CVS Transforming Longs

Discussion
Oct 01, 2009

By George Anderson

As a chain that has grown primarily through acquisitions in recent years,
one would think CVS should have this whole store conversion and integration
thing down. The company’s current big project is remodeling 541 former Longs
Drug Store locations into CVS pharmacies.

The company doesn’t expect the changes to be too jarring to shoppers as it
held onto 98 percent of the workers who had worked for Longs.

Changes that consumers can expect to find include lower shelves, wall-to-wall
carpeting and MinuteClinics at many locations. The CVS loyalty card program
is regarded as one of the best in the business and should be seen as an upgrade
by former shoppers at Longs. The chain has also expanded its grocery section
and added photo centers with computers to aid in retouching and doing special
projects like creating greeting cards and calendars.

Discussion Questions: Has CVS’s experience with
Eckerd and now Longs made it more adept at the transitions involved in
taking over another retailer? In your opinion,
has the chain’s emphasis on acquisitions hampered its organic growth in
any way? Will CVS be a hit with Longs’ shoppers?

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15 Comments on "CVS Transforming Longs"


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Steve Montgomery
Guest
11 years 7 months ago

Hopefully, from experience comes expertise. Having grown from acquisitions rather than organically, CVS has had a great deal of experience in adapting the elements from its brand, go-to-market methodology and physical plant to a variety of formats.

Based on yesterday’s article in the Wall Street Journal about Walgreens’ new format, they sound amazing similar. They are converting their stores to have lower shelving, on-site clinics (my wife got her flu shot at Walgreens yesterday), and they already had an expanded grocery section–sound familiar? The Journal article indicated the results from Walgreens’ effort were well received. I see no reason CVS’ wouldn’t be too.

Ben Sprecher
Guest
Ben Sprecher
11 years 7 months ago

There are many companies out there that have grown through acquisition. Some of them turn into giant, Frankenstein-like monsters with patchwork, siloed systems, confused and disgruntled employees, and purely cosmetic changes at the ground level to indicate the change in ownership (without naming names, I can think of several examples in both the grocery and commercial banking spaces). CVS, fortunately, does not have this problem.

CVS has become expert at integrating acquisitions, not merely papering them over. From conversations with folks at CVS, it’s my understanding that they have a dedicated integration team that can roll off of one project and onto the next. And as the author points out, CVS can bring concrete benefits to the Longs locations: Minute Clinics, the best-in-class ExtraCare program, and a solid front-of-store merchandising approach.

I see this acquisition as a real win for Longs’ owners and their shoppers.

David Biernbaum
Guest
11 years 7 months ago

The experience CVS realized from the Eckerd Drug transformation will go a long way to help make the Longs transformation in the actual stores. I do hope, and believe, that CVS will allow some room for keeping some of the Longs traditions, product assortment, and regional culture, that served the specific markets where Longs stores existed.

W. Frank Dell II, CMC
Guest
11 years 7 months ago

CVS, like Cisco, has the acquisition integration down to a process. Like all large complex projects, breaking it down into small pieces and good communications helps.

Never are all stores the same, so each must be re-designed. Next is ordering the equipment and materials. Then the key task is coordinating the installation with merchandising. Associate training is never easy as people must re-learn a job they have been doing for years. Some associates resist change but the more time spent here, the greater the bonding with CVS. The real challenge is getting the merchandising right. CVS is East Coast and Longs is West Coast. Here is where the greatest mistakes are made.

Roger Saunders
Guest
11 years 7 months ago

Growth strategies will vary from industry to industry and retailer to retailer. Some will choose a path of “growth” along the lines of acquisition. Others will choose “growth” via organic expansion of their own brand. We all see that in retail, as well as technology plays (Oracle compared to Microsoft), energy (Shell compared to Exxon), pharmacuetical, grocery, transportation, CPG, etc.

Neither strategy offers “one best approach.” What both strategies have to take into account is the ability to deal with:

• Execution
• Structure
• Culture

If these elements are effectively dealt with, the strategy cannot possibly work.

CVS has proven that they can effectively unify their strategy, execution, structure, and culture plans as they have made acquisitions. They should find the Longs Drug acquisition a positive one that will not only grow their revenues and market share, but their profitability as well.

Doron Levy
Guest
Doron Levy
11 years 7 months ago

Longs is ‘long’ overdue for a change. Compared to their competition, especially in California, they are getting smoked when it comes to HBA and cosmetics merchandise mix. I just hope they leave the soda fountain at the Horton Plaza location in San Diego. Great draw for the tourists.

Susan Rider
Guest
Susan Rider
11 years 7 months ago

I should hope so because they really fumbled the Eckerd acquisition. But the true loss would be in not learning the lesson.

