INDUSTRY | CATEGORY ANALYSIS Pharmacies and drug stores retail a range of prescription and over-the counter (OTC) medications, health and beauty items, toiletries, and consumable goods directly to consumers on a walk-in basis. Industry companies may also provide basic health and photo processing services.
$216 billion in revenue
30%
Other
12%
Rite Aid
31%
Walgreens
27%
CVS Caremark
$4.3 billion in profit
Industry Structure Life Cycle Stage: Mature Revenue Volatility: Low Competition Level: High Industry Globalization: Low Key External Drivers Per capital disposable income Number of hospital visits Number of people with private health insurance Number of senior adults (65+ years) Federal funding for Medicare and Medicaid
INDUSTRY | CATEGORY ANALYSIS Outside Factors that Affect the Industry
Health Care Reform This is a double-edged sword. Although sales volume can benefit as more people gain coverage, the government is expected to initiate cost cutting, which could affect profit margins.
Aging Population The number of people in the United States who are 65 or older will jump to roughly 47 million by 2015 and to 55 million by 2020. This age group fills an average of more than 25 prescriptions per person annually – 30 percent more than people between the ages of 55 and 64.
Blockbuster and Generic Drug Introductions Nearly $100 billion in branded drug sales will lose patent protection over the next six years.
INDUSTRY | CATEGORY ANALYSIS Industry Segmentation
Pharmacy & Drug Stores Segmentation among products
Pharmacy & Drug Stores Segmentation among demographics
INDUSTRY | CATEGORY ANALYSIS Industry Segmentation
Prescription Drug Wholesaling Retail pharmacies create the greatest demand for prescription drugs.
Warehouse Clubs and Supercenters Pharmaceuticals for this segment are significantly less important than for retail pharmacies.
COMPETITIVE ANALYSIS Retail Pharmacy Segments
2009 Revenue
2009 Operating Income
Number of Stores
$63,355
$3,247
7,522
$48,990*
$4,158
7,025
$50
4,780
“Inspiring a healthy life in your communities.”
“Improve the quality of human life.”
$26,289.3 “With us, it’s personal”
(In millions, except for number of stores) *Not including PBM sales or operating income
Other pharmaceutical retail competitors include mail order pharmaceuticals, mass merchants, super centers, warehouse clubs and grocery stores.
COMPETITIVE ANALYSIS Retail Pharmacy Segments
Revenue from Facebook Fans Twitter Followers Pharmaceuticals
“Inspiring a healthy life in your communities.”
“Improve the quality of human life.”
$41,181 (65%)
598,701
9,089
$33,313* (68%)
17,918
10,512
$17,246 (67%)
3,479
567
“With us, it’s personal” (In millions, except for number of stores) *Not including PBM sales or operating income
Other pharmaceutical retail competitors include mail order pharmaceuticals, mass merchants, super centers, warehouse clubs and grocery stores.
CVS/PHARMACY BRAND HISTORY In 1963, the first CVS store, selling health and beauty products is founded in Lowell, Mass. by brothers Stanley and Sidney Goldstein and partner Ralph Hoagland. CVS stands for Consumer Value Stores. Within a year, the chain grows to 17 stores. In 1967, CVS begins operating its first stores with pharmacy departments. By 1984, CVS reaches $1 billion in annual sales. Throughout the nineties, CVS ramps up its acquisition growth strategy. By 2005, CVS/pharmacy becomes the largest pharmacy retailer in America while serving more than 400 million customers. In 2007, CVS Corporation and Caremark Rx, Inc. complete their transformative merger, creating CVS Caremark, the nation’s premier integrated pharmacy services provider.
CVS/pharmacy Brand
‘09 Revenues for Retail Pharmacy
Percentage of Revenue
Dollar Amount*
Prescription Drugs
68%
$37,642
OTC and Personal Care
11%
$6,089
Beauty/Cosmetics
5%
$2,768
General Merchandise and Other
16%
$8,857 * in millions
CVS/PHARMACY BRAND CORE BUSINESSES
RETAIL PHARMACY With more than 7,000 CVS/pharmacy and specialty pharmacy locations across the country.
MINUTECLINIC
PBM SERVICES
More than 560 of CVS/ pharmacy stores in 25 states now feature a MinuteClinic, the U.S. leader in retail-based health clinics.
Payors and patients count on Caremark for a broad range of services, from managing pharmacy benefits to filling prescriptions by mail or offering clinical expertise.
