Insights: And then there were two! Walgreens just acquired Rite Aid. The third largest drug chain in America became too valuable to pass on. Together controlling over 90 percent of the U.S. retail drug market, this deal effectively consolidates the drug chain industry into two elite organizations that operate with two distinct visions and business philosophies: Walgreens and CVS.
But why now and what are the implications to Walgreens’ business partners?
The metamorphose of Rite Aid started when an agile culture allowed for their reimagining of their top 1700 stores. They became beautiful Wellness Stores and they extended their GNC Vitamin (store within a store) formats which established leadership in vitamins and supplements. They designed a prototype home medical product format for caregivers, higher end nail bars, and they extended their skin care categories to attract the beauty enthusiast.
Similarly, Rite Aid expanded their Rite Aid Health Alliance, a program that empowers local doctors, care coaches, and pharmacists to work together in providing holistic care to patients with chronic conditions. They acquired 100 RediClinics and dramatically enhanced their wellness+ loyalty program, partnering with some of the most prominent companies in the country like Exxon and Mobil, Macy’s, AT&T, Nationwide and Enterprise. This past year, Rite Aid acquired EnvisionRx, a pharmacy benefit management company that also offers a suite of pharmacy-related services. This was critical considering that each day 10,000 Americans are turning 65 years old.
They resurrected their organization and created a gem to be proud of. And that’s why Walgreens Boots Alliance came calling.
Walgreens Boots Alliance’s recent acquisition of 4,570 Rite Aid drug stores creates a massive U.S. footprint of more than 12,700 stores with annual revenue of more than $100 billion, with the potential to extend their Boots Beauty brand deeply across the U.S. marketplace. They have global power – they are in 25 countries – and they are capable of negotiating worldwide strategic relationships with some of the biggest brands in the world.
Three questions to ponder as you assess your go-to-market strategy with Walgreens.
- Financial Balance: The $7.3 billion dollar acquisition of Rite Aid adds to Walgreens’ $11.7 billion. There is a lot of debt, which means there will be a lot of “asks.” How will you partner on their business initiatives while achieving longer-term profitability for your firm?
- Exclusivity: Every retailer wants to look and feel different, and you must get good at co-designing exclusive solutions for different chains. Your customer strategy must meet the unique needs of every retailer. How do improve your capability of creating customized “exclusive solutions” for Walgreens?
- Talent: The best organizations attract & retain “game changing” talent. The business leaders who serve Walgreens think like general managers. They possess the ability to lead higher level engagements, co-create custom “customer centric” solutions as well as manage financial negotiations. Do you have the right team in place?
Given the new dynamic, there is massive opportunity, and massive risk, to change your alignment strategy with Walgreens. This new order will separate the wheat from the chaff. It separates the high performers from the posers. Are you ready to seize this market shift?
