Pharmacy Merger. So what?
Tom Dougherty, CEO – Stealing Share
28 October 2015
Walgreens buys Rite Aid. Why should I care?
Rite Aid as Walgreens
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.”
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.
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.
Almost half of the market locations
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.
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.
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