Much More Than Pharmacies

Walgreens Boots Alliance (Walgreens), CVS Health (CVS/pharmacy, or CVS) and Rite Aid Corp. are the top three pharmacy retailers in the United States based on 2014 prescription revenue. But while the pharmacy might be what set these three chains on their path to superstardom, innovation and business acuity made each of them a household name.

Along the way, Walgreens, CVS and Rite Aid took the time to create and maintain a strong private label presence within their stores, likely because of the important revenue stream store brands can bring in.

“A strong store brand program can account for as much as 20 to 25 percent of front-end unit sales for drugstores and [offer] margins much more conducive to be able to absorb promotional discounts and still yield a healthy gross margin,” states Mark Heckman, principal, Mark Heckman Consulting, Bradenton, Fla. “Consequently, CVS Health, Rite Aid and Walgreens have leveraged store brands heavily.”

A brief review of each of these drugstore retailers reveals just how much they have done in recent years to revamp and support their store brands across both the non-food and food/beverage categories.

Private brand makeovers

Of the three drugstores, Camp Hill, Pa.-based Rite Aid was the first to revamp its private brand program. During its fiscal 2010 fourth-quarter earnings call in March 2010, John Standley, president and chief operating officer, announced that the company would be rolling out a “new private brand architecture” throughout the coming year. Brands would include Rite Aid Pharmacy for health products, Rite Aid Renewal for beauty products, Rite Aid Pantry for food and consumable products, Rite Aid Home for household products, Tugaboos for baby products and Simplify as its “price fighter” brand. At the time of the announcement, Standley said that all existing private brand products would be migrated over to the new brands and would receive updated, contemporary packaging.

Then in August of 2011, Walgreens, Deerfield, Ill., overhauled the food side of its private brand program with its introduction of the Nice! brand. As part of the transformation, Walgreens phased out many of its former store brands, some of which included Deerfield Farms, W, Cafe W, W Ultra and Chief Karlin, reported an Aug. 18, 2011 Chicago Tribune article. However, the Good & Delish food brand, a brand initially called DR Delish that Walgreens acquired when it bought Duane Reade in 2010, remained in stores.

Since then, Walgreens has continued to introduce new products under existing and new store brands (such as Ology). For example, during Walgreens’ fiscal 2013 fourth-quarter earnings call in October 2013, Wade Miquelon — executive vice president, chief financial officer and president, international for the company — said the retailer “invested significantly this year” in product lines such as Walgreens, Good & Delish, Nice! and Well Beginnings, introducing 400 new items in the fourth quarter alone and increasing its private brand penetration in front-end sales to 22.3 percent in the quarter.

To ensure those new products are successful, the retailer does its best to focus on its customers.

“Walgreens puts the shopper at the center of our product development,” says Mailee Garcia, a company spokesperson. “We work with our manufacturers, consumer insights teams and others to ensure we are aware of shopper trends, sentiment and expectations. We also conduct research analysis to identify unmet customer needs and explore potential solutions we might be able to provide.”

One product the retailer just recently launched to meet customer needs is the Well at Walgreens Flavor Enhancer. The flavor enhancer is available in a 1.6-fluid-ounce bottle and comes in two flavors: Mint and Butter Pecan. It can be squeezed into nutritional shakes or other beverages such as protein shakes to create a new flavor, Garcia added.

“We identified that many consumers who purchase nutritional shakes are seeking flavors outside of the traditional selection of vanilla, chocolate and strawberry,” Garcia says. “Having uncovered this unmet customer desire, Walgreens worked with manufacturers to develop a unique, exclusive solution.”

In Feb. 2013, Woonsocket, R.I.-based CVS also decided to revamp the food portion of its store brand program — its Gold Emblem brand, which was originally introduced in 1995, the retailer said. Updates to the brand in 2013 included a contemporary identity and package redesign that embodied the retailer’s commitment to meeting a “very high taste standard.”

“We have reintroduced our Gold Emblem brand with enhanced ingredients, new recipes and an updated design and packaging,” Judy Sansone, senior vice president of merchandising for CVS/pharmacy, said at the time of the relaunch. “As part of our ongoing effort to exceed our customers’ expectations, we have also incorporated an in-depth taste-testing process for each item within the Gold Emblem line.”

Just a few months later, in June 2013, CVS launched Gold Emblem Select, an assortment of items that feature premium ingredients, artisanal techniques and distinctive flavors. The first products the retailer introduced under the Gold Emblem Select product line were premium ground coffees.

