Jean Coutu regroups to tackle Canada market
LONGUEUIL, Quebec —The Jean Coutu Group last month set its sites on Ontario for future expansion, with plans for developing a new store concept to better compete with the dominant drug store player in that market—Shoppers Drug Mart.
“We have to do this right and find our place in the sun,” noted Jean Coutu president and chief executive officer François Coutu after the chain’s annual meeting for shareholders. Quebec represents the greatest sales-per-store upside and is the “best investment opportunity” now, Coutu said. The day before the chain’s annual meeting, Coutu told analysts that Jean Coutu’s “retail sales per square foot reached C$1,362 [US$1,433] per square foot in the first quarter of 2008, an increase of 4.8 percent over last year. “In fact, this measure is about 40 percent better than our closest Canadian drug store competitor, and we all know who it is,” he said, referencing Shoppers Drug.
According to a report in the Canadian daily, The Globe and Mail, Jean Coutu’s initial intention was to use its U.S. banners, both Eckerd and Brooks, as part of its domestic expansion strategy. But that strategy was nixed following the sale of its U.S. operations to Rite Aid in June. For now, it is uncertain whether the Jean Coutu Group would grow its banner organically or through acquisition, though Coutu favored growth through acquisition in a conference call with analysts.
Going forward, the Jean Coutu Group announced five stratagems that the company would pursue to help grow both its Canadian footprint and drug store marketshare in that country. These include:
Add registered nurses to the pharmacy team:
The Jean Coutu Group last month introduced its I.D.E.A.L. project, a test pilot in which nurses are being hired to assist the chain’s pharmacy teams in an effort to improve pharmaceutical follow up with patients. According to Jean Coutu, the nurses are required to be members of Canada’s professional order of nurses, l’Ordre des Infirmieres et Infirmiers du Quebec.
Currently, I.D.E.A.L. is in the pilot project phase at a dozen PJC Jean Coutu drug stores. As a result, 12 nurses have been hired for the project.
“In the future, nurses will assist PJC pharmacists and customer advisory services,” Coutu said. “This innovative professional collaboration will allow our pharmacists to achieve two objectives—improved customer patient compliance, as well as improved security associated with prescription drug therapies,” he said.
A substantial commitment to capital investment:
The company plans to invest US$110.2 million in the coming year on 11 new outlets, 11 store relocations and 44 store expansions and renovations. Jean Coutu plans to open 50 new stores by 2010. Jean Coutu also plans to open another 20 Boutiques Passion Beaute. In terms of selling square feet, the Jean Coutu Group is looking to grow its overall store base by 6 percent to 2.4 million square feet. More than half of the Jean Coutu Group stores currently have a selling space of more than 8,000 square feet.
Optimize customer offering:
In an effort to grow sales, Jean Coutu Group plans to continue to leverage its Air Miles program, an awards program administered by Alliance Data that reaches almost two-thirds of Canadian households, as the program’s exclusive pharmacy sponsor. Members of the Air Miles program can earn reward miles at more than 100 leading brand-name sponsors and can be redeemed for more than 800 different rewards, such as travel and electronic merchandise.
In addition, Jean Coutu announced it would mine its sales data in an effort to offer more targeted promotions based on customer spending habits.
Expand private-label share:
Jean Coutu Group’s current offering of some 2,300 private-label SKUs accounts for approximately 9 percent of the chain’s front-end sales. The goal is to increase that share to 12 percent by 2010. “Going forward, the Personnelle brand will be used primarily for health and beauty products,” Coutu said.
Emphasize pharmacist consultations:
“We have understood that in order to support our pharmacists in this role, we need to assign technical and other tasks to others,” François said, noting that Jean Coutu Group plans to extend additional training opportunities to its pharmacy technicians, provide them with improved prescription management software and employ more leading-edge automated technology and improved pharmacy department workflow.
The Jean Coutu Group most recently reported an 8.2 percent increase in operating income, which totaled US$55.5 million for the first quarter ended Sept. 1, and includes the company’s share of Rite Aid’s results.
The share of the loss in the Jean Coutu Group’s first quarter 2008 earnings amounted to US$30.3 million.