Walgreens buys Rite Aid. Why should I care?

Rite Aid as Walgreens

Walgreens Pharmacy It was officially announced today that Walgreens has agreed to buy rival Rite Aid, pending approval that this consolidation does not violate anti-trust regulations. The purchase would, according to Walgreens, better position the company to compete with industry giant CVS by enabling the new Walgreens to negotiate better prices on ethical drugs. Phew. What a bunch of crap. Not, the purchase. To think that this horribly lost market space could adversely affect consumers by a merger of this size is crazy. They compete only on price and location and not a jot more. As Napoleon warned, “The logical end of defensive warfare is surrender.”

Walgreens buys Rite AidThose of you who have followed this blog, or read any of my writings on the pharmacy industry, will remember the distain of which I hold their brands. (You can read more about the brands here). They don’t have brands. They have locations. There is not a single one of them that believes a consumer would travel more than a mile or so to inconvenience themselves to frequent the brands. As a matter of fact, being on the wrong side of the street is enough to get shoppers to choose a different store. Where is the brand? Certainly it is not visible in terms of preference.

Walgreens rival is CVSWalgreens vs CVS

CVS Health took a bold step a while back by banning cigarette sales. It was an attempt at positioning the brand as being the home of better health. Logically, this goes hand-in-hand with the quick clinics manned by nurse practitioners across the brand’s locations. (I recommended to Rite Aid that they ban cigarette sales 15 years ago). It is an attempt to reposition but the brand has not made the fundamental changes needed in its messaging to own the position. CVS is still a convenience store/pharmacy dependent upon location for its business. Contrast this with IKEA whose brand inspires pilgrimages to the store from up to four hours away. That is the difference between a BRAND and a business.

This is an opportunity for Walgreens to rewrite the pharmacy story. Only hubris will stand between the new expanded brand and a slam dunk in brand loyalty. I say hubris because Walgreens believes it is the expert in this category and it has not been willing to challenge its assumptions and get out of its own way. Think about this. The purchase would give the new brand roughly 42% of the market (CVS has 58% but CVS has 7,800 stores and the new Walgreens brand would have 13,000 stores). More than 77% of the industry revenue comes from prescription drugs.

Walgreens will be forced to change signage on 4,600 Rite Aid stores (however, it will no doubt close some) and, if there was ever a time to rebrand, this is it.

Walgreens logoBut first, Walgreens needs to get out of its own way and rethink the difference between corporate identity and BRAND. Brand is a means by which customers aligns their values with the brand’s promise. To rebrand properly, Walgreens needs to look deeply into the preceptive (from the root precept) fiber of the consumer it needs to influence. Then the brand must be built around that highest emotional intensity. The brand is about the customer not the company.

So will Stefano Pessina, the new head of Walgreens call me and and be willing to put all the sacred cows on the butcher’s block? Will Walgreens decide to turn the industry upside down and inside out or will it simply plaster the newly acquired store fronts with the same old Walgreens logo? We will soon find out.

Target CVS deal lessens Target

In news that was labeled as a shock to the retailing industry, Target is selling its pharmacy business to CVS Health in what I find as no surprise at all.

The $1.9 billion Target CVS deal simply says that the CVS brand is stronger than the Target one because, other than some superficial changes, little will be different as it stands now.

Target CVS deal
Target cashes in

Oh, the signage will change and there might be some minor hassle with customers, but CVS will remain in the Target stores, including at its 80 clinic locations. There will just be more outlets for CVS.

Like we need more of them.

Right now, the retail pharmacy war is being fought between CVS, Walgreen’s and, to some extent, RiteAid. And, as of now, the battleground is based almost entirely on location, which is why CVS is making this acquisition simply to purchase more locations.

It’s a shortsighted strategy because the pharmacies could go the way of banks, in which those who actually visit a bank mostly go through the drive-thru instead of inside (where, at least in retail, consumers buy more). The pharmacies will end up with the most expensive billboards on the street.

What this says about Target.

But this acquisition says more about Target than it does about CVS. Target says it is making the deal so it can be better focused.

Target does have a lack of focus, and has essentially lost the war to Walmart over low-price retail. It has been a follower, adopting “Expect More. Pay Less” not long after Walmart positioned itself as “Save Money. Live Better.”

Even when Walmart introduced grocery across all its stores, Target followed suit. Pretty soon, Target became a copycat of Walmart only in the color red. And when you copy the market leader, that market leader becomes the default choice.

Now what does Target do now? Well, the obvious is that it needs to rebrand after an intensive, quantitative study that finds the highest emotional intensity in the retail market. It also, as we’ve said with all retail outlets, needs to own something that is unique.

In Target’s announcement of this sale, Brian Cornell, Target chairman and CEO, detailed the sale as a partnership with CVS and will enable the retailer to “sharpen our focus on elevating the way we deliver wellness products and experiences to our guests.”

Now, if I’m a Target shareholder, that statement makes me nervous. This is not a partnership because Target is hoping the CVS brand will bring in customers for the CVS brand. The brands are not on equal footing. CVS is the driver.

Target needs to realize that to compete and win in the retail category, its brand needs to be the driver. And it needs to be something totally different than Walmart. It also needs to be something different than a house of brands because anyone can do that.

CVS banning tobacco. Shouldn’t CVS Get Completely Pregnant?

I read a story today about a follow up plan from CVS banning tobacco sales in its stores. “To bolster its image as a health care company, CVS will announce a corporate name change to CVS Health. Retail stores will still be called CVS/Pharmacy.”

CVS banning tobacco
The acronym CVS just means pharmacy

This is a prime example of a brand not taking advantage of its leadership.