And in June 2014, CVS introduced Gold Emblem Abound. Distinctive with its bright green packaging, the line is meant to reinforce the importance of taking small, everyday steps to meet individual health goals. Products in the snack line are free from artificial flavors and preservatives and trans fats. Additionally, Gold Emblem Abound offers consumers gluten-free, sodium-free and cholesterol-free options, as well as options that contain superfoods such as chia and baobab, the retailer said.

A bevy of beauty products

CVS and Walgreens also have been focusing much of their product development efforts on the beauty category in recent years.

In August 2011, CVS and Salma Hayek announced an exclusive beauty collection called Nuance Salma Hayek. The beauty line was the first complete beauty line to be developed by an actress in partnership with a national retailer, CVS said. At the time of its launch, the line offered more than 100 products within four categories: skincare, cosmetics, haircare and body.

“I wanted to create a line of premium beauty products that were both effective and affordable,” Hayek said at the time of launch. “My partnership with CVS/pharmacy allowed me to be truly involved in every aspect of product development, bringing my vision to life in making a line that is available to all women.”

Then in August of 2014, CVS announced another exclusive beauty collection called Makeup Academy. Developed for the retailer by makeup professionals and beauty experts, the collection includes more than 145 products within three categories: lip care, false eyelashes and makeup brushes. All of the products are meant to deliver makeup artist must-haves in fashion-forward colors, luxurious textures and pro-performance designs.

The collection is said to be designed specifically for CVS customers, 80 percent of whom are women. For example, the retailer designed 100 lip products knowing that lip products are the No. 1 impulse purchase by CVS customers. Additionally, knowing that fake eyelashes had been the fastest-growing category for three years prior to the beauty collection’s introduction, CVS chose to introduce a wide assortment of false lashes for beginners and professionals alike.

For its part, Walgreens debuted the No7 skincare range for men from Boots in June 2013. It was the first nationwide Boots product launch in Walgreens and Duane Reade stores after the retailer and Alliance Boots began their partnership in the summer of 2012. The skincare line offers products that are hypo-allergenic, dermatologically tested and backed by science, the retailer said.

“With the launch of No7 Men in our stores, we look forward to working with Boots to provide our customers with differentiated products, making Walgreens their first choice for health and daily living,” said Mark Wagner, president of operations and community management, Walgreens, at the time of the launch.

The differentiation that the now-extended Boots No7 offerings bring to Walgreens could end up setting the retailer apart from the two other big drugstore chains, Heckman states.

“It will be interesting to see if Walgreens with its newly acquired Boots brand can create some separation from CVS and Rite-Aid by positioning Boots as a ‘boutique’ brand that carries with it some of the quality and cache of a national brand with the economic characteristics of a private label,” he adds.

And in February, Walgreens and Maesa, a New York-based manufacturer of beauty products, announced the launch of Circa, a line of professional color cosmetics developed in partnership with actress Eva Mendes. Exclusive to Walgreens, the beauty line is designed to appeal to the varying needs of a multicultural market, with shades that work across the lightest and darkest of skin tones.

“As a Latin woman, it was important to me that we create a line of products that work for all women and is accessible without compromising quality,” Mendes said.

The Circa product portfolio includes offerings across the eye, lip and face categories, with 133 SKUs in total.

Also in February, Walgreens announced the addition of Nonie Creme Colour Prevails, a line of prestige-quality lip, nail, eye and cheek beauty products developed by Nonie Creme, a celebrated manicurist and color mixologist. The line is meant to give customers the ability to create their own unique and unexpected color moments, straight out of the tube or hand-mixed and blended as they see fit.

The makeup brand features products that are “innovative and never-seen-before,” including nail polish with an ergonomically designed brush for improved painting ability, as well as a formulation that is free from five potentially harmful chemicals, Walgreens said. Then in July, Walgreens said it acquired Liz Earle Beauty Company Ltd. from Avon. Liz Earle is a premium skincare range that uses naturally active ingredients. The award-winning brand is also recognized as one of the leading botanical brands in the United Kingdom.

“Liz Earle is the perfect fit for Walgreens Boots Alliance where it already has a strong presence in its retail stores,” said Avon CEO Sheri McCoy.

While Rite Aid has not announced an exclusive beauty brand tied to a celebrity, it launched a line of dermatologically tested over-the-counter skincare products called Receutics Active Skin Repair in February. Developed exclusively for Rite Aid, the 10-SKU line is meant to offer customers affordable, effective treatment for common skincare conditions such as acne and eczema, while also promoting the skin’s own repair and renewal process.

The line was developed in response to inquiries Rite Aid pharmacists received from customers, the retailer said.

“Our research and feedback from our pharmacists told us that customers were looking for solutions to common skincare issues that were both effective and affordable,” said David Abelman, senior vice president of brand development and innovation for Rite Aid.

