[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[8 comments]

CVS deal is all about better understanding Latino consumers

July 16, 2014

CVS Caremark announced on Monday that it had entered into a definitive agreement to purchase Miami-based Navarro Discount Pharmacy, the largest Hispanic-owned drugstore chain in the U.S.

Navarro, with annual sales of more than $340 million, operates 33 pharmacies as well as Navarro Health Services, a specialty pharmacy for patients suffering from chronic or complex diseases.

"The acquisition of Navarro will strengthen CVS/pharmacy's position in the Hispanic marketplace, the fastest growing demographic in the U.S., and we are excited to be adding the Navarro Discount Pharmacy brand to the CVS/pharmacy family," said Helena Foulkes, president, CVS/pharmacy, in a statement.

In addition to its pharmacies, Navarro caters to its core Hispanic customer base with products and services not found in conventional drugstores. According to a release announcing the deal, Navarro sells wireless phones, designer fragrances and a large assortment of over-the-counter drugs and supplements to differentiate from competitors. It also offers a pediatric window for parents, a "Mommy and Me" club, compounding pharmacy services and a club for patients with diabetes.

Navarro CEO Juan Ortiz told the Miami Herald that the chain customizes its offerings based on the needs of consumers. He said locations in Miami have more Cuban, Puerto Rican and Dominican Republic customers and that is reflected in the products and services offered there. The company's store in Homestead caters to more Mexican consumers.

"We are a community pharmacy and, as such, we cater to the neighborhoods and businesses around our stores," Mr. Ortiz told the Herald in an interview last year.

"The Navarro brand is one of the most recognizable in the Hispanic marketplace," CVS/pharmacy spokesman Mike DeAngelis said in an email to The Associated Press. "We expect to maintain their current product mix and will learn from our Navarro colleagues about Hispanic marketing and merchandising."

FINANCIALS:     [NYSE:CVS] [ ]

Discussion Questions:

What do you think of CVS's acquisition of Navarro Discount Pharmacy? Do you expect to see CVS expand the Navarro banner or use learning from the acquisition to expand CVS/pharmacy more deeply in areas with large populations of Hispanics?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Navarro Discount Pharmacy to be successful after being acquired by CVS?

Comments:

The acquisition is a great move on the part of CVS. Since Navarro has such a great name within the Hispanic marketplace it would be wise on the part of CVS to leave the name alone. At the same time, they need to learn all they can so that the traditional CVS stores can also benefit from the experience. Walgreens has done the same thing in NYC with the acquisition of Duane Reade. New Yorkers do not know Walgreens but they do know their Duane Reade and the same will be true with the customers of Navarro.

[Image of: View Braintrust Panelist button]
Frank Riso, Principal, Frank Riso Associates, LLC

The acquisition potentially provides CVS with a goldmine of difficult-to-obtain data. The Hispanic customer segment is important and growing, but even beyond this, the ability to analyze data that joins pharmacy, OTC and more general basket purchases is very exciting.

The analysis challenges are complex and difficult, but having access to this data is a great first step for CVS. If they cultivate the opportunity by creating quality analytics, the ability to gain insights will go far beyond any single population segment.

[Image of: View Braintrust Panelist button]
Dr. Paul Helman, Chief Science Officer, KSS Retail

This is a smart move for CVS. Regarding the question of expanding the purchased brand or incorporating it into the CVS chain, it is too early to make that decision unless there has been a lot of research and due diligence before the purchase. CVS needs to evaluate Navarro to determine exactly what customer activities, business processes and in-store activities have led to Navarro's success. Then CVS needs to determine whether those activities and processes work well within current CVS stores or in separate stores. This is not a decision to be made lightly.

[Image of: View Braintrust Panelist button]
Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

This is a slam dunk for CVS, IF they utilize the power of the name in the right way. This means mining data, transferring the learning to other markets and potentially expanding the name and the concept to new and existing outlets. Not always easy to do when you have such a tiny tail trying to wag the dog!

[Image of: View Braintrust Panelist button]
J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

Launched just before the credit crisis and recession, Navarro never recovered from its ill-timed expansion initiative, including the acquisition of Sedano's in 2007. Losses and operating issues mounted, until it was inevitable the only way out was to put itself up for sale. Doubtful the equity investors got much, or any, return. CVS will be able to turn around the assets, and maybe pull some added value from the "Hispanic" data.

'mikeb22'

IF CVS retains the Navarro name on the stores there is a good chance for success. If CVS decides to put their name on the stores, the customers are going to start looking for that local pharmacy again who understands them and their needs. The decision will be based on ego or profits. Simple.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Si, acquiring Navarro Discount Pharmacies to gain insights and increased business in Hispanic communities is a positive move. To achieve that objective, use the Navarro in areas of large Hispanic populations. But CVS must still focus on its larger base of mostly non-Hispanic stores with its CVS banner.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

I agree with some of the other commenters. It isn't clear to me that CVS has demonstrated that they are able to act like Walgreens, and utilize an acquisition of a different company active only in urban settings to significantly reshape the "big" firm in terms of how it is operating (the Walgreens flagship stores, which are quite remarkable, are the result).

As someone who works in urban settings, I was impressed by Navarro initiatives including having some stores with cafeterias and business centers; providing services that are often under-present in lower income communities.

CVS could do the same in many of the center city markets that they serve. I haven't been super impressed with their food initiatives because the pricing is so high, operating more like convenience stores with a much broader and deeper range of products.

It will be interesting to see what happens. The CVS decision on tobacco products is equally path-breaking a la how Duane Reade was allowed to influence Walgreens. Maybe that example is something that CVS officials are thinking about quite a bit?

Richard Layman, Consultant, Retail Empire LLC

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters