Walgreens Will Change Food Scene in The Big Apple

February 19, 2010

Wall Streeters know the best deals are often the quietest ones –

Wall Streeters know the best deals are often the quietest ones – the ones that get done without buzz or speculation. Walgreens just pulled off a retail coup with its $1 billion deal to acquire the iconic New York City drug chain of Duane Reade.

The wedding of the two chains will undoubtedly impact food merchandising in The Big Apple – where millions of consumers on the run could be influenced to meet more eating occasions through foods bought in these convenient stores, rather than in high-priced green grocers or cramped supermarkets in the same neighborhoods. Think commuters in the morning, office workers at lunchtime, and NYC residents heading home after their evening gym workouts as a few of the primary targets. 

In a recent interview with Bloomberg, Walgreens vice president of merchandising Bryan Pugh spoke of an intent to test the sale of freshly prepared foods such as salads, cut fruits, ready-to-bake pizzas and sandwiches. “We won’t get our customer every day on the way home, but if we could get 50% of our customers one day a week, that would do wonders for our sales,” he added.

By accessing millions of New Yorkers through the 257 Duane Reade stores in and around the city, Walgreens nearly quadruples its local presence (70 stores currently) and leverages the power of its pending prepared-foods initiatives. Walgreens has long been known as the best-developed food merchant among drug chains, and for its assortments that serve every day part.  Also, since last spring, the chain expanded food offerings in select stores in Chicago that were underserved by supermarkets – areas regarded as ‘food deserts.’

How serious is Walgreens about prepared foods? It has brought on board Jim Jensen, who was formerly the director of fresh foods for Tesco Fresh and Easy, to fill a new position of divisional merchandise manager in charge of fresh foods. 

Now it has committed more than $1 billion to own Duane Reade. All of the food-selling lessons Walgreens has learned in its hometown of Chicago will be applied and refined in New York City, we believe to great effect. Duane Reade already sells packaged foods (and the DR Delish private label line), and could become powerful prepared-foods outlets in the city that never sleeps.