News

You spoke; we listened ­— introducing the NEW DSN

BY Rob Eder

We’re making big changes around here in 2011 — and we’re doing it because you told us to.


Whenever we ask one of our readers what they want from Drug Store News, inevitably, the answer always is: “Tell me something I don’t already know about.”


That’s the problem with most trade magazines today — by the time you get the issue, it’s all old news; often more than a month old by the time it lands on your desk. 


And we know from talking to readers just like you that you don’t get your news that way anymore. You’re online. You’re WiFi-enabled. You read electronic newsletters like DSN A.M. every morning on your iPhones, iPads, Blackberries and Droids. You go to the Web because you want the latest breaking news. You read magazines for other reasons.


You told us that magazines are NOT for reporting the news any more. You told us that you think a magazine’s job is to provide deeper insight and perspective. A magazine’s job, you said, is not to tell you that something “happened.” A magazine’s job is to tell you what it means and why it’s important to you. A magazine’s job is to tell you what you DON’T ALREADY know about the things you THINK you already know.


That is the mission of the NEW DSN. And it begins on the cover of every issue. Our bold new format allows us to use the cover of DSN to make a statement that can’t be lost, glossed over or otherwise misconstrued. If we think it’s important, it isn’t going to be buried in a sea of tired, old headlines about stuff you already know about.


The changes we are making are based on extensive reader surveys and an independent survey of retail executives from leading national chains. It means exciting new departments that put a much clearer focus and broader emphasis on new store formats and products that you HAVE NOT 
already seen before.


And we’re not just changing the magazine. As this issue of DSN went to press, our Web editors were busy rolling out our vastly enhanced new website at DrugStoreNews.com. It’s now easier to navigate and incorporates some exciting, new content features beyond just the top headlines, including more store photos, more new products, deeper dives into the data and more. 


And we’re still updating the site with the latest, breaking news more than 20 times a day. Want to make sure you don’t miss a single important headline? Make sure you’re signed up to receive the DSN electronic newsletters that you need to stay on top of your business.


You told us that today a trade magazine like Drug Store News HAS TO be more than just a collection of month-old headlines. We listened. 


Enter the NEW DSN — coming in January 2011. 


Be sure to let me know what you think at 
reder@lf.com.

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WAG test drives electric fill-ups

BY Michael Johnsen


HOUSTON — Walgreens will receive a jolt to its brand image in February as the chain begins playing host to NRG’s eVgo electric vehicle charging stations across 18 locations in the Hous­ton market. The eye-catching stations will help position Walgreens, and such other participating retailers as H-E-B and Best Buy, as cutting-edge companies with an eye to the future — and as responsible neighbors intent to make good on the promise of sustainability.


“This is another way we are providing our customers with an environmentally sustainable shopping experience, and it sets us apart as a retailer who is moving clean and green energy alternatives forward,” stated Menno Enters, Walgreens director of 
energy and sustainability.


Driving that healthy brand image home to consumers makes 
sense for retailers today. But down the road, these charging stations — where potential 
shoppers are captive for as many as 30 minutes — also may represent an entirely new revenue stream for retailers, said Arun Banskota, president of NRG’s EV services. “There is going to be revenue-sharing possibilities in addition to driving more people into these stores,” he said. And that could happen in as little as two years, depending upon how fast any EV 
market develops, he added.


Similar to the way mobile phone companies quickly drove cell-phone penetration, NRG will be covering all up-front costs — the home charger, at-work charger and publicly accessible chargers — for a subscription fee ranging between $49 and $89 per month. 


Under the best market conditions, electric vehicles may capture 10% of the auto market by 2020, projected Antonio Benecchi, a partner at Roland Berger Strategy Consultants. While aggressive, it’s a projection justified by such recent announcements as that of Renault-Nissan CEO Carlos Ghosn, who is targeting production of 500,000 EVs per year as soon as 2013. “The market has almost reached a point of no return with these vehicles in terms of investments that car makers have made [and] investments that the government, at different levels, [has] made,” Benecchi said.


Roland Berger, in partnership with the nonprofit Rocky Mountain Institute, in October released a report outlining how far along major metropolitan areas were in developing the EV infrastructure. 


The top five most-prepared cities are along the West Coast: San Jose, Calif.; Los Angeles; 
San Francisco; Sacramento, 
Calif.; and Portland, Ore. Houston also was identified as one of the “first-wave” cities.

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Cardinal diversifies 
with Kinray deal

BY Jim Frederick


DUBLIN, Ohio — Say goodbye to Kinray, the service-obsessed regional drug wholesaler. But say hello to a more muscular and diversified Cardinal Health.


The wholesale and health services giant announced Nov. 18 it will buy Kinray for $1.3 billion. The buyout, set for completion in early 2011, will be a boon to Cardinal, boosting its customer base to more than 7,000 independent drug stores, extending its reach in the Northeast and adding scale versus its wholesale rivals, McKesson and AmerisourceBergen.


Equally important, the addition of Kinray’s 2,000 independent customers in the New York/New Jersey metro area propels the company ahead in its efforts to diversify its customer base, which in recent years has become precariously dependent on two chain pharmacy giants, Walgreens and CVS, for half of its distribution revenues.


“The acquisition grows [Cardinal’s] base of customers by [more than] 40%,” said Adam Fein, founder and president of Pembroke Consulting. However, he warned, “they’re going to have a big challenge in retaining those customers. Kinray had a unique reputation.”


Indeed, Kinray’s service reputation and close ties to independents are legendary. Applying that kind of personalized culture to the much bigger scale of Cardinal’s business model will be challenging, but Cardinal chairman and CEO George Barrett appears to put a high premium on Kinray’s customer service standards, saying his company will work “to continue that tradition.” And Kinray’s customers, he said, will benefit from Cardinal’s “branded pharmaceutical programs, inventory and pharmacy management tools, and … extensive generic 
drug program.”


For Kinray, it’s the end of a remarkable, 36-year run as a privately owned juggernaut, and a bonanza for its owner and CEO, the colorful and socially connected philanthropist and billionaire Stewart Rahr. Beginning in the 1970s, Rahr built the Whitestone, N.Y.-based company into a distribution powerhouse, thanks to an obsessive commitment to personalized, responsive service; high-tech order and fulfillment muscle; and rapid order turnaround. Kinray ships prescription and over-the-counter medicines, health-and-beauty aids and home health products across the United States, but its real strength lies in the Northeast, where it generates most of its $3.5 billion in 
annual revenues.


One thing that motivated Rahr to exit the market now, Fein observed, is “the level of competition in the wholesale market. Margins are continually under pressure, and the scale to buy generic drugs is crucially important.”


That last factor, he told Drug Store News, will work to