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Doritos packs on the heat with latest offering

BY Gisselle Gaitan

PepsiCo's Frito-Lay division has introduced a new product to its Doritos snack line. The latest launch, Doritos Blaze is both hot and spicy, with a complex flavor and heat that builds with every bite, the company said.

The company is looking to join the rising trend of spicy foods, which is projected to be one of the most popular food trends in the years to come, as 1 out of 4 consumers are eating spicy foods more often than they have in the past, according to research from Mintel.

"Doritos Blaze is truly a first-of-its-kind snack with a robust flavor that's as bold as the heat in every bite," Ryan Matiyow, senior director of marketing of Frito-Lay North America, said. "We know our heat-seeking fans will enjoy this intense snacking experience all year long."

Although Doritos Blaze is currently launching in one spicy flavor, the company will look to expand the product’s platform in the future. Consumers can purchase the snack in two sizes, a 9.75-oz. sized bag for the suggested retail price of $4.29 and a 3-oz. sized bag for $1.69 at retail locations throughout the nation. 

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Backed by strong Q1 results, Walgreens is rethinking how retail is done in 2018

BY Michael Johnsen

As good as Walgreens performed behind the back bench this past quarter, the company’s continued focus on enhancing its beauty offerings is expected to lead improvements across the front-end as Walgreens plans to amalgamate the many store format pilots it has been testing into one of many yet-to-be-identified stores.

“Over the past few years we have been conducting pilot studies in certain U.S. stores to test our merchandising, format, supply chains and beauty propositions and a number of new initiatives,” Stefano Pessina, executive vice chairman and CEO Walgreens Boots Alliance, shared with analysts Thursday morning. “In 2018, you will see us deploy the first pilot stores [integrating] all the work we have done to date in a single format. We will study the results in depth and fine tune the format before rolling this new concept [out] under the ongoing store rejuvenation [initiative] and within our current capital plan. However, this is about much more than just our retail offering. It is about rethinking and redefining our presence in and relevance to the communities we serve. That requires us to rethink our supply chains, the services we offer to our customers and how we deliver those services. This is why strategic partnerships like the one we have done with FedEx are so important. [It] gives us an additional role in the community, provides flexibility in how we physically move things in and out of our stores, and that creates a completely new way of thinking about how we interact with our patients and our customers.”

[quote-from-article] For the third quarter, Walgreens’ U.S. pharmacy business was hitting on all cylinders. Pharmacy sales, which accounted for 72.4% of the division’s sales in the quarter, increased 14.1% compared with the year-ago quarter, primarily due to higher prescription volumes, including mail and central specialty following the formation of AllianceRx Walgreens Prime. Comparable pharmacy sales increased 7.4%, primarily due to higher volume.

And the division filled 260.2 million prescriptions (including immunizations) adjusted to 30-day equivalents in the quarter, an increase of 9.5% over the year-ago quarter. With that, Walgreens reached a significant milestone – exceeding 1 billion prescriptions filled on a 30-day adjusted and rolling annual basis.

Many of those prescriptions are being filed by patients through digital means, noted George Fairweather, Walgreens Boots Alliance executive vice president and global CFO. “In the quarter, over 20% of Walgreens’ refill scripts were initiated through digital channels, demonstrating the impact of the work we are doing to improve our digital capabilities,” he said. “This includes the progressive enhancement of the Walgreens mobile app, which has been downloaded more than 50 million times since its launch [and has earned] a five-star customer rating on the Apple store.”

And even though retail sales for the Deerfield, Ill.-based drug chain decreased 2.8% in the first quarter compared with the year-ago period, with a 0.9% decline in same-store sales, Walgreens is excited about its enhanced beauty position moving forward. “Declines in consumables and general merchandise were partially offset by sales growth in the health and wellness and beauty categories,” Alex Gourlay, Walgreens Boots Alliance co-COO, explained to analysts Thursday morning. “This is the sixth consecutive quarter that we’ve delivered comparable sales growth in both the health and wellness and beauty categories.”

Overall, beauty represents 9% of total retail sales at Walgreens. “We continue to invest in our beauty differentiation program and are encouraged by the results,” Gourlay said. “We have now completed the introduction of our enhanced beauty offering to over 1,000 additional stores, bringing the total number of stores with this offering to around 2,900. I’m pleased to report that during the first quarter the beauty differentiation stores performed stronger than in prior quarters. Beauty category sales in these stores continue to be markedly better than in other stores, resulting higher retail gross margin and higher retail comparable sales. … Given how well our beauty offering has been received, we are looking to widen the range of products offered in our beauty differentiation initiative.”

Walgreens Boots Alliance reported first quarter U.S. sales of $22.5 billion for the period ended Nov. 30, an increase of 8.9% over the year-ago quarter. Sales in comparable stores in the U.S. market increased 4.7% compared with the same quarter a year ago.

“I am pleased that we delivered another strong performance in the first quarter, led by continued prescription volume and market share growth in Retail Pharmacy USA. At the same time, we continue to position our company for future growth with the acquisition of the first Rite Aid stores following regulatory clearance for the transaction in September," Pessina said. "Since the end of the quarter, we announced an agreement to acquire 40% of Sinopharm Holding Guoda Drugstores, a leading retail pharmacy chain in China, where regulatory changes have allowed us to prioritize retail opportunities. We also have accepted an offer to sell part of our investment in our Chinese wholesale partner Guangzhou Pharmaceuticals Corporation for a substantial cash return.”

The company continues to expect to complete integration of the acquired Rite Aid stores and related assets by the end of fiscal 2020, at an estimated cost of approximately $750 million. As previously announced, the company plans to spend approximately $500 million of capital on store conversions and related activities. The company also continues to expect to realize $300 million in annual synergies within four years of the initial closing of this transaction.

