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Kroger, Walgreens to pilot hybrid offering

Drugstores to be tested as pickup sites for Kroger brands

Russell Redman

October 2, 2018

3 Min Read
Walgreens
Walgreens

Responding to the convenience demands of today’s on-the-go consumer, The Kroger Co. and Walgreens Boots Alliance are piloting a new retail format that brings supermarket wares to a drugstore.

The companies said Tuesday that 13 Walgreens stores in northern Kentucky will test a one-stop shopping experience that will enable customers to buy products and services from both retailers. The pilot will run over the next few months, and Kroger and Walgreens said they will close monitor customer feedback.

“This exciting collaboration aligns with Kroger’s vision of serving America through food inspiration and uplift,” Kroger Chairman and CEO Rodney McMullen said in a statement. “This concept brings together the best of two great brands to rethink convenience and redefine the way America shops for food.”

Through the pilot, consumers initially will be able to order Kroger groceries online and pick up orders at the Walgreens stores, which are near Kroger’s Cincinnati headquarters. Kroger store brands, including its Simple Truth natural and organic label, will be among the products available.

The retailers said the grocery shopping assortment from Kroger will complement the health and wellness, pharmacy and beauty products and services already offered at the Walgreens stores.

Kroger_Simple_Truth_brand_products_0.png

“This innovative new concept is an opportunity to test and learn, as we determine how we can best work together to further elevate our customer offering,” said Stefano Pessina, executive vice chairman and CEO of Deerfield, Ill.-based Walgreens Boots Alliance. “We continue to evolve our offerings to meet the changing needs of our customers and provide a more differentiated shopping experience. We’ve been implementing new approaches to promotions, product selection and other areas to deliver greater value in our stores.”

As digital shopping has escalated, Walgreens has tried various retail concepts to help drive customer trips to stores, including online photo services with in-store pickup, the creation of in-store beauty boutiques in about 2,000 stores and the rollout of Federal Express package drop-off and pickup sites. The latter are slated to be in nearly 8,000 stores by this fall. And last month, Walgreens expanded a pilot to offer Sprint Express outlets in another 80 stores. The drug chain, which includes the Duane Reade banner, has more than 9,800 stores across the United States.

“The Kroger-Walgreens 13-store pilot is a strategic move that allows Kroger to test the waters on potential cannibalization of existing stores with remote [Kroger] Pickup sites and underscores Walgreens’ focus on retail-building traffic,” Jefferies analyst Brian Tanquilut wrote in a research note on the partnership. “It also frees up retail square footage for growth of Walgreens’ in-store health care services. In addition, we think the partnership could open the door to greater long-term collaboration, including a low-single-digit, EPS-accretive deal for Kroger if it sells its in-store pharmacies to Walgreens Boots Alliance.”

The Kroger-Walgreens pilot also comes in the wake of other mass retail/pharmacy chain deals.

In December 2015, for example, Target Corp. closed a $1.9 billion sale of its 1,672 pharmacies to CVS Health. CVS now operates the pharmacies under the CVS Pharmacy banner inside Target discount stores.

This past August, Albertsons Cos. and Rite Aid Corp. called off a planned $24 billion merger that would have joined the nation’s second-largest supermarket operator with its third-largest drug chain. Rite Aid Chairman and CEO John Standley, in a May analyst event, had called the planned merger “a unique combination of grocery and pharmacy.” And in a July interview with Supermarket News, then-Albertsons Chief Operating Officer Jim Donald said of the deal, “Nobody has ever put together a drug channel play and a grocery channel play like this.” Potential crossover ideas for Albertsons-Rite Aid included offering fresh food and special-diet meal kits at Rite Aid “wellness” stores, selling Albertsons’ O Organics and other private brands at Rite Aid stores, and leveraging the smaller drug-store format to help the company penetrate deeper into urban areas and experiment with convenience-focused retail concepts.

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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