Walgreens confident of success in Hawaii

Innovation in plans for isle Walgreens

STORY SUMMARY »

Knowing that it is in for stiff competition, Walgreens plans to move into Hawaii with some new concepts that include a Cafe W beverage bar as well as its drive-through pharmacies.

While Walgreen Co. is a giant on the mainland, outnumbering Longs Drug stores 10-to-1, it faces an uphill battle in the Aloha State, given that Longs beat Walgreens here by 53 years. And Hawaii's tight commercial real estate market has led them to scale back their planned store count to 30 or less.

But representatives from Walgreens are confident that as they enter the market, they will set themselves apart by offering the new cafe, along with prescriptions in 14 different languages, full-time beauty consultants and competitive price points.

Walgreens says the aging population in Hawaii makes it ideal for entry, given that baby boomers are increasing the demand for prescription drugs.

---

FULL STORY »

Walgreen Co. is ready to enter the Hawaii market in an innovative way.

When it opens its first store in Hawaii, Walgreens plans to set itself apart by offering Cafe W, a beverage fountain that harks back to the old soda-fountain days.

Cafe W is a walkup beverage bar which will offer fountain drinks, specialty coffees, cappuccinos, icees, pastries, fresh fruits and nutrition bars. On the mainland, about 100 of these Cafe Ws have been rolled out.

WALGREENS Expected entry in Hawaii: November 2007 No. of stores nationwide: 5,461 in U.S. and Puerto Rico No. of stores planned in Hawaii: 25 to 30 Revenue: $47.4 billion* Headquarters: Deerfield, Ill. Founder: Charles R. Walgreen Sr. (1901) *Most recent fiscal year ending Aug. 31, 2006 Source: www.walgreens.com LONGS DRUG STORES CORP. Entry to Hawaii: 1954 No. of stores nationwide: 500+ in western U.S. and Hawaii No. of stores in Hawaii: 36 Revenue: $5.1 billion* Headquarters: Walnut Creek, Calif. Founders: Brothers Joe and Tom Long (1938) *Most recent fiscal year ending Jan. 25, 2007 Source: www.longs.com

Whereas drug store chains are somewhat similar throughout the country, Walgreens is making an effort to stand out as a health-oriented retailer catering to the customer's need for convenience.

Its Hawaii stores will be open 24 hours.

"The emphasis is on convenient locations," said Michael Polzin, Walgreens' director of external communications. "We want places where it's easy to get in and get out."

The Walgreens at the former Tower Records site on Keeaumoku Street is under construction and expected to open in November, according to Polzin.

Walgreens on the sites of the former Star Market in Kaneohe and at the former Kam Bowl in Kalihi should open sometime within the next year.

A fourth site is under negotiations, but Polzin declined to disclose details.

Though Walgreens might have originally intended to roll out 40 stores total in the Aloha State, Polzin said 25 to 30 stores would be a better long-term estimate, given the realities of hard-to-find real estate in Hawaii.

Walgreens stores average about 14,500 square feet, and the latter two will be that size, offering a drive-through pharmacy. But the Keeaumoku Street store will be smaller, without the drive-through.

Given the challenges of real estate here, Polzin said, Walgreens was willing to be flexible with its sites.

The first free-standing stores with drive-through pharmacies were introduced in the early 1990s and are now more than 80 percent of Walgreens stores. On average, 50 to 60 customers per day use each drive-through.

Nationally, Walgreens is on a fast track to growth, with plans to roll out 500 new stores in fiscal year 2007. It first announced plans to cross the Pacific Ocean to Hawaii last year to capture some of the three-fourths market share monopolized by Longs Drug Stores.

Walgreens believes it is an opportune time to enter Hawaii.

"The pie everyone is going after is actually growing because of the aging population," Polzin said. The company plans to offer prescriptions in 14 languages.

By 2020, he said, one in four Hawaii residents will be over the age of 60. Walgreens' highest concentration of stores is in Florida, where it has 720 locations.

Retail prescription sales grew from $232 billion in 2005 to about $250 billion in 2006, according to the National Association of Chain Drug Stores. In Hawaii, NACD tallied traditional drug store sales at about $530 million in its 2005 industry report.

Retail analyst Marty Plotnick ranked Longs Drug at the top of the local loyalty list, second only to the former Liberty House, now Macy's.

Having been established since 1954, Longs is often mistakenly identified as a local company, though it is based in Walnut Creek, Calif. Over more than 50 years, Longs has secured some of the best real estate in Hawaii.

Just like Longs, Walgreens plans to feature plenty of local vendors for products. More than 400 Hawaii vendors approached Walgreens at a meeting in June.

On the mainland, Walgreens easily outnumbers Longs Drug, with more than 5,000 stores in the U.S. and Puerto Rico dwarfing the 500 or so that Longs has. Its revenue is also 10 times larger.

By 2010, Walgreens plans to operate more than 7,000 stores.

Plotnick described the loyal Longs demographic as primarily elderly and ethnic -- the shopper who has long clipped Longs coupons. But younger customers are not as loyal, he said, and can now choose to shop at big boxes like Wal-Mart, Costco and Don Quijote.

Customer service, convenience of location and competitive price points will be key to winning, he said. Still, Plotnick feels that Hawaii's market has plenty of room for a new player.

"Walgreens is not going to fail," he said.