I think I mentioned in the past that I took this same idea to Rite Aid over a decade ago. (Rite Aid was under different management then and it was like a meeting with The Sopranos.) Needless to say, they were not very interested in doing so.

So kudos to CVS for running with the new position. But, shame on you for not leveraging the move in a way that would steal market share.

You ABSOLUTELY need a name change and not simply a change of the company’s legal name. The pharmacy itself needs to rebrand.

I believe that your current customers will appreciate the move and that loyalty will increase based upon the new tobacco ban. But the goal should be to attract the competitor’s customers and they — not your customers – need to SEE the change and understand it. Right now, you are simply a meaningless three-letter acronym that means pharmacy.

Come on guys. CVS banning of tobacco sales is a BIG move. Don’t blow this.

The Pharmacy Buisness Has Severe Brand Issues

Is there a pharmacy branding strategy?

By Tom Dougherty

The CVS pharmacy branding strategy is all about wellness
Can CVS Reposition without a name change?

The pharmacy business is one of the most troubled in a troubled category — namely retail. If ever there was a group of stores looking for an identity, not to mention a brand identity, the pharmacy business is it.

Walgreens pharmacy branding strategy is about retail and location
Walgreens is dominant

Think about how the industry has changed over the years. When I was young, local shops dominated the pharmacy business — mom and pop shops, if you will (read our blog about pharmacies). They sat on corners all around America and represented a small store with first aid medical products, watchbands, batteries, candy and prescription drugs. They were independently owned and operated and the proprietor was a recognized member of the community.

Consolidation swept over the industry and, eventfully, most of the small stores were either acquired by larger entities or driven out of business. The promises of large chains like Walgreens, CVS, Eckerd, Rite Aid, and countless others was profitability through efficiencies and the ability to advertise.

Pharmacy Branding Strategy is Mondane

Pharmacy branding strategy is very mundaneOver the years, however, the pharmacy as we knew it – the purveyor of ethical drugs and over-the-counter drugs has changed. They became convenience stores manned by hourly employees and faceless pharmacists in the back that still sold the medical products we needed but made their money on the sale of tobacco and film developing. One of those markets has deserted them and they are left scrambling to find a new niche.

Walmart's pharmacy branding strategy is all about price
Pricing drives Walmart

Enter into this foray the arrival of big retailers like Wal-Mart and Target, which promise savings and convenience and the supermarket pharmacy that promises the convenience of having your prescriptions filled while shopping for milk, flour and bread… Wait a minute… those same things are available in the pharmacy too. (Read our retail marketing study here)

Pharmacies – Looking For A Reason To Be

CVS is on to something with its ban on tobacco products but they don’t seem to be willing to go the whole nine yards. So what are the pharmacies today and how important are they? These are questions that all of the major chains need to be asking because their place in the mind space of consumer is cloudy at best.

However, they do occupy real estate. They continue to build as the draw of their brands contract and the scope of their real estate holdings is increasing. This is a signal that even CVS knows that its preference over Rite Aid and vice versa is limited to which side of the street they are occupying.

Don’t believe me? Take a look at their footprint. Undoubtedly, they will occupy real estate within 300 yards of a major competitor, and often right across the street. More often than not, they are also within three miles (which when I was a kid was walking distance) from a sister store.

They Have No Brand Power — None of Them

The pharmacy branding strategy for Supermarkets is convenience
Supermarkets are growing share

All this means is they know that the power of their brand is limited to a few-mile radius and, if someone else builds another pharmacy (or should I say, convenience store) between them and a new development, all the business will desert them. How many of us have our medical insurance information stored at more than one pharmacy because you never know which one will be more convenient at any given time.

As a brand strategist, this conundrum is vexing, and the answers are not simple. This is because making a brand viable and important is much more complex than just fixing marketing problems. The brand is the foundation for everything and, as a result, the new brand must, by definition, influence operations, marketing and, in the case of pharmacies, the category itself. No marketing slogan alone will fix the problem that the pharmacy business has dug for itself. In creating a viable brand we need to fix the model and develop a new category of retail store that meets a need, is seen as distinctive from competitive offerings and offers a reason to be that redefines an entire category.

How Do They Fix The problem?

Rite Aid does not have a pharmacy branding strategy
Rite Aid was not interested in stopping the sale of tobacco

CVS has taken a BIG STEP in deciding not to sell Cigarettes. Interestingly, we took this idea to RiteAid 15 years ago. They turned it down because it was such a profit center. This despite research that proved it would increase the RiteAid preference by double digits. What is interesting at this point is the process that needs be employed to find the answers. It starts with a blank slate, one where the proprietors are willing to slay all of the sacred cows. First, a need must be uncovered in the fabric of the target audience. Not a niche that someone else currently owns but a new need, one that represents a high emotional intensity in the customer we need to influence.

Target plays on price too in the pharmacy game
Don’t Forget Target

The only way to do this is by using an anthropological dig into pharmacy brands (read about brand anthropology) into the attitudes and issues surrounding modern life. What does the market covet and how is it best delivered in an emotionally meaningful way. What space needs to be occupied in the preceptive fabric of those that we wish to influence and how then can the new brand manifest those values in a tangible way?

These are not easy questions to find let alone ask, but they must be addressed by someone in the category — and soon. Otherwise the pharmacy businesses will bankrupt itself in an expanse in real estate. Real estate, by the way, that is worth less today then when it was purchased just three years ago. They will need to build every few hundred yards and at every intersection. If, as Napoleon once said that the logical end to defensive warfare is surrender, then pharmacy chains already have their hands on their heads. All that is missing is a white flag.

(Read some of our other thoughts on the Pharmacy Business here)