DEERFIELD, Ill. -- Walgreen Co. plans to add beer and wine tomost of its stores, marking a return to the liquor business, said The Chicago Tribune. The Deerfield, Ill.-based drugstore chain expects to roll out alcohol to stores in the next 12 to 18 months, Walgreen CEO Gregory Wasson said in an earnings conference call Tuesday.
Walgreens had been selling liquor since the end of Prohibition, but exited the business at most stores in the early 1990s. Beer, wine and, in some cases, small amounts of liquor have been available in "a handful" of Walgreens stores in [image-nocss] the Southwest, but the company de-emphasized that part of the business in the 1980s, the company said in July when it was in the early stages of contemplating bringing liquor back to its stores. Based on research and competitive factors, Walgreens decided to re-visit the idea, it said. (Click here for previous CSP Daily News coverage.)
Although the category is expected to account for less than 1% of store shelf space, the hope is that beer and wine will drive traffic to the stores and that shoppers will buy other items once they are there, Wasson said during the conference call.
In late 2008, Walgreen launched "Rewiring for Growth," a major initiative designed to fundamentally reduce costs and improve productivity. The program will align the company's costs, culture and capabilities to its strategy and the realities of the current economic environment. It targets approximately $1 billion in annual cost savings by fiscal 2011.
The chain said this week in its most recent earnings report that it has made progress on strategies to enhance the customer experience and drive cost reduction and productivity gains. Based on positive results from its 35 Customer-Centric Retailing (CCR) test stores, Walgreens is now rolling out the format in 400 stores in Texas, which will be completed this fall.
The chain said it is "re-inventing the customer experience" by streamlining merchandise selection and shifting promotional focus toward essential consumer needs. The company is also expanding its private-brand products to provide value to customers and higher profit margins to stores, and is focused on growing its e-commerce initiatives.
The CCR format rollout will continue in additional markets after the holiday season. The company expects the new format to improve sales, take work out of stores, reduce capital deployed and provide a better customer experience, the company said.
A remodeled Walgreen store in suburban Chicago illustrates the changes it made to ease shopping in its stores, added a report by The Wall Street Journal. Shelves were lowered to 66 inches from 78 inches high, so aisles look brighter and less cramped. The vitamin area has new shelf signs that promote the supplements' health benefits. Well-organized displays of mouthwash and paper towels help customers find departments easily.
The store looks so much less cluttered that a few customers discovered for the first time that the store has windows, Bryan Pugh, Walgreen's vice president of merchandising, told the newspaper.
In some departments, Walgreen has slashed the number of items stocked. In paper goods, the variety of products declined 30%, but sales jumped because the department is less confusing for shoppers, Pugh said.
Employees used to squeeze 22,000 different items on store shelves. But in the newly remodeled outlets, stores carry about 4,000 fewer products, said the report. The streamlining makes it easier to keep goods in stock. In total, the chain reduced the value of its inventory per store by more than 11% in its fiscal fourth quarter.
Remodeling the 400 stores will cost of about $40,000 per store. By December 2010, the company expects to finish about 80% of its planned store remodels, Pugh said. Walgreen has changed the merchandise for all its stores in 36 categories, which account for 65% of nonpharmacy sales, he added.
Pugh said the company also sees new opportunities for sales growth in particular markets. In certain Chicago neighborhoods, for example, Walgreen is expanding its grocery selection in areas that have no supermarket within a 1.5 mile-radius, he said.
The recession has shaped Walgreen's long-term plans for its stores, the report said. "Consumers are concerned with rising unemployment, keeping their homes and paying down their credit cards," Wasson told analysts. "They're focused on value, and they're buying needs versus wants."
To respond to new customer preferences, Walgreen is emphasizing staples, such as food and paper products, and stocking fewer impulse buys, said the report; it also is pushing its private-label goods, which are priced below brand-name merchandise but carry higher profit margins.
In the past decade, Walgreens has grown from 3,000 stores to reach its goal of operating 7,000 stores by 2010. With more than 7,040 drugstores currently in operation, Walgreens is the nation's largest drugstore.
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