CVS/PHARMACY BRAND CULTURE At CVS Caremark, they understand how much a company's culture impacts its people and ultimately its performance. That's why, soon after the merger in 2007, they quickly established a unifying Vision, Mission and set of Values that defines the company and serves as a guiding beacon for how they conduct our business every day. Vision Strive to improve the quality of human life. Mission Improve the lives of those CVS serves by making innovative and high-quality health and pharmacy services safe, affordable and easy to access. Values Accountability
Respect
Integrity
Openness
Teamwork
CVS/PHARMACY BRAND GROWTH AS A STRATEGY CVS Corporate focuses on convenient store locations, customer service and satisfaction, and product selection and price. The company has been restructuring and streamlining to improve returns with these focuses at the center of its strategy. It has also expanded its store development program, which has involved a combination of entering new geographic markets, adding stores within existing markets and relocating stores from strip malls to freestanding locations. The company continues to acquire additional stores which is inline with its aggressive expansion strategy. In 2006, CVS acquired 700 drugstores and a distribution center from Albertson’s, Inc. This followed its 2004 acquisition of 1,260 Eckerd stores. Most recently, they have acquired Longs Drug Stores in 2008.
CVS/PHARMACY BRAND PAST ADVERTISING CAMPAIGNS Last year, CVS spent and estimated $142 million in measured media, not including advertising costs associated with the ExtraCare loyalty program. Most communications revolve around promotional offers, coupons, direct mail and the ExtraCare loyalty program. 2007 – For All The Ways You Care In an attempt to reach the caregivers, CVS launched a campaign and contest to show that CVS cares as much as caregivers do. They know that the woman who cares for children, elderly and husband, is also the one that chooses the pharmacy, so they chose to portray her as a heroine. The execution received significant criticism and near the same time Walgreens also introduced communications that were similar in concept, but different in executions. VO from TV Spot: “It’s in your nature to care for others. To listen, to advise, to always be there. Isn’t it nice that there’s a pharmacy that cares as much as you do? CVS/pharmacy. For all the ways you care.”
CVS/PHARMACY BRAND For All The Ways You Care Website
CVS/PHARMACY BRAND For All The Ways You Care TV Spots
CVS/PHARMACY BRAND 2009 - Service Based Communications
2009 campaign to promote the ReadyFill refill prescription program. This is aimed at the boomer generation who may neglect strict pharmaceutical regimens.
2009 campaign to ExtraCare bucks from prescription sales. This is aimed at mom’s who make the majority of prescription and health decisions.
CVS/PHARMACY BRAND 2010 - Service Based Communications
2010 campaign to promote in-store coupon centers. This is aimed at price-conscious baby boomers.
2010 campaign to promote introduction of more advanced medical care in drug stores. This is aimed at women on the go as CVS attempts to position themselves as a one-stop-shop.
CVS/PHARMACY BRAND PROMOTIONAL
CVS/PHARMACY BRAND EXTRACARE LOYALTY PROGRAM The ExtraCare loyalty program, which rolled out in 2001, is today the most popular among all retailers. More than 64 million active cardholders take advantage of sales in the store and at CVS.com, and they received $1.9 billion in ExtraCare savings and Extra Bucks rewards throughout 2009. ExtraCare represents a significant competitive advantage for CVS, and CVS Caremark has a huge head start over any drug retailer contemplating its own loyalty program.
Earning Bucks: Earn 2% back with every purchase in-store and online at CVS/pharmacy. Earn 1 Extra Buck for every 2 prescriptions purchased in-store and online at CVS/ pharmacy. Earning Additional Bucks: Get instant savings on items featured in weekly store circular ads. Earn even more Extra Bucks on select brands advertised in weekly ads. Extra Bucks will print on your receipt immediately following your qualifying purchase(s).
CVS/PHARMACY BRAND Company Facts • 1 in 5 prescriptions are filled at CVS. • ExtraCare loyalty program has more than 64 million active card holders. • There are 4,300 CVS brand and proprietary branded products. • CVS Caremark is the first retail pharmacy business to merge with a Pharmacy Benefits Manager (PBM).
• CVS Caremark has doubled in size in the last 8 years in both revenue and store count. • CVS/pharmacy is the nation’s largest provider of prescriptions, filling or managing more than one billion prescriptions annually.
• 75% of the US population lives within 3 miles of a CVS/pharmacy store.
CVS/PHARMACY CHALLENGES THE PROBLEM With strong competition and an aggressive growth strategy, drug stores have become ubiquitous. While preaching ease and convenience, they occupy the same mind space as Walgreens. CVS needs to develop a strong emotional connection and preference with customers so that they will seek out a CVS/pharmacy instead of just choosing the closest and most convenient drug store. It should be considered that pharmaceutical sales make up almost 70% of all revenue for CVS/ pharmacy. Overall growth in this segment is directly tied to acquiring and retaining pharmaceutical customers. CVS/pharmacy has also recently moved from a regional drug store to a national health care player. The momentum and projected growth demand a more powerful and integrated media and creative strategy.
MOVING FOWARD AREAS OF EXPLORATION 1.Stand out as the progressive industry leader for pharmacy care service. 2.Own flu season. 3.Clearly differentiate pharmacy from other products and services. Become the “go-to� source for prescription and health information. 4. Encourage customers who use the pharmacy to purchase more while in the CVS store.