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Fruth aims to keep its mix 'new and exciting'.

POINT PLEASANT, W.Va. -- Executives at Fruth Pharmacy view the challenge of operating a small chain in a world of giants with relish. "We're still having a lot of fun," says president and chief operating officer Don Pull-in. That's one reason the 21-unit retailer is thriving.

With no increase in store count, Fruth is projecting a 9% increase in sales, to $80 million, for the fiscal year ending June 30. Net profits are also expected to rise, as they have for several years running.

Pacing the sales increase is higher prescription volume, which is running 15% ahead of fiscal 1999, according to Pullin. Between higher prices for ethical drugs and an ever-growing number of prescriptions, scripts have gone from representing 55% of total volume at Fruth several years ago to 67% today.

To help deal with that rapid increase, the retailer, like other small drug chains, is adding an interactive voice response (IVR) system for customers calling to order refills. "The phone is the biggest problem in pharmacy after third-party adjudication," explains Pullin.

Fruth is also looking at automating the dispensing function. "Though such systems are expensive and pharmacy margins are only about 20%, we're going to have to do something," the executive says.

The company certainly appreciates the importance of technology in meeting the challenges of chain drug retailing today. It upgraded its computer hardware and software last year during its Y2K compliance project. This year Fruth plans to implement communication by computer among its stores as well as companywide E-mail. It also continues to fine-tune its web site, on which every circular is now posted.

The retailer plans to add drive-through windows for pharmacy service to five more outlets this year. "We have some stores now doing 30% of their prescription business in the drive-throughs. Convenience seems to be the name of the game," comments Pullin.

Outside of pharmacy Fruth continues to focus on direct imports. "We try to offer our customers new and exciting products at reasonable prices," he says. "Buying direct and cutting out the middleman helps us achieve that goal."

At the time he was interviewed Pullin had just returned from a buying trip with other Fruth executives, spending 14 days in Hong Kong and five days in China. The drug chain plans to increase its imports from China, where it now deals directly with factories, in contrast to Hong Kong, where it deals with trading companies. Among the goods Fruth expects to bring in from China are artificial trees, greenery and "as seen on TV" type items, according to Pullin.

The importance of giftware at Fruth also continues to grow, accounting for $4 million in sales last year. Most of the stores devote about 1,500 square feet to the category; new units up to 2,000 square feet. (Older stores are about 9,600 square feet; new ones, 11,000 square feet.)

The company's giftware assortment is quite extensive, including crystal figurines, Precious Moments and other Enesco figurines, other porcelain figurines, porcelain dolls, plush animals, religious plaques, artificial flowers, seasonal gifts, gift bags, candles, wire candelabras, wire votive holders, wooden hail trees, magazine racks and antique-looking chests.

Pullin notes that Ty's Beanie Babies have been very successful for Fruth in the past two years, with each of the retailer's orders running between $100,000 and $200,000 at cost.

Fruth has floral arrangers in most of its outlets who create custom baskets with artificial flowers. In some stores the company offers live flowers as well, and does floral arrangements for weddings and funerals. Its gift boutiques do other custom work, including gift baskets and colored bows.

And Fruth stores promote gifts 12 months a year, though most intensively for holidays. For example, all of the outlets sold live roses last Valentine's Day, though only eight of them have cases for live flowers.

The retailer's success with giftware in its drug stores prompted it to open a 9,500-square-foot gift, card and flower store in January called the Honey Bear Tree. The outlet is located in Cross Lanes, W.Va., close to Charleston. "We'll see how it does," notes Pullin. "We may open more gift stores. The gross margins are tremendous."

The chain continues to work on assortment and presentation in other sections as well, staying on top of trends. For example, it is implementing a professional hair care section and upgrading its ethnic sections, buying direct from vendors for its six stores with sizable African-American clienteles.

Fruth is also fine-tuning its cosmetics mix, reducing the size of the department while trying to do a better merchandising job with the lines it is keeping. "Cosmetics is a tough business right now," says Pullin. "We're taking a more upscale, boutique-like approach, hoping to do a better job with fewer lines."

The drug chain is also downsizing its bath and body section, but staying with the proven sellers. Directing many of the changes is a new cosmetics buyer, Amy Siders.

Though it did not increase its store count last year, Fruth continued to upgrade its store base, moving two outlets to larger locations and remodeling a third. The retailer did buy one independent pharmacy in 1999, consolidating its files with an established store in Wellston, Ohio.

Fruth would like to add one or two units this year and is now negotiating for real estate. "If an opportunity jumps up, we can take advantage of it," remarks Pullin.

Most of the company's advertising has been through newspaper inserts. It is now testing direct mail as well as off-week newspaper ads to complement its circulars. The retailer produces 28 circulars in-house each year, printing about 200,000 a month. (It also produces a circular for the Honey Bear Tree.)

During holiday selling seasons the circulars, which run up to 16 pages, are devoted exclusively to appropriate seasonal merchandise. The strategy is designed to fix in consumers' minds the idea that the drug chain's stores are the outlets of choice for such products.

Active in the communities it serves, Fruth continues to conduct an "Rx for Education" program whereby customers are encouraged to save their sales receipts between September and December and turn them over to the local Parent-Teacher Association (PTA), which reports the total to the retailer. Fruth then gives the PTA a check for 1% of that amount to be used as schools and teachers see fit. "People really like this program," Pullin comments.

The drug chain also participates in the annual Point Pleasant, W.Va, WalkAmerica fundraiser for the March of Dimes, which raises the largest sum per capita of any WalkAmerica site in the country, according to Pullin.

FRUTH PHARMACY

* HEADQUARTERS

Route 62 North Point Pleasant, W.Va. 25550

Phone: (304) 675-1612

Fax: (304) 675-7338

Web site: fruthpharmacy.com

* INDUSTRY RANK--4l in stores, 44 in sales

* Full-year results (6/30/00)

Sales -- $80 million [*]

Net earnings -- N/A

Net margin -- N/A

Comparable-store sales - N/A

* Number of drug stores -- 21

* Number of states operating -- 2

* Number of drug stores opened or acquired in 1999 -- 1 (consolidated with established store)

* Number of drug stores closed or sold in 1999 -- 0

* Number of drug stores planned for 2000 -- 1-2

* Average sales per store -- $3.8 million

* Average store size -- 10,100 sq.ft.

* Distribution -- Warehouse (I)

(*.) Projection,

N/A = Notavailable.
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Title Annotation:Fruth Pharmacy
Comment:Fruth aims to keep its mix 'new and exciting'.(Fruth Pharmacy)
Publication:Chain Drug Review
Geographic Code:1USA
Date:May 1, 2000
Words:1214
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