Walgreens hopes to use beer as door opener – Comment

Ask any Joe Six-Pack what he buys at Walgreens’ and he will probably reply: “Shampoo, err some chewing gum, and after a hard night’ s drinking a packet of Aspirin.”

However, soon your average U.S. beer consumer could head off to the local Walgreens to stock up on a multi-pack of his favourite beer.

Walgreens estimates it will sell a limited selection of beer and wine at 70 percent of its 6,857 drugstores when the rollout of a store redesign – at USD 30,000 to USD 50,000 a drop – that includes lower, less-cluttered shelves is completed.

Walgreens is the number two drugstore chain in the U.S. behind CVS Corp. (7,500 stores) and ahead of Rite Aid (4,900 stores).

Last year Walgreens generated 65 percent of its sales with prescription drugs, 10 percent with non-prescription drugs and 25 percent with general merchandise. Walgreens’ revenues were up 10 percent in 2008 to USD 59 billion while earnings rose 6 percent.

Walgreens had phased out beer and wine in all but a few hundred stores in the 1990s. Since then, Walgreens has put increasing emphasis on health and wellness merchandising, a convenient shopping format and such faster-turning front-end categories as cosmetics, photo and convenience foods.

Walgreens’ executives first mentioned in March this year that they were reconsidering the nearly 20-year-old decision that beer and wine made too little profit and cost too much of management’ s time.

What has caused Walgreens to do a strategic U-turn?

Perhaps executives had checked their figures and discovered that as recently as 1991, the alcohol category accounted for 12 percent of Walgreens’ total revenue.

What is more, other competitors have decided long ago to sell beer. The New York City drugstore chain Duane Reade (253 stores), for example, which has had beer on its shelves since 2000, regularly features beer promotions.

For Walgreens, the re-listing of beer could turn out to be a smart move since it is on almost every street corner in the U.S.