Overall sales in the first quarter for Walgreens Boots Alliance totaled $30.7 billion, an increase of 7.9% from the year-ago quarter, and an increase of 7.2% on a constant currency basis.

During the quarter, the company completed its $5 billion share repurchase program announced in June 2017 and the $1 billion expansion of that program announced in October 2017.

The company raised the lower end of its guidance for fiscal year 2018 by 5 cents per share and now anticipates adjusted diluted net earnings per share of $5.45 to $5.70. This guidance does not take into account any impact from the recent U.S. tax legislation, and assumes current exchange rates for the rest of the fiscal year.

Retail Pharmacy International had first quarter sales of $3.1 billion, an increase of 4.1% from the year-ago quarter due to currency translation. Sales decreased 0.8% on a constant currency basis. Pharmaceutical Wholesale had first quarter sales of $5.7 billion, an increase of 5.6% from the year-ago quarter.
 

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Rite Aid ‘Well’ positioned against specialty Rx, immunization opportunities

BY Michael Johnsen

Rite Aid Wednesday evening outlined the number of tools the company has on hand in the delivery of low-cost, high-cost health and wellness services as it enters a new era featuring a tighter network of stores and a broad selection of diverse health services.

It begins with the company’s Wellness store format, which will represent more than two-thirds of its new store base. “These stores continue to outperform the rest of the chain,” noted Kermit Crawford, Rite Aid president and COO, on his first quarterly earnings call since joining the team in October. “We will continue to enhance our product selection, traffic flow and services based upon learnings and a better understanding of our local customer needs. We’re excited to be in a position to further leverage this popular store format in delivering an even better customer experience.”

One of the in-store services Rite Aid expects to enhance is its immunization offerings and medication therapy management consultations. “While we have strong momentum with flu immunizations, we have a significant opportunity to further increase adult non-flu immunizations that protect against conditions like shingles, pneumonia and whooping cough,” Crawford said. “We’re also highly focused on working with patients to improve medication adherence. This is especially important as we participate in additional performance and Medicare Part D networks as increased medication adherence improves their CMS Star ratings.”

In addition to in-store services, Rite Aid plans to further extend its reach into specialty pharmacy, which is expected to account for more than 40% of the total U.S. drug spend by 2021, Crawford noted. “When you consider the specialty platform already in place through EnvisionRx, along with [the] health coaching, disease-state counseling and analytics capabilities of Health Dialog, we have assets in place to build a more integrated specialty offering to help patients manage these high-cost therapies,” he said.

Rite Aid earlier in the afternoon beat analyst earnings estimates by two cents per share as the Camp Hill, Pa.-based company posted adjusted net income from continuing operations of $1.6 million, or $0.00 per diluted share. The company's third quarter net income of $81 million or $0.08 per diluted share, was up significantly compared to the prior year third quarter net income of $15 million or $0.01 per diluted share thanks to the ongoing sale of 1,932 stores to Walgreens Boots Alliance.

Analysts had projected a loss of two cents per share. Rite Aid's stock sold at $2.11 at close of business Wednesday, representing a slight decline of 0.9%.

[quote-from-article] "Our pro-forma Adjusted EBITDA from continuing operations for the third quarter of $153 million, which includes $24 million in fees that would have been received if all of the divested stores were being managed under the TSA Agreement as of the beginning of the period, was in line with our expectations," stated John Standley, Rite Aid chairman and CEO. "The third quarter was a busy time for our team in preparing for and beginning the transfer of stores and related assets to Walgreens Boots Alliance. … To date, we have transferred 357 stores and have received approximately $715 million in proceeds, which we have used to pay down debt. Looking forward, in addition to completing the transfer process, we will continue to focus on our most significant business-building opportunities as we work together to deliver a great experience to our customers and patients."

For the third quarter ended Dec. 2, 2017, the company reported revenues from continuing operations for the quarter were $5.4 billion, representing a decrease of 5.6%.

Retail Pharmacy Segment revenues were $4 billion and decreased 3% compared to the prior year period primarily as a result of a decrease in same-store sales and reimbursement rates. Revenues in the company's Pharmacy Services Segment were $1.4 billion and decreased 12.2% compared to the prior year period, due to an election to participate in fewer Medicare Part D regions and a decline in commercial business.

Same-store sales from continuing operations for the quarter decreased 2.5% from the prior year, consisting of a 3.5% decrease in pharmacy sales and a 0.5% decrease in front-end sales.

Pharmacy sales included an approximate 198 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores, adjusted to 30-day equivalents, decreased 2.4% from the prior year period due in part to exclusion from certain pharmacy networks that Rite Aid participated in the prior year. Prescription sales from continuing operations accounted for 66.5% of total drug store sales.

In the third quarter, the company opened one store, relocated nine stores, remodeled 20 stores and expanded one store, bringing the total number of wellness stores chainwide to 2,505. The company sold 97 stores to WBA and closed 7 stores, resulting in a total store count of 4,404 at the end of the third quarter.

As part of its agreement with Walgreens Boots Alliance, WBA will purchase a total of 1,932 stores, three distribution centers and related inventory from Rite Aid for an all-cash purchase price of $4.375 billion. Rite Aid and WBA expect to continue to transfer ownership of the stores in phases over the coming months. Since the majority of the closing conditions have been satisfied, and the subsequent transfers of Rite Aid stores and related assets remain subject to minimal customary closing conditions applicable only to the stores being transferred in those phases, the company classified the assets and liabilities to be sold to WBA-1,932 stores and three distribution centers- as held for sale and the corresponding operating results and cash flows of those stores as discontinued operations in its financial statements in accordance with GAAP.

 

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