadruple the number of stores in which it provides expanded healthy food selections to serve communities identified as "food deserts," a term that refers to areas lacking access to basic foods necessary to maintain a healthy diet.

The latest Walgreens test, which started this May, launched fresh foods in approximately 30 Walgreens stores in San Francisco. Among the items offered are sushi, wraps and fruit. All participating stores should have the offer sometime this summer.

"Today's consumers are looking for more healthy food alternatives," Robert Elfinger, a Walgreens spokesperson, told CSNews Online. "Our San Francisco-area customers are already buying a lot of food in our stores and there are requests for more product offerings. As we learn from this initial test, we believe there's potential to expand this offering to more stores in the Bay area."

Ongoing, Walgreens' product selection will include fruits and vegetables, meats, prepared salads, sandwiches, wraps, soups and other on-the-go meal options, as well as convenient meal alternatives for immediate consumption. "With our three fresh food pilot markets, we hope to give consumers more options and more reasons to visit our stores," Elfinger said.

In a separate initiative that also impacts c-store retailers, last winter Duane Reade outfitted a Brooklyn store with Fire Island Lighthouse Ale and eight other beers on tap and lined the walls with refillable glass bottles. While the store isn't operating as an on-premises drinking establishment, uniformed clerks have been conducting tastings behind a bar, which stands in front of a large walk-in refrigerator stocked with nationally branded, local, craft and imported beers.

Duane Reade is continuing its strategy of targeting local tastes through prepared food. Stores in some residential areas of Manhattan are also selling cut flowers and, over the holidays, fresh-baked pies.

Walgreens' and Duane Reade's competition is stepping up its fresh offerings, too. Since its May 2010 announcement that it would expand its grocery section and add fresh salads and sandwiches to urban stores, CVS Caremark Corp. has moved ahead with its Urban Cluster store concept.

The company's plans call for expansion of the Urban Cluster offer, which provides urban dwellers with a broad array of consumables, many packaged groceries and grab-and-go prepared sandwiches, salads and fresh fruit individually wrapped, according to Mike DeAngelis, director of public relations for the 7,100-plus CVS store chain.

Last year, the retailer began adapting its product mix and store layout at 220 stores in Boston, Chicago, New York, Philadelphia and Washington, D.C. Another 200 urban stores will get the makeover this year, some of which will be outside the initial five urban markets. Ultimately, some 20 percent of the chain's stores will meet the retailer's standards for an Urban Cluster transformation.

"Based on customer research and analysis that we performed to help us understand how to make our stores more shopable in different types of markets, we found that in urban markets, our customers shop our stores much more like a general store than a drugstore," DeAngelis told CSNews Online.

Along with the product mix change, Urban Cluster stores feature reduced window signage and a modified layout that create clear sight paths to make navigation easier. The chain also implemented assisted self-checkout stations, which make it easier for shoppers to get in and out of the store, greatly reducing rush hour lines.

"Customers have responded very positively to the changes we've made in the redesigned stores, as they are making more visits and sales are up in these locations by about 10 percent," said DeAngelis.