You knew it was just a matter of time before Amazon would be entering the retail pharmacy business. The buzz has been around since even before the Seattle juggernaut acquired Whole Foods in 2017 and it became a bit louder when “Godzilla” purchased niche online pharmacy PillPack a year later. But now it’s game on as Amazon will enter a crowded field in which it will be considered an underdog – albeit an intimidating underdog – for now.
So, here are the details of the Amazon pharmacy structure which is really a two-headed animal (dare we say beast?): customers can access the company’s online store via their desktop or mobile devices through the Amazon App. Additionally, subscription Prime members will have access to savings on medications at Amazon Pharmacy when paying without insurance, as well as at more than 50,000 other participating pharmacies nationwide.
The company said that Amazon Prime prescription savings benefit will save members up to 80 percent off generic and 40 percent off brand name medications when paying without insurance. Prime members will have access to their prescription savings at checkout on Amazon Pharmacy.
“We designed Amazon Pharmacy to put customers first – bringing Amazon’s customer obsession to an industry that can be inconvenient and confusing,” said TJ Parker, VP of Amazon Pharmacy and co-founder of PillPack. “We work hard behind the scenes to handle complications seamlessly so anyone who needs a prescription can understand their options, place their order for the lowest available price, and have their medication delivered quickly.”
“As more and more people look to complete everyday errands from home, pharmacy is an important and needed addition to the Amazon online store,” commented Doug Herrington, senior VP of North American Consumer at Amazon. “PillPack has provided exceptional pharmacy service for individuals with chronic health conditions for over six years. Now, we’re expanding our pharmacy offering to Amazon.com, which will help more customers save time, save money, simplify their lives, and feel healthier.”
The new service will allow customers to order prescription medications, from a licensed healthcare provider, for home delivery which are then delivered in discreet packaging to the customer’s preferred address. Amazon Pharmacy said it will securely manage customer information in compliance with HIPAA and will not share protected health information outside of the pharmacy for advertising or marketing purposes without clear permission from the customer. The company will not deliver Schedule II controlled medications, which includes most opioids.
PillPack will remain part of the new Amazon Pharmacy store but will continue to be a distinct service for customers managing multiple daily medications for chronic conditions.
The Prime prescription savings benefit, also available to those using the PillPack by Amazon Pharmacy service, will be administered by Inside Rx, which is part of a recently launched health services company Evernorth, the parent of PBM Express Scripts and specialty pharmacy Accredo and a subsidiary of health insurer Cigna.
Even though it might be several years before Amazon gains significant traction in the pharmacy business, it has the time, innovativeness and energy to build a deep infrastructure. The big three drug chains – CVS, Walgreens and Rite Aid – will be tested almost immediately (all three retailers saw their stock prices drop after the Amazon Pharmacy announcement). Even PBM (Prescription Benefit Managers) such as Cigna/Express Scripts, United Healthcare/Optum and CVS-owned CVS Caremark will be impacted as well as supermarket chains who operate large pharmacy businesses.
The trick will be to actually motivate consumers (and their doctors) to shift away from their current and traditional prescription routines, a mindset which is far different than cross-shopping to buy groceries.
Can Amazon actually deliver impactful and meaningful lower pricing (especially for the uninsured)? And while many Americans currently receive their prescriptions by mail or online, Amazon is surely counting on that number to grow substantially.
Certainly, the link to Prime membership (currently at more than 125 million U.S. members) and its hypnotic mojo, will be vital to the success of this effort. Additionally, I believe that in the next two years, Amazon needs to add a brick and mortar piece to its new business much like it did with Whole Foods and continuing with its recently launched Amazon Fresh stores.
And Walgreens or Rite Aid might be there for the picking when considering that both chains have endured periods of past and recent struggles.
For now, this is a big announcement and one that almost certainly will be a game changer.
Remember those jokes in the 90s when people would say that one day we will be buying clothing, hardware, food, insurance and medical services from Walmart?
I don’t think too many are people laughing now.
Grocery Outlet To Open As Many As Five New PA Units In 2021
Grocery Outlet, which entered Pennsylvania in 2012 with the purchase of Amelia’s Grocery Outlet, announced that it will add 3-5 new stores in the Keystone State next year and could be adding other new units in adjacent states in the future as it focuses on expanding its licensee-based model.
Last year, the discount retailer became a publicly-traded company and added former Sam’s Club executive Heather Mayo to supervise its Mid-Atlantic business. In 2019, it opened a new store in Warminster, PA and real estate sources have told us that new Grocery Outlets are slated to open in East Norriton, PA and in the Sharswood section of Philadelphia, not far from Temple University.
The store expansion news from the Emeryville, CA-based merchant came after the company announced another period of strong sales and earnings in its third quarter which ended on September 26. Net sales rose 17.1 percent to $764.1 million with comp store sales increasing 9.1 percent. Grocery Outlet, which currently operates 19 stores in the Food Trade News region, also saw net income rise 141.8 percent to $55.3 million, or $0.41 per diluted share.
The company opened 10 new stores ending the quarter with 372 stores in six states, primarily on the West Coast. It also predicted that quarter-to-date comparable store sales growth for the fourth quarter of fiscal 2020 will be in the positive mid-single digits driven by an increase in average basket size partially offset by declines in store traffic. Based on current trends, the company expects comparable store results for the full fourth quarter to remain consistent at these levels.
During the follow-up conference call with financial analysts, CEO Eric Lindberg provided some color abouts its store expansion plans in the region. “As we have discussed previously, we have significant white space in front of us, which we believe supports over 1,500 new stores in existing states and neighboring markets. Our business model is rooted in value and has a broad customer appeal. This has resulted in a store model that has proven to be highly portable with strong performance across geographies, urbanicities and with customers at various income levels. We have made great progress this year in establishing our foundation for growth in the Mid-Atlantic region, where we plan to open approximately three to five stores next year,” he told the analysts, adding, “I think we’re going to see some nice opportunities in the broader Pennsylvania and New Jersey market.”
Lindberg added, “I am extremely proud of our strong execution throughout the third quarter as our corporate teams and IOs (independent operators) continue to focus on what we do best: offering exciting deals and delivering exceptional value to our customers. While we continue to navigate COVID, we are actively reinvesting in our people and operational initiatives in support of our long-term growth objectives. We remain excited about our ample white space for retail expansion and the opportunity to continue to deliver tremendous values to our loyal customers.”
Grocery Outlet currently expects to open 34 stores this year with no additional closures planned. The company said it will continue to build its real estate pipeline to support 10 percent annual unit growth.
And Walmart, Target Also Post Strong Sales, Earnings
The industry’s two largest mass merchants – Walmart and Target – also posted strong financial results in their recently completed third quarters.
At Walmart, comp store revenue at its U.S. stores increased 6.4 percent with health and wellness and food items contributing above that level. The Bentonville, AR-based merchant also rang up strong e-commerce gains, with its growing digital presence rising 79 percent. Operating income rose 22.5 percent to $5.8 billion and operating cash flow skyrocketed from $8.3 billion in fiscal 2019’s Q3 to a very healthy $23.8 billion this year. All told, third quarter sales at the Behemoth were $134.7 billion, a 5.2 percent increase worldwide.
“This was another strong quarter on the top and bottom line. Our associates continue to impress during this challenging year. They are working together to serve customers and communities in new, relevant ways and we’re very proud of them,” said Doug McMillon, president and CEO. “We think these new customer behaviors will largely persist and we’re well positioned to serve customers with the value and experience they’re looking for.”
The company listed some of its third quarter highlights including the launch of Walmart +, its “open call” event which was held virtually this year and led to 175 small businesses being added to Walmart’s vendor roster, and a pilot program with all-electric self-driving car company, Cruise, to test grocery delivery services.
The news at rival Target was slightly better. The Minneapolis-based merchant’s comp store sales increased 20.7 percent on overall revenue of $22.6 billion, a 21 percent gain ad its average transaction size rose 15.4 percent in its third quarter. Additional highlights include a jump of 155 percent in digital comp sales.
