Down on the Pharm

Drug store chains stretch beyond Rx to take on mass merchandisers.

Drug store chains are following a new marketing prescription that includes more spending, more diverse merchandising, and packaged goods partnerships.

Competition with mass merchandisers and supermarkets has intensified now that chains have replaced most independent corner drug stores and are jockeying for national stature. At the same time, changes in the healthcare industry – most notably prescription drug coverage – have shifted drug stores’ profit mix and made other categories such as toys more important than they’ve been in the past.

Drug store chains account for 7.3 percent of total U.S. retail sales. They’re the fastest-growing retail channel, with 38 percent more stores than a decade ago; meanwhile, the number of indy drug stores fell 22.3 percent, per MarketPlace Intelligence, New York City.

Chain drug stores’ total sales are $160 billion per year, with nearly $80 billion of that coming from prescription drugs, reports the National Association of Chain Drug Stores. Chains account for 60 percent of all drug prescriptions, per NACDS, Washington, DC.

Drug stores face more competition for prescription business as grocers and mass merchandisers add pharmacies to new stores. To compete for one-stop-shopping, drug store retailers are “expanding their food and home products to compliment the traditional staples such as health and beauty products,” says NACDS spokesperson Phil Schneider.

While chains are de-emphasizing traditional categories like cosmetics, they’re expanding new segments including toys and electronics.

“The biggest change we’ve seen is a sizeable reduction in our cosmetics business,” says David Kriegel, chairman-ceo of Drug Emporium, Powell, OH, which operates 171 stores. “However, scooters and digital cameras are hot sellers.”

For many health & beauty care brands, drug store chains are still the primary channel of distribution. “About 40 percent of our business comes from drug stores, and most of that marketing is funded through our trade division,” says Leah Stevenson, director of marketing services at Minneapolis-based CNS, maker of Breathe Right nasal strips.

Chains are getting more aggressive with their own campaigns. Drug Emporium bumps up its ad budget about 10 percent each year and promotes its full-service prescription care, which includes community health events and free screenings for blood pressure and osteoporosis. That helps the chain compete with mass-merch pharmacies, Kriegel says. The chain also recently beefed up its ad circulars with coupon books.

Eckerd Drug Stores, Clearwater, FL, uses its circular to offer an All-in-One monthly rebate service that lets consumers redeem different manufacturers’ rebates in a single transaction. “Our weekly circular is a primary traffic driver,” says director of advertising Mary Beth Fox. “It helps showcase value pricing on key items and special coupon discounts.”

This year, Eckerd will use its annual Salute to Women campaign to roll out Mira private-label cosmetics, now selling in Florida and New York. The program honors 100 women across the country who make a difference in their communities. Eckerd will review this year’s winners to recruit spokeswomen for Mira. The campaign “differentiates Eckerd [because] we use real, aspiring women to be ambassadors for the brand,” says Kathy Steirly, merchandising vp of beauty.

Shelf Partners Partnerships with manufacturers are increasingly important as chains go head-to-head with other channels. Twice each year, Drug Emporium hosts Beauty Week, which features in-store demos and a sweeps awarding a trip for two to a world-famous spa, trips to local day spas, and gift baskets. Partnering vendors have experienced sales increases as high as 196 percent, the chain reports. The chain supports the program with circular ads, bag stuffers, P-O-P, and a decorating contest for store and cosmetics-aisle managers.

Last summer, Youngstown, OH-based Phar-Mor, Inc. teamed with search engine Dizzyduck.com to sponsor a cross-country tour educating consumers about online healthcare programs. Phar-Mor reps told visitors about the chain’s First Class Care program, which provides low-cost dental care to people without dental insurance. The tour hit 75 Phar-Mor stores in Ohio, Pennsylvania, and Virginia, and stopped throughout the South at schools, hospitals, libraries, and special events such as NASCAR races. Tours in the Midwest and West Coast followed.

Of course, store traffic benefits brands, too. Maybelline, New York City, in April kicks off its Lucky Looks instant-win game to drive shoppers from retail partners including CVS and Target to its Web site. Online entrants give UPC codes; prizes include magazine subscriptions and cameras. In-store displays and e-mails to current Maybelline customers support. RealTime Media, Haverford, PA, designed the online component.

Newsletter Healthy Catalina Marketing’s Health Resource Network, St. Louis, has expanded its customized patient newsletter service to 20,000 stores after buying Healthcare Data Corp. and its Medi-Link info service last June. Newsletters are printed individually to accompany prescriptions, with information on the drug, related health facts, and product ads from marketers like Bristol-Meyers Squibb, Pharmacia, and SmithKline Beecham. The newsletters reach four million shoppers each week, Health Resource claims.

Catalina started Health Resource to lead prescription-drug consumers to related HBC products, but most of its business is still with Rx ads. The system serves about 7,000 chain drug stores and 2,500 supermarkets. Last year, the company signed a two-year deal with AmericasDoctor to feature data on drug research and clinical trials in newsletters. Gurnee, IL-based AmericasDoctor helps drug companies market their brands with input from researchers, hospitals, and marketing experts. Its Web site, sponsored by 100 hospitals, lets consumers chat online with board-certified doctors for free.

Manufacturers will continue to find opportunities to promote with drug stores as chains balance Rx diets with new product categories. That and competing with Wal-Mart keeps stores hungry for new ideas.

Retail subscriptions hit 3.15 billion last year, up from two billion in 1992, per National Association of Chain Drug Stores. If the federal government institutes a prescription drug plan program, Rx sales could grow 40 percent per year, says Alan Levin, NACDS chairman and ceo of Happy Harry’s, a Northeast chain.

Ninety-five percent of shoppers say their purchases are affected by some health concern, reports the Food Marketing Institute in its Shopping for Health 2000 study. Top concerns: controlling fat, lowering cholesterol, reducing disease risk, and slowing the aging process.