Walgreen hopes to add value with prepared foods(70269)

Walgreen to sell prepared meals and fresh foods

Walgreen Co. plans to offer fresh foods and prepared meals to draw "time-starved" shoppers to its more than 7,000 stores, taking on other grocers and retailers such as Target Corp. and Kroger Co.

The drugstore chain has been talking with food makers, including Unilever NV, Nestle SA and Sara Lee Corp., about creating private-label and branded products, said Bryan Pugh, vice president of merchandising.

"Everyone is time-starved, and we have the most convenient 7,000 locations in the U.S.," Pugh said. "They're on-the-way-home destinations that are easy to get in and out of and will provide a good value." He declined to say when the project will be implemented or how much it costs.

Walgreen has numerous stores in the Nashville area.

Walgreen, based in Deerfield, Ill., still must sort out supply and distribution issues and test in some markets before introducing freshly prepared foods such as salads, cut fruits, ready-to-bake pizzas and sandwiches into more stores.

The goal of the program, along with the sale of beer and private-label wine, is to boost revenue, Pugh said. Same-store sales declined in November and December as 10 percent unemployment and falling home values blunted consumer spending.

"If they can get consumer acceptance, this would be good for sales," said Andrew Wolf, a Richmond, Va.-based analyst with BB&T Capital Markets, which recommends that investors buy the shares. "Consumers aren't used to buying salads from a drugstore chain. That would have to change."

There's plenty of competition

The move will push Walgreen into competition with supermarket chains Kroger, Aldi and others; membership warehouse clubs operated by Costco Wholesale Corp. and Wal-Mart Stores Inc.; and retailers such as Target.

Walmart's supercenters sell prepared foods, including ready-to-bake pizzas.

"You've also got convenience stores and gas stations trying to go in that direction," said Bob Goldin, an executive vice president at Technomic Inc., Chicago-based food consultants.

Walgreen "does have a lot of stores, but I don't see it as being a venue of choice for consumers," Goldin added. "It will be hard for them to establish credibility in freshness and variety. I don't see it as being a big business driver." Walgreen hired a director of fresh foods, who will begin work in several weeks, Pugh said. He wouldn't name the person.

"We won't get our customer every day on the way home, but if we could get 50 percent of our customers one day a week on the way home, that would do wonders for our sales," he said.

Target, the second-largest U.S. discount store, also is expanding its food offerings in general merchandise stores under the name PFresh. PFresh stores will have fruit, ground meat and other fresh foods, as well as pre-made sandwiches, salads and other prepared meals, said Jana O'Leary, a spokeswoman.

Target has 108 PFresh stores at this point but none in Tennessee, a spokesman said. By the end of the year the chain wants a total of 350 but hasn't announced where the new locations will be yet.

Walgreen also is about to start selling beer at its Middle Tennessee locations, and it will sell private-label wines at about 1,500 other locations where it can legally do so. In Tennessee, wine can be sold only in liquor stores.

Stores carrying beer and wine have higher average sales per person, Walgreen officials said.

Walgreen hopes to add value with prepared foods

Related News

Photos

trade

market

finance