According to John Mulligan, Tar-jay’s COO, increasing the number of Target stores that feature fresh, refrigerated and frozen foods for same-day pickup as well as expanding the mix of these items available for pickup, has been and will continue to be a leading priority. Currently, approximately 1,600 of Target’s 1,900 U.S. locations offer fresh and frozen foods in-store or through the chains “Drive Up” pickup service. In the post-release analysts’ conference call, CEO Brian Cornell said that Target (like many other retailers) has suspended its 2021 guidance because of COVID-19 uncertainty including how consumers will change their shopping behaviors once the pandemic ends. He noted that the company has been pleased with the performance of its small-format units and more than 30 locations are expected to open next year. Also on the docket will be significant investment in sorting centers that will allow Target to continue to utilize it physical stores as fulfillment hubs.
‘Round The Trade
Hope you’re not tired of Amazon news yet, because we’ve got more. While it continued to experience softness in its physical grocery sales (primarily Whole Foods), that seemed to be a mere blip in its overall performance as Amazon once again posted stellar sales and earnings in its recently completed third quarter which ended on September 30. Overall sales for the e-commerce mega-merchant reached a record $91.6 billion with profits also skyrocketing to $6.3 million. And while the Seattle-based juggernaut experienced a 10 percent decline in physical store sales to $3.8 billion (which also included Amazon Go and Amazon Four-Star stores), Amazon’s online store sales (which includes orders that were fulfilled by Whole Foods but not purchased in those stores) increased an impressive 37 percent to $48.4 billion. Amazon’s “Prime Day” estimated $10 billion revenue boost was not included in those stats because they occurred last month in the company’s fourth quarter. As rapidly as “Godzilla’s” sales are growing, it is also ramping up its fulfillment and distribution needs. Last month we reviewed several new DCs that Amazon has coming on board including a SpartanNash facility in Severn, MD which we believe will service about a dozen Amazon Fresh stores slated to open next year. We’ve learned of a few more just in the Metro New York market including a 211,000 square foot building in the Flatlands section of Brooklyn to handle deliveries and a 90,000 square foot “last mile” delivery warehouse on Linden Boulevard also in Brooklyn. And in the last few months, Amazon has inked deals to: lease a 1 million square foot depot at the site of the old Cascades Containerboard factory in Maspeth, Queens; agreed to take over the 200,000 square foot former jet.com (Walmart) DC on Bronx River Avenue in the Bronx; and open a 201,000 square foot “last mile” delivery center in Blauvelt, NY (Rockland County). Man, these guys are busy!
Another rapidly growing e-commerce company, Instacart, is preparing to go public early next year. According to multiple reports, the San Francisco-based company has chosen Goldman Sachs to lead its IPO effort. The grocery delivery service organization has become the darling of Wall Street (but not with all retailers who use their services), and financial analysts say the market value of the eight-year old company could be as much as $30 billion, a mind-boggling figure for what is essentially a service-organization primarily utilizing independent contracts that is driven by an app…and not to be undone, Walmart has some distribution news of its own to report. The “Behemoth” has begun placing “pop up” e-commerce fulfillment centers into 42 regional warehouses nationally. The new temporary sites are prepared to ship up to 30 percent of Walmart’s online holiday volume and are also designed to reduce transportation costs. “It’s a seamless merge of store and e-commerce, so our building can do either one,” said Srini Venkatesan, EVP at the company’s global technology unit and the man who oversees all of Walmart’s company-wide supply chain technology.
Local Notes
Some store openings of note this month include Weis’ newest ribbon cutting in downtown Dingman’s Ferry, PA (Pike County). The 63,000 square foot net-new store is the first of five new units the Sunbury, PA-based regional chain will open in the next four months.
Giant Company has completed a major remodel of one of its flagship stores – the 93,000 square foot flagship unit Camp Hill, PA, after 15 years in that location. New additions include a sushi bar, tap wall with rotating craft brews and wine, a smoothie bar, a charcuterie station and a Saladworks location inside the big store.
A tip of the hat to Gus Lebiak, newly named president and COO of voluntary wholesaler Krasdale Foods. He will be handling the role most recently held by Steve Silver who will be retiring at the end of the year. Gus is smart and tenacious with a very strong work ethic and a load of experience (38 years) beginning with his days at the old Mayfair Supermarket organization to Twin County and then Allegiance, before joining to the While Plains, NY distributor eight years ago. We wish him all the best in his new post.
