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Demographics are right for additional expansion. (Walgreens: The Jorndt Years).

DEERFIELD, Ill. -- A key to successful chain drug expansion in the 21st century is putting stores where the baby boomers are, according to Walgreens chief executive officer Dave Bernauer, who will succeed Dan Jorndt as chairman next month.

Americans born between 1946 and 1964 are fueling the tremendous increase in demand for prescription drugs, Bernauer explained earlier this year.

He said the drug chain already had a presence in the 10 major markets with the fastest-growing boomer populations, as well as in nine of the 10 small markets where the number of baby boomers is rising the fastest. For the future he promised to concentrate Walgreens' sharpest growth in Florida, Texas, California, Nevada and Georgia, "where demographics and growing populations provide the most opportunity."

Over the past five years the chain has built its base in Florida from 395 stores to 576, in Texas from 234 to 391, in California from 168 to 326, in Nevada from 11 to 43, and in Georgia from zero to 51.

But Bernauer promised not to just add stores scattershot. "There have been too many companies that have grown too fast by opening too many stores too quickly," he remarked. "We don't want to be one of them."

Walgreens ended up adding a net 363 outlets in fiscal 2002, a company record. That compared with a net loss of 276 units for its three largest competitors.

In fact Walgreens' expansion plans have elevated its projected 2010 store count from 6,000 to 7,000. And the outlets the company is debuting now, Bernauer pointed out, differ greatly from the stores it operated a decade ago when the retailer had 1,646 units.

Whereas Walgreens stores in 1991 tended to be concentrated in strip malls, nearly 75% of the company's outlets are now freestanding, with all but 120 of them offering shoppers a drive-through window for pharmacy service.

Moreover, said Bernauer, Walgreens' outlets this year were on average just 4.4 years old, versus the 9.1-year average a decade ago.

By 2006, he noted, the company expects to operate more than 5,300 stores, with 4,800 of them being stand-alone units, 4,775 having drive-through pharmacy windows and every one offering one-hour photoprocessing.

Bernauer vowed that Walgreens will not let the country's pharmacist shortage stall its ambitious growth plans. Acknowledging that there would not be enough pharmacists to staff the number of stores opening industrywide, he said, "Someone is not going to be able to open their stores, because they won't be able to get the pharmacists. It's not going to be us. We have become the employer of choice. Pharmacists understand that Walgreens is fully committed to pharmacy. It's our No. 1 priority."

On the competitive front Bernauer contrasted the daily sales of the average Walgreens unit with the figures of those same three competitors. Walgreens posted about $22,600 compared with its rivals' $14,000, $14,500 and $11,900.

Comparing Walgreens' performance with all mass market trade classes, Bernauer said a review of the company's 60 best-performing categories over the past year showed that discount stores increased their sales 8.3% in those areas, supermarkets had raised their's 3.3%, and all other drug stores increased their sales 5%. At Walgreens, Bernauer noted, sales in the 60 product areas soared 11.2%.

"Not only can we compete with Wal-Mart and the other discount store operators," he remarked, "we can outperform them."
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Title Annotation:Walgreens plans expansion as Dave Bernauer succeeds Dan Jorndt
Comment:Demographics are right for additional expansion. (Walgreens: The Jorndt Years).(Walgreens plans expansion as Dave Bernauer succeeds Dan Jorndt)
Publication:Chain Drug Review
Geographic Code:1USA
Date:Dec 16, 2002
Previous Article:Another achievement to celebrate. (Walgreens: The Jorndt Years).
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