Focused on health and wellness

The beauty category isn’t the only non-food category getting some store brand love. Products aimed at shoppers’ health and wellness needs also have been a big focus of late for Walgreens and CVS.

For example, Walgreens introduced a store brand fitness tracker similar to Fitbit and Garmin Vivofit in December 2014. The Walgreens Activity Tracker with smartwatch technology can accept incoming calls and text messages, track steps and monitor sleep patterns, and it is automatically connected to Walgreens’ loyalty program, Balance Rewards. Users earn 20 points for each mile walked using the device.

“Walgreens champions everyone’s right to be happy and healthy, and through our own brands, we aim to provide quality products, at a good value, that help customers solve for their everyday health, wellness and beauty needs,” Garcia states. “For example, the Well at Walgreens brand supports this approach and … in order to make sure its packaging is relevant, we’re always seeking and evaluating customer feedback.

“Most recently, we updated the packaging of our owned-brand vitamin category to specifically address the feedback we’d received from shoppers regarding their desire to more easily identify products on the shelf,” she adds.

Meanwhile, in July 2014, CVS introduced a new line of store brand vitamins under the name radiance PLATINUM. A premium brand of 100 percent preservative-free vitamins and supplements, radiance PLATINUM includes certified non-GMO, gluten-free, certified organic, vegan- and vegetarian-friendly options.

CVS also reformulated and redesigned its existing radiance line. The line now is 100 percent preservative-free and features brighter and easier-to-read packaging, according to the retailer.

And in May, CVS launched CVS/pharmacy Hospital Series wound-care products. Previously, these types of wound-care options were available only at hospitals and select specialty medical stores. At the time of the line’s introduction, CVS said it was the only retailer to offer these products directly to consumers nationwide.

“Through the launch of this exclusive line, we’re making it easier for millions of patients to have access to high-quality wound-care solutions during healing, right in their own homes,” said Cia Tucci, vice president of store brands for CVS/pharmacy, at the time of launch. “This is a perfect complement to our corporate mission of helping our customers on their path to better health, and we are proud to be the first national retailer to offer these options.”

Touting store brands

To ensure customers are aware of the hard work they put into building their store brand portfolio, the drugstore retailers have found unique ways to promote such products. For example, in April, CVS announced a month-long “Fill Your Bag” promotion event meant to help shoppers save on their favorite CVS brand products, as well as select exclusive product lines. Each week, ExtraCare program members could scan their cards at the ExtraCare Coupon Center to receive a 30 percent off coupon that applied to their entire purchase.

Meanwhile, Walgreens has used multiple media outlets in recent years to advertise store brand products. For example, in May 2013, it had a high-profile sponsorship of the reality TV show “All-Star Celebrity Apprentice.” During the season finale episodes, Trace Adkins and Penn Jillette were challenged to create a new and unique Good & Delish ice cream flavor. Then in 2014, Walgreens partnered with P&G to leverage Tim Gunn as the 40th annual People’s Choice Awards spokesperson. Gunn broadcast from the Red Carpet at the grand opening of the flagship Walgreens store in Hollywood and promoted various Walgreens private brand products. And in March 2014, the retailer created a YouTube series of videos titled “Mom’s Cool Things.” The series, hosted by former Melrose Place star Laura Leighton, featured Walgreens’ private brands such as Good & Delish and Ology.

More recently, in March, Walgreens introduced a TV commercial called “Cozy Up” to promote its Good & Delish brand. In a computer-animated environment, it shows a fireplace, rug and the retailer’s ice cream while a voiceover says: “Indulge in peanut butter and cookie dough. Nestle in decadent ice cream from Good & Delish, only at Walgreens.”

Rite Aid used a completely different approach in marketing its private brands this past March. Instead of promoting what it already had on the shelf, the retailer asked customers to help it invent new store brand products with its first Innovation Challenge. The month-long challenge was a nationwide search for original product ideas that would improve the health and wellbeing of Rite Aid customers, the retailer said. It was conducted in partnership with Edison Nation Medical, selected to work with Rite Aid to design, develop and patent any chosen health and wellness products submitted by Rite Aid customers.

“Rite Aid is excited to hold its first-ever Innovation Challenge because we believe that our customers, who inspire us every day, are the best partners to help us develop unique products to meet their individual wellness needs and likely those of many of our other customers,” Abelman said. “In addition to reinforcing Rite Aid’s commitment to innovation, this customer-centric challenge gives consumers the opportunity to become product inventors and assist Rite Aid in bringing new, meaningful products to our customers.”