While the move could be perceived as a direct threat to grocery stores, c-storesand mass merchants like Target Corp., which also sell such items, Walgreen emphasized that it is being selective in adding fresh foods to more stores.
Selling perishable, prepared [image-nocss] products can be risky, analysts say, because of spoilage and shrinkage. Execution is extremely important, as it may be difficult to please consumers' fickle tastes, said the report. Still, analysts generally applaud Walgreen's measured approach.
Walgreen already offers fresh food in a few hundred mostly urban stores,spokesperson Tiffani Washington said.
Moving forward, "we'll be trying to identify what stores make sense and what selection makes sense," she told the newspaper. Jensen will be assisting in that effort, she added.
Jensen recently left London-based Tesco PLC's Fresh & Easy Neighborhood Market chain, based in El Segundo, Calif., where he held a similar position to the one he is taking at Walgreen. Before that, he worked at Dallas-based 7-Eleven Inc. as a category manager.
Selling perishable items in more Walgreen locations could help the drugstore boost revenues, as it looks to leverage its convenient locations to busy shoppers, Washington added.
Even so, the company does not anticipate fresh foods will be a good fit for all its 7,149 stores, the report said, and distribution and supply issues still need to be worked out.
Washington declined to identify when Walgreen would potentially put fresh food in more stores or how much it would cost the company.
Andrew Wolf, analyst at BB&T Capital Markets, described Walgreen's move as "ambitious" andtold the paper thatthe company would nothire a senior manager on a "whim."
The news of Jensen's hire comes as Walgreen is in the midst of a major transformation, the Journal said. The drugstore chain has worked to slow its once breakneck store growth in favor of making its existing store base more productive.
Amid the tough economy, Walgreen has put a greater emphasis on staples like groceries, through its "Affordable Essentials" program, and pushed its own private-label brands. Sales of nonpharmacy items have been soft at Walgreen in recent months, as consumers have cut back spending.
Walgreen recently began selling beer and wine in some stores, and Washington said the drugstore has seen good results in the roughly 1,600 locations that carry alcohol.
Washington said thatcustomers who buy wine and beer tend to buy more products in general, and as Walgreen explores adding fresh food to more stores, it hopes the results will be similar. "We have that convenience factor,"she said.
Even so, some analysts say selling fresh foods at drugstores could be hard to do well.
"The idea of fresh food at drug stores is difficult," Scott Mushkin, analyst at Jefferies & Co., told the Journal. Mushkin said Walgreen may face the challenge of finding enough buyers for the foods. The company may have trouble realizing enough volume since offerings may not always suit customers' tastes.(Click here for previous CSP Daily News coverage of Walgreens.)
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