Dave Wendland
Guest
11 years 7 months ago

Yes. This transition will go more smoothly. Perhaps the biggest discoveries will be around retaining customer loyalty (since Longs was a fixture in California/Hawaii) and incorporating some of the best of CVS without sacrificing the secrets of the Longs operation.

Gene Detroyer
Guest
11 years 7 months ago
Mergers and acquisitions rarely go smoothly. Success rates across all industries are less than 50%. But, it seems the CVS roll-up has worked well. They are getting better and better at embracing their new stores and perhaps more importantly, the people and customers. This skill is critical for Chain Drug. Organic growth only adds more stores to an over-stored industry. New store success depends on building a customer base from scratch. That is a very expensive way to go when you have an already limited customer base. When one acquires a store, they are acquiring the costliest element in the success mix, that customer base. And, the retailer can expect the customer base to hold, unless they chase them away with unwelcome policies and actions. (On another observation, Steve Montgomery noted that his wife got her flu shot at Walgreens. One can also get a flu shot at Duane Reade. With the high profile of H1N1 flu and the need for vaccination, using the chain drug store as a very convenient alternative to going to… Read more »
Jonathan Marek
Guest
11 years 7 months ago

From a consumer perspective, it is already improving the stores here in Northern California. CVS is heavily promoting its loyalty card and has dramatically improved the merchandising (which was awful to begin with). My guess is that these were very low-cost things to do. In the Bay Area (Longs’ home), they have incredible locations in high traffic affluent suburban locations (surrounded by people who probably have many prescriptions). They have very little competition from Walgreens (more from Rite Aid). In other words, the upside in these stores in huge.

Craig Sundstrom
Guest
11 years 7 months ago

“The CVS loyalty card program is regarded as one of the best in the business and should be seen as an upgrade by former shoppers at Longs.”

Well, it isn’t ! (at least to this former Longs shopper): I’ve groused long and hard about this takeover, and I’m not about to stop now (even if I appear to be a minority of one here today). So far, what I’ve seen is: the disappearance of a long-time name; required use of “loyalty” cards to get discounts during sales (Longs didn’t); and higher prices/lesser sale discounts (admittedly on a small and non-random sampling, but still…) All of this may make sense from a business perspective–and I know little about their merchandise mix, margins and other technical details–but from this side of the counter, the merger gets a thumbs down.

James Avilez
Guest
James Avilez
11 years 7 months ago
I live in the Bay Area and have a Longs near my house. Longs just finished with a major renovation to that location. They installed indirect lighting, configured the shorter aisles at different angles, had tasteful graphics and signage, a nice color palate of earth tones, i.e. it was a very nice shopping experience. The other thing I liked about Long’s was the autonomy that corporate gave the local managers as far as product selection. My locale had this really interesting selection of gourmet food, whole aisles of products from the UK, Italy, Germany, and Asia besides locally made goods; everyone seemed to like this and it sold. All of that has been eliminated. I was in this location yesterday, the latest renovation has changed the space radically. Now it’s fluorescent tube lighting, painted white walls and all the aisles are long and situated in one direction. What ever was unique about the former Long’s isn’t there anymore. For myself anything I am in the market for I can get at Target or Walmart for… Read more »
Cathy Hotka
Guest
11 years 7 months ago

I recently visited the Longs store at Horton Plaza (thanks for the shout-out, Doron!) and was surprised at how run-down, almost shabby, it looked. I’m sure that the Longs customer base will be pleasantly surprised with the results of the remodeling and rebranding project.

Joel Warady
Guest
Joel Warady
11 years 7 months ago

CVS learned a tremendous amount when they integrated Eckerds into their chain. While it might not have been the smoothest transition, it provided great learnings, and ultimately helped in creating what CVS is today; a 7000-store powerhouse. CVS will no doubt add great value to the Longs stores it has acquired. While it is true that they will need to learn how to manage much larger stores, especially the Hawaiian Longs stores which are closer to a department store than a drug store, CVS is the best chain prepared to properly handle this.

The former Longs customers will ultimately find cleaner, more modern, more customer friendly stores with a great loyalty card. What they will miss is the larger selection of unique products that Longs used to carry. CVS’ SKU-count is significantly lower than what a typical Longs store used to carry. CVS has already eliminated many products from the former Longs’ shelves.

Sandy Miller
Guest
Sandy Miller
11 years 7 months ago

CVS has perhaps the most effective acquisition and integration program of any of the major retailers. The principal reason is they acquire in a business they know. They have developed the management structure and processes to do the job right. Notable is retaining 98 percent of Longs’ employees.

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