CVS: Health-forward transformation continues
If you could pick only one headline regarding CVS Health over the past year, the conversion of all 1,669 pharmacies and 79 clinics acquired from Target in 2015 to CVS Pharmacy locations would be a good one. To be sure, those efforts are paying off. In the former Target pharmacy locations, script counts are up, CVS Health president and CEO Larry Merlo told analysts during a February earnings call.
“The CVS Pharmacy team accomplished a lot in 2016, including the conversion of all Target 1,669 pharmacies and 79 clinics to CVS Pharmacy and MinuteClinic,” Helena Foulkes, president, CVS Pharmacy, told Drug Store News.
But certainly that isn’t the only news the company made in 2016. In its own stores, CVS continues its health-forward transformation in the wake of its 2014 decision to stop selling tobacco products, and repositioning CVS Pharmacy as a leading health and beauty destination. In 2014, health and beauty products comprised less than half of the CVS in-store mix, but company executives believe health and beauty could be a much bigger part of the business, with a goal to make it up to 80% of the assortment in the years to come, Foulkes told investors during the company’s December analyst meeting. “Health and beauty products are closely tied to pharmacy,” she said. “They also have 1.7 times more profit than other categories.”
With the conversions complete, and CVS systems and branding in place, the focus in the latter half of 2016 shifted to marketing its proprietary pharmacy programs, such as Maintenance Choice and Specialty Connect to customers in the converted Target stores.
To make up the $2 billion loss of tobacco sales, the company in 2015 set about a five-point strategic plan, outlined below, to drive long-term growth and profitability in its stores.
Better Health Made Easy: In 2015, CVS added healthier food offerings in 500 stores. The move is “driving growth and has been well-received by customers,” Foulkes told DSN last fall, with 77% of surveyed customers saying that access to more healthy food options at CVS was important or very important to them.
CVS also introduced a number of new merchandising features, including special “Discovery Zones” throughout the store to highlight emerging new products; and new endcaps at the front of the store that help raise visibility for OTC health and wellness. In all, these changes — now in some 400 stores — have improved run rates in consumables (up 9%), as well as beauty (up 4%) and health (up 2%), Foulkes noted in December.
Elevate Beauty: Enhancing department visibility and product selection in cosmetics and skin care, CVS has introduced its new look in beauty in more than 2,000 stores, and adding some 1,200 new products. Stores that received the new Elevate Beauty changes saw growth of about 3% compared with stores that did not receive the changes, CVS executives told DSN. In 2016, CVS raised the stakes, rolling out an amplified Beauty Service program in about 900 stores that redefined the role and responsibilities of its in-store beauty advisors, spending less time on store tasks and more time helping customers.
MyCVS: Expanding and refining its store clustering initiative, CVS has introduced its new CVS Pharmacy y más format in 20 locations thus far in Miami and Los Angeles. The company planned to extend y Mas further in California, Florida and two new states — Texas and New Mexico.
Personalization and digital innovation: CVS is using digital technology to personalize the individual shopping experience. Its industry-pioneering ExtraCare loyalty program is focused increasingly on personalized offers to its best customers. Meanwhile, the company’s dedicated Digital Innovation Lab in South Boston is allowing CVS to move quickly to rapidly test, improve and implement new programs, such as CVS Curbside and CVS Pay, both of which debuted in 2016.