My son is looking for a full-time job. He graduates in May and seems eager to start making some real
money and get his career off to a great
I am trying to help for the obvious
reasons—to be a good dad and get
him off my payroll. I am just not certain
which is more important at this point.
What I can tell you is that a majority
of people who I have talked with over
the last few months looking for some
advice for him have pointed me in the
same direction: health care.
Which leads me to the decision by
Fred’s to announce the acquisition of
850 Rite-Aid stores for
a pretty sultry sum of
$950 million. The fact
that these stores were
for sale is pretty easy to
grasp. As we all know
at this point, Rite-Aid
and Walgreens Boots
Alliance are merging
and it was pretty clear
from the start that
some of their stores
(by the way, this may
not be enough stores)
needed to be sold to a third-party to
get the support of the Federal Trade
Commission and other oversight
groups that need to approve the deal.
As of Jan. 23, there were signs that the
federal government may hold up the
deal, seeking to completely squash it
or get Rite-Aid to give up more stores.
If it goes through, the fact that Fred’s
is the buyer—and came up with the
capital to fund this deal—is the surprising part. Few in, or even out, of the
industry thought that Fred’s officials
had the… shall we say intestinal fortitude to pull off this deal. But they did
and Wall Street applauded, sending its
stock rocketing up.
In essence, Fred’s made this move
to position itself as the third national
player in the extremely-profitable drug
store arena. Rite-Aid’s need to get rid
of a bunch of stores became Fred’s
opportunity to expand from a regional
player into a national force overnight.
But why? Simply, Fred’s top brass
correctly see health care as the goose
that lays the golden egg going forward.
Fred’s previous reputation has been of
a half-hearted drug store chain, more
in tune with the general merchandise
offered at dollar stores than the health
and beauty care and prescriptions sold
at drug stores.
Now the chain’s executives see the
best of both worlds. Fred’s can still
make a killing offering dollar-store
type merchandise to its customers, and
at the same time, start drawing in the
aging Baby Boomers and others who
are looking for a pharmacist and OTC
shelves to satisfy their increasingly-complicated needs. Right now, only
about half of Fred’s 650 or so stores
have pharmacies. That total quadruples when this deal is completed.
Supermarket operators need to pay
close attention here. Fred’s needed
to spend close to one billion bucks to
make this happen. The typical super-
market does not need to spend any-
where near that amount. In fact, all
they have to do is make sure they
install a pharmacy counter where pos-
sible, hire competent pharmacists to
work it, create the proper environment
around the pharmacy and promote the
stuffing out of it.
The pharmacy will be a hot button
issue for at least the next 30 years in
retail. Consumers need convenience
when shopping for health care products and no place offers that as much
as the grocery store. There is a lot of
competition out there, and with companies spending big bucks to gain
market share, it is going to get ugly.
Yet, there is absolutely no reason why
food stores cannot cash in too. But
they have to want to. for my son, he is
a good kid. Anybody hiring?
Seth Mendelson is publisher
and editorial director of Grocery
The pharmacy will
be a hot button issue
for the next 30 years.
shopping for health care
products and no place
offers that as much as
the grocery store.
CASHING IN ON HEALTH CARE
Food retailers that promote their pharmacy counter are poised to reap future benefits.
By Seth Mendelson