Joel Warady

Walgreens Takes Manhattan and Other NYC Boroughs, Too

February 18, 2010

FROM RETAILWIRE:
Walgreens announced yesterday that it had signed an agreement to acquire privately-held Duane Reade from Oak Hill Capital Partners in a cash transaction valued at $1.075 billion. Do you have any concerns about the effects of consolidation in the drugstore channel?      [more...]

Walgreens went a number of years with a somewhat arrogant attitude in which they were steadfast in growing the chain organically, as opposed to through acquisition. Obviously, that attitude has changed.

The Duane Reade acquisition is a smart one, and one that is not unexpected. DR has the best real estate in Manhattan, and no matter how much money Walgreens has, there was never going to be a situation where they were going to beat DR at the location game. So if you can't beat them at their own game, simply buy them. Smart move by Walgreens.

While it is great that Walgreens claims to plan on leaving the Duane Reade name on the door for the time being, I think we will see that change within 24 months. New Yorkers like DR, and they tend not to love change. But Walgreens will want to make the change sooner rather than later.

Finally, as it relates to consolidation and being a monopoly, the fact is we still have three strong chains in the US with Walgreens, CVS and Rite Aid, so I think one would be hard-pressed to claim that this move was anti-competitive.

Walgreens played this one perfectly, and it is a BIG win for them.