W. Frank Dell II, CMC

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...]

The drug store segment is doing what comes naturally for a mature industry. This is no different than what has happened in retail and wholesale food. Without growth, the likely outcome is management replacement. Walgreens has historically built their own stores so they could have control. This is extremely difficult in high population cities. This only leaves acquisition as a route to growth.

Unlike some retail channels, like hardware and stationary, the local drug store is not easily replaced, but the name can be changed. Independent drug stores simply don't have the buying power and merchandise expertise to compete with ever widening competition of supermarkets, club, and specialist formats.