In uncertain times, supermarkets hold their own
In times of uncertainty and economic turmoil, Americans still have to eat and take their medicines.
That essential marketplace truism isn’t lost on supermarket pharmacy operators. Trading on the enormous appeal of one-stop shopping convenience, growing demands among consumers for healthier eating alternatives, and their own growing ability to merge the health and prevention expertise of their pharmacy staff with the nutritional benefits offered in the food aisles, food-store operators continue to elevate the role their pharmacy departments play in overall store performance.
Indeed, supermarket chains, led by Kroger Co., now account for three of the 10 largest pharmacy retailers in the United States, and 10 of the top 25.
“Pharmacy is a major contributor to the supermarket’s bottom line,” the Food Marketing Institute noted. “Prescription sales make up 9.5 percent of total store sales.”
“Consumers are demanding both nutritional advice,” said FMI president and chief executive officer Tim Hammonds, “and pharmacists who can bridge the gap in the supermarket between medicinal counseling and nutritionally-driven wellness programs.” And growing awareness of nutritional issues, wellness and preventive health among consumers, he said, has handed the supermarket industry a golden opportunity to build stronger ties to the U.S. population—and to strengthen its long-term business model.
“Health and wellness…is a space that supermarkets can own,” Hammonds said. “This is a great opportunity…connecting the dots between health and wellness.”
Supermarkets that contain in-store pharmacies, Hammonds added, also derive “a tremendous halo effect from the pharmacist being there.”
One indication of the growing recognition by supermarket industry leaders of pharmacy’s importance to their long-term survival was the hiring, one year ago, of pharmacy veteran Cathy Polley as FMI’s first vice president of pharmacy services. Polley, who has served in high-level pharmacy management positions for the National Association of Chain Drug Stores, the American Pharmacists Association, Kmart Corp. and other organizations, has called pharmacies “strategically essential to food retailers,” adding that food-store pharmacies serve as the anchor for “the health-and-wellness initiatives that many supermarkets emphasize.”
What’s more, FMI noted, food-store pharmacies are “positioned to bring in even more revenue,” with “more than half of all supermarket pharmacies [offering] in-store programs to turn shoppers into pharmacy customers.”
Those pharmacies have plenty of opportunity to do so. According to FMI, “41 percent of [supermarket] shoppers who say their diets could be a lot healthier would be very interested in information related to disease prevention and management.”
According to the food-store industry’s newest research, contained in the Supermarket Pharmacy Trends 2008 report released by FMI in July, supermarket pharmacies dispensed an average of 126 prescriptions per day in 2007, basically the same number dispensed the previous year. The average food-store pharmacy generated weekly prescription sales of $46,000, up roughly 9 percent over 2006.
On a broader level, “supermarkets are managing reasonably well through a challenging macro [retail environment] and to a large degree, are faring better than discretionary retail sectors,” according to Goldman Sachs retail analyst John Heinbockel.
Given the current state of the economy, some price inflation could be expected, however, Heinbockel noted, fears of a dramatic drop in the nation’s supermarket business are overblown.