With COVID-19 cases spiking again (with more than 11.5 million cases and sadly over 250,000 deaths), several retailers are imposing new measures at their stores and offices. Albertsons, which has been among the industry’s fastest responding merchants in dealing with the crisis, has added automated health screening kiosks for vendors who visit through the front doors at the 275 Acme and Safeway stores that comprise the chain’s Mid-Atlantic division. Beginning on November 16, the five-step process includes vendor identification (individual name, company name and phone number); a brief Q&A about the vendor’s current health condition; a mask-checking procedure; a body temperature check; and a print-out sticker that says “clear” that they must wear during their time spent in the store. If a vendor does not pass the health screen, they will receive printed instructions directing them to leave the store immediately and contact their supervisor. We’ve already heard some yapping from the vendors about this, but it is truly uncalled for. Wear a mask, follow the rules and have enough respect for other people in your orbit and fear of the virus itself!
On a corporate Albertsons note, the Boise-ID based retailer has named former CPG executive Mary Beth West (ex-Hershey, Mondelez and Kraft) to the company’s board of directors. She’ll join Albertsons’ 13 other directors including co-chairs Leonard Laufer (Cerberus Capital) and the popular Jim Donald.
Utz Brands announced its first acquisition since it went public a couple of months ago. The Hanover, PA-based snack packer has agreed to purchase Truco Enterprises, a manufacturer of tortilla chips, salsa and queso sold under the On The Border (OTB) brand for $480 million. Utz hopes The On The Border brand will provide Utz Brands with scale in the $6.2 billion retail tortilla chip category, which is the number two sub-category in salty snacks. “This strategic acquisition will make Utz a significant competitor in the tortilla chip sub-category, where OTB holds the number three position, and also provides us with a meaningful position in salsa, queso and dips,” said Dylan Lissette, Utz’s CEO. “In combination with our small but growing premium Tortiyahs! brand, the integration of the On The Border brand will continue to improve Utz’s scale and product diversification, which are important success factors in salty snacks.” Utz Brands expects Truco Enterprises, based in Carrolton, TX, to generate $195 million in net sales during fiscal 2020. Once the acquisition is complete, Utz Brands will have approximately $1.3 billion in total retail sales
We have a couple of notable deaths to report over the past month. Passing through the goalposts of life was football great Paul Hornung. The former Green Bay Packer Hall of Famer was known as much for his nightlife persona as his gridiron skills. Nicknamed “Golden Boy” because of his rugged good looks and off-field antics, Hornung was the first player to win the Heisman Trophy while playing for a losing team (the 1956 Notre Dame squad) and proved to be one of the most versatile players in NFL history, playing running back while also serving as the team’s place kicker. To wit: he set the league record for points in a season in 1960 (back then, the season was only 12 games). He scored his 176 points this way – scoring 15 touchdowns and kicking 15 field goals and 41 extra points. In 1963 Hornung’s “bad-boy” side emerged when he was suspended for the season for gambling on college and pro games. By the time he returned to the gridiron in 1964, Hornung had clearly lost a step, but had one great game left in him. On December 12, 1965, he scored a team-record five touchdowns in a key late-season victory over the Baltimore Colts. Hornung, 84, spent his entire nine-year career with the Packers and was enshrined into the NFL Hall of Fame in 1986 when he joined players such as Bart Starr, Jim Taylor, Willie Davis, Ray Nitschke, Herb Adderley and Willie Wood as fellow Green Bay Packer greats from the 1960s to be enshrined in Canton.
Our condolences go out to the family, friends and fans (including me) of Alex Trebek, the greatest game show host of the greatest game show ever – “Jeopardy.” Trebek passed away earlier this month at the age of 80, 18 months after being diagnosed with stage 4 pancreatic cancer. Trebek was the perfect host for a show that was both serious and fun – and addictive. His self-effacing personality seemed to blend perfectly with the teachers and bartenders, businessmen and students, and many others who appeared as contestants over the 37 years he hosted the show. Jeopardy’s original host, Art Fleming led the show from 1964 to 1975. It returned to the air in 1978 with Trebek as host and he never looked back. And here’s one last clue that Trebek could easily answer: “He created Jeopardy.” Send me your responses.
