If you enter a Walgreen (WAG) and it looks more like an upscale sushi bar or a grocery store than a pharmacy, that’s okay with chief executive Gregory Wasson.
It’s actually by design and part of the “Well Experience” concept that will be rolled out in more Walgreen stores this year as the company pushes further beyond the traditional look of a drugstore with a pharmacy counter in back to a variety of looks that also emphasize fresh food, beauty supplies and an array of private label products.
“You’re beginning to see the blurring of the retail channels in America,” Wasson told more than 2,000 shareholders Wednesday afternoon at the company’s annual meeting on Chicago’s Navy Pier. “Frankly, that is what we are doing with our ‘Well Experience’ concept. We are deliberately blurring those channels.”
The push comes as Walgreen recovers from the loss of customers to CVS/Caremark (CVS) from last year’s Express Scripts (ESRX) contract dispute and expands globally through its Alliance Boots partnership.
Walgreen opened about 400 “Well Experience” stores, mostly in the past year, though not even close to the breakneck pace of a few years ago when the company opened new stores every 17 hours. Wasson said the company is “still opening stores . . . maybe just in a different way.”
For example, Walgreen just last month opened its 8,000th store in Hollywood, Calif., at Sunset and Vine, complete with flash bulbs and testimonials from celebrities like Mark McGrath and Kurt Russell. The new stores also appear in iconic buildings such as a location in Chicago’s Bucktown/Wicker Park neighborhood where a three-floor drugstore opened in the historic Noel State Bank building where even the basement was turned into a “vitamin vault.”
The new Well Experience stores, still considered a pilot project, are a hit with local politicians and developers who see Walgreen as revitalizing decaying buildings that include some architectural gems. It also boosts Walgreen in these neighborhoods. “They help lift our brand and that’s what we are trying to do,” Wasson said.
Much is at stake.
Walgreen will need the stores to be successful to improve on last year’s lackluster sales, which were down nearly 1 percent to $71.6 billion in the company’s fiscal 2012, which ended Aug. 31, 2012.
Wasson took heat from some shareholders over the Express Scripts contract dispute, which has led to a loss of millions of prescriptions.
Still, Wasson has said the Deerfield, Ill.-based company is winning back customers as fast as they were leaving during a nearly nine-month period last year where customers who had Express Scripts benefit plans could not get discounts at Walgreen pharmacies.
In June of 2011, Walgreen and Express Scripts began a battle over payment issues, which continued through the fall open enrollment season of 2011 and ended Jan. 1 of last year with the two parting ways. That left millions of Americans with Express Scripts drug plans looking for a new pharmacy.
Express Scripts is a pharmacy benefit manager, or PBM, that works as a middleman between drug-makers and employers when it comes to buying drugs. PBMs pay pharmacies to dispense the drugs.
“The headwinds of last year are the tailwinds of this year,” Wasson told shareholders.
