Walgreens Wants You To Know It Cares

Phil Wahba
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Walgreens might be a 116-year-old drugstore but it is feeling the need these days to remind customers it’s a pharmacy chain that can be at the center of their health and wellness.

The chain, a unit of , on Monday is launching a marketing campaign to burnish its health and wellness credentials at a time archival looks to get stronger by buying health insurer in a new $69 billion deal, and is believed to looking into getting into the pharmacy business. What’s more, Walgreens retail sales have been soft (as have CVS’), adding to the pressure to get more people to its drugstores.

The 8,000-store chain will start airing ads on TV that show so-called “care stories” depicting customers sharing Walgreens experiences related to their care and well-being. Other ads will follow in 2018 and the campaign also includes a big social media component as Walgreens looks to try to win over more young women. The goal, as Walgreens puts it, is to show it will “champion” the health and well-being of people.

Much of what Walgreens is touting in a so-called “iconic” brand transformation – which also includes a beefed up mobile app, better e-commerce, and enhanced beauty- is really just a roundup previously announced efforts, projects that CVS has also introduced in its own business, plus this new campaign.

But Walgreens has been busy with other things in the last few years, leaving marketing somewhat on the back-burner. At about this time three years ago, it agreed to complete its multi-billion dollar acquisition of European druggist Alliance Boots, and followed that 10 months later by trying (and failing) to buy smaller rival outright. (Walgreens is however in the process of buying and converting about 1,320 Rite Aid stores as a consolation prize.) The company has also been updating its tech, much of it getting up there in years, and supply chain.

“What customers probably don’t realize is much is how modern Walgreens has become,” Walgreens Boots Alliance co-Chief Operating Officer Alex Gourlay told Fortune. He and Chief Marketing Officer Adam Holyk rattled off initiatives such as being among the first retailers to use Pay and having a popular mobile app, which has been downloaded 51 million times.

Holyk said customer focus groups showed that many customers were not very up on the changes in recent years. The company is also adding the tagline “Trusted since 1901” to remind the public of its long history. “How do we become even clearer?” he asked. “What customers probably don’t realize as much is how modern Walgreens has become?”

And a clear value proposition is all the more crucial at the time of intensifying pharmacy competition, a side of the business all the more important to support at both Walgreens and CVS given the lackluster performance of sales of general merchandise like toothpaste and toilet paper at their stores.

CVS Health and Walgreens are pretty much neck-and-neck as the leading providers of pharmacy services: according to Pembroke Consulting, CVS had 14.8% of the U.S. market last year to Walgreens’ 13.8%. And both get about 70% of retail revenues from filling prescriptions with the rest coming from sales of merchandise in the store. At both chains, pharmacy comparable sales are strong, in contrast to the rest of the retail side.

So Walgreens, which now offers the higher end Boots brand of beauty products thanks to its 2014 megamerger, is looking to leverage that more than it has to support retail sales. The chain also says it has beauty advisers at thousands of stores. Beauty and wellness products are selling much better at Walgreens that other product categories.

Still, it is worth noting that CVS has also beefed up and improved its beauty offering, yet retail comparable sales remain in decline. Each chain has many thousands of locations making it nearly impossible to improve all that many stores, or enough to really move the needle.

As the owner of the Caremark pharmacy benefits manager (which negotiates reimbursement rates with drugmakers on behalf of employers), CVS benefits from a steady flow of customers coming into its stores as they get pick up prescriptions. (Though many opt for the drive-through service, which would explain the soft traffic at CVS.) Walgreens doesn’t own a major PBM but it has a partnership with UnitedHealth’s OptumRx as well as Prime Therapeutics.

CVS has bought Aetna, an acquisition that would make it even more formidable and bring millions more people to its stores. In the meantime, though Walgreens Boots Alliance CEO Stefano Pessina told a Forbes conference last week that Amazon won’t be a big threat absent a megadeal, history shows Amazon can siphon away market share and is also willing to willing to make big deals to get there.

Walgreens wants to also tout its 400 healthcare clinics (CVS has about 1,000) as well as its specialty pharmacy chain.

When CVS wanted to make clear to Wall Street and Main Street it was pivoting its business much more toward to the health industry in 2014, it went as far as changing its name to CVS Health from CVS Caremark, and to drop tobacco products, a $2 billion a year revenue generator, from its stores. The move won CVS praise from the White House and many others and garnered a lot of press. Walgreens doesn’t see the need to make such a major move to relaunch itself identity.

“There is no big splash,” says Gourlay. “There is a lot of hard work and listening to customers.”

See original article on Fortune.com

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