Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

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storewanderer
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Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by storewanderer »

Kroger is outsourcing the drug department (not pharmacy) to Walgreens in Knoxville, TN.

Wow.

What exactly does Walgreens bring to the table here? Weird private label brands. Super high prices. A trend of sales declines in recent years and in the process of closing hundreds of stores.

Kroger's existing drug/HBA program is very good, and pretty well priced. The private label mix is strong and retail pricing is generally pretty good. Why mess with something that is good. Target didn't cede control of its merchandise aisles for drug/HBA to CVS when they sold their pharmacies to them and there is a good reason for that.

Another unwise move by Kroger. I buy a lot of drug/HBA from Smiths. Almost none from Walgreens. Put in Walgreens and I will not be purchasing it at Smiths anymore.
Last edited by storewanderer on August 24th, 2019, 8:31 pm, edited 2 times in total.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by pseudo3d »

storewanderer wrote: August 20th, 2019, 9:33 pm Kroger is outsourcing the drug department (not pharmacy) to Walgreens in Knoxville, TN.

Wow.

What exactly does Walgreens bring to the table here? Weird private label brands. Super high prices. A trend of sales declines in recent years and in the process of closing hundreds of stores.

Kroger's existing drug/HBA program is very good, and pretty well priced. The private label mix is strong and retail pricing is generally pretty good. Why mess with something that is good. Target didn't cede control of its merchandise aisles for drug/HBA to CVS when they sold their pharmacies to them and there is a good reason for that.

Another unwise move by Kroger. I buy a lot of drug/HBA from Smiths. Almost none from Walgreens. Put in Walgreens and I will not be purchasing it at Smiths anymore.
Well, that's dumb. It would make sense if they changed one of the lesser-used Marketplace departments to a better-known store-within-a-store but the HBA department is so fundamental to a supermarket it would be a sign that the wheels are falling off. I have a contact in Knoxville, I'll have to contact him about that to see what things are really like.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by klkla »

This is part of a bigger partnership between the two companies.

"Today, Kroger (KR) and Walgreens Boots Alliance (WBA) announced the expansion of their strategic partnership. As per the announcement, Kroger would roll out Kroger Express stores within 35 additional Walgreens locations in Knoxville, Tennessee. Additionally, these 35 locations will offer Kroger Pickup facilities."

"Under the expanded deal announced today, Walgreens’s owned-brand health and beauty products will be offered in 17 Kroger stores in Knoxville, Tennessee, effective this fall."

https://marketrealist.com/2019/08/kroge ... rtnership/

Also a little more about the strategic thinking here:

https://www.forbes.com/sites/christophe ... c9ffe44ce3
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by storewanderer »

klkla wrote: August 21st, 2019, 2:31 pm This is part of a bigger partnership between the two companies.

"Today, Kroger (KR) and Walgreens Boots Alliance (WBA) announced the expansion of their strategic partnership. As per the announcement, Kroger would roll out Kroger Express stores within 35 additional Walgreens locations in Knoxville, Tennessee. Additionally, these 35 locations will offer Kroger Pickup facilities."

"Under the expanded deal announced today, Walgreens’s owned-brand health and beauty products will be offered in 17 Kroger stores in Knoxville, Tennessee, effective this fall."

https://marketrealist.com/2019/08/kroge ... rtnership/

Also a little more about the strategic thinking here:

https://www.forbes.com/sites/christophe ... c9ffe44ce3
Kroger has a lot to offer to Walgreens through an expanded food mix and the pick-up service. There is also a benefit to Kroger because this increases their volume of food and online ordering pick-ups to additional sites. This further benefits Walgreens because they were at a cost disadvantage on food due to their low volume and partnering with Kroger likely significantly helps get their cost down and opens up the ability for them to get a wide variety of products. Walgreens food private label program is also terrible and Kroger can greatly enhance that by bringing in its brands.

As far as what Walgreens has to offer Kroger, some benefits noted above. But from a front end product perspective, Walgreens offers no advantage to Kroger at all. Walgreens front end is a failing format. Stores are closing in the hundreds, downsizing stores, cutting product mix in other stores, etc. All Walgreens has is pharmacy to bring traffic to its stores. Its front end program is an afterthought at best. Their beauty program is a total joke (in my market only one store has the enhanced beauty area and they stopped staffing it months ago, another cost cutting move) and does hardly any volume.

