Walgreen Co. is taking aim
at chains such as Target and Kroger. The company will now sell prepared meals and fresh foods at its 7,000 U.S. stores.
The drugstore chain has been talking with foodmakers including Unilever NV, Nestle SA and Sara Lee Corp. about creating private-label and branded products, said Bryan Pugh, vice president of merchandising.
"Everyone is time-starved and we have the most convenient 7,000 locations in the U.S.," Pugh said in a Jan. 11 telephone interview. "They're on-the-way-home destinations that are easy to get in and out of and will provide a good value." He declined to say when the project will be implemented or how much it costs.
Walgreen, based in Deerfield, Illinois, must sort out supply and distribution issues and test in some markets before introducing freshly prepared foods such as salads, cut fruits, ready-to-bake pizzas and sandwiches into more stores, he said.
The goal of the program, along with the sale of beer and private-label wine, is to boost revenue, Pugh said. Same-store sales declined in November and December as 10 percent unemployment and falling home values blunted consumer spending.
"If they can get consumer acceptance, this would be good for sales," said Andrew Wolf, a Richmond, Virginia-based analyst with BB&T Capital Markets, which recommends that investors buy the shares. "Consumers aren't used to buying salads from a drugstore chain. That would have to change."
Walgreen's will now compete with grocery stores such as Safeway and Kroger, as well as warehouse clubs such as Costco. This is a new retail trend as everyone from drugstores to gas stations aims to grab a slice of the retail grocery market. The theory is that consumers are pressed for time and if they need a gallon of milk they'll grab it at the drugstore or the gas station to be more efficient.
