Walgreen vs CVS: Growth Strategies of the US' Top Drugstore Chains


Code : COM0093

Year :

Industry : Retailing

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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Introduction:The US retail drug store market consists ofmore than 33,000 drugstore chains and about 20,000 independent pharmacy stores. Both Walgreen and CVS that form part of this retail pharmacy chainstores, together occupy around 20% of the drugstore market. Walgreen, the US' number one chain of pharmacies in terms of total drug sales, has a century long experience. Starting in 1901, it gradually grew to more than 4,850 stores, spreading across 45 states of the US, by the end of July 2005. Ever since Walgreen opened its first store, it tried to provide convenience to its customers and launched new stores in 'easy-to-reach' locations for buying medicines. By growing organically in new locations, though Walgreen had to invest huge amounts, it was able to save the future expenditure on renovations and relocations. It planned the interior design and chose the right locations for its new stores during the initial stage itself. "The strength of the Walgreen Co. is our real estate strategy. We pick where we want, build our stores how we want. Organic growth increases our profitability", commented Jeff Rein, President and Chief Operating Officer of Walgreen.

Where as the CVS drug chain, which is ranked second behind Walgreen in terms of drug sales, opened its first store in 1963. Slowly by acquiring other existing drugstore chains, it grew to become the US' largest drugstore chain in terms of number of stores. Some of the major acquisitions made by CVS include Peoples Drug chain in 1990, Big B chain in 1996, Revco D.S., Inc. in 1997, Arbor Drugs, Inc. in 1998 and Eckerd drugstores in 2004. The inorganic expansion strategy of CVS helped the company to reach newmarkets faster than its competitors. By July 2005, CVS hadmore than 5,400 stores under its brand name. Though CVS was able to expand in a short span, it was not free from problems. It had to incur huge expenditure for the purpose of renewing the acquired stores...

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