Kroger's Drug/HBA areas run pretty strong volumes since their stores are high volume and they price and promote the category aggressively. I would venture Kroger moves more drug/HBA in its much lower store count, than Walgreens does in its much larger store count. Kroger is a more effective merchandiser of these products and higher volume operator.

Kroger is making a serious mistake ceding its Drug/HBA areas in an entire market area to Walgreens and it will be interesting to see how this test market works out.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by klkla »

storewanderer wrote: August 21st, 2019, 7:38 pmKroger has a lot to offer to Walgreens through an expanded food mix and the pick-up service. There is also a benefit to Kroger because this increases their volume of food and online ordering pick-ups to additional sites. This further benefits Walgreens because they were at a cost disadvantage on food due to their low volume and partnering with Kroger likely significantly helps get their cost down and opens up the ability for them to get a wide variety of products. Walgreens food private label program is also terrible and Kroger can greatly enhance that by bringing in its brands.

As far as what Walgreens has to offer Kroger, some benefits noted above. But from a front end product perspective, Walgreens offers no advantage to Kroger at all. Walgreens front end is a failing format. Stores are closing in the hundreds, downsizing stores, cutting product mix in other stores, etc. All Walgreens has is pharmacy to bring traffic to its stores. Its front end program is an afterthought at best. Their beauty program is a total joke (in my market only one store has the enhanced beauty area and they stopped staffing it months ago, another cost cutting move) and does hardly any volume.

Kroger's Drug/HBA areas run pretty strong volumes since their stores are high volume and they price and promote the category aggressively. I would venture Kroger moves more drug/HBA in its much lower store count, than Walgreens does in its much larger store count. Kroger is a more effective merchandiser of these products and higher volume operator.

Kroger is making a serious mistake ceding its Drug/HBA areas in an entire market area to Walgreens and it will be interesting to see how this test market works out.
I think both companies are just trying to 'think out of the box' and test the theories in a single market and see how it goes.

Also, I don't think they are letting Walgreens run their drug/HBA department, just making some of their products available. At least that's how I read it. I have a Ralphs and Walgreens both within a couple blocks from my home. At least here in LA Walgreens stores are pretty high volume and still carry their full product lines. They even staff their cosmetics department still (Which is probably more of a loss prevention move). The store is always well stocked and clean.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by pseudo3d »

klkla wrote: August 21st, 2019, 8:08 pm
Also, I don't think they are letting Walgreens run their drug/HBA department, just making some of their products available. At least that's how I read it. I have a Ralphs and Walgreens both within a couple blocks from my home. At least here in LA Walgreens stores are pretty high volume and still carry their full product lines. They even staff their cosmetics department still (Which is probably more of a loss prevention move). The store is always well stocked and clean.
That might work if there were some products that Walgreens carried that Kroger didn't, but as far as I know that's not the case (Albertsons, on the other hand...), and besides, random products carrying another company's label is just trashy-looking without a cohesive branding move (in-store signage, etc.)
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by arizonaguy »

There are rumors that Kroger may make a deal with Walgreens similar to Target's deal with CVS. Essentially sell the Pharmacy operations to Walgreens. However that still doesn't explain Walgreens HBA products in Kroger stores.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by rwsandiego »

arizonaguy wrote: August 21st, 2019, 10:29 pm There are rumors that Kroger may make a deal with Walgreens similar to Target's deal with CVS. Essentially sell the Pharmacy operations to Walgreens....
That's very interesting because Kroger operates its own PBM.

arizonaguy wrote: August 21st, 2019, 10:29 pm...However that still doesn't explain Walgreens HBA products in Kroger stores.
When I said I wanted Jewel-Osco to open in Phoenix it didn't occur to me that it might be called Fry's-Walgreens.
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by J-Man »

Shouldn't this thread be in the "Southeast USA" forum? It doesn't seem to have anything to do with the Midwest and Plains (unless you count where Kroger and Walgreens are headquartered.)
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Re: Kroger to outsource Drug Dept. to Walgreens in Knoxville, TN Market

Post by storewanderer »

J-Man wrote: August 22nd, 2019, 5:59 am Shouldn't this thread be in the "Southeast USA" forum? It doesn't seem to have anything to do with the Midwest and Plains (unless you count where Kroger and Walgreens are headquartered.)
I forgot what state Knoxville is in.

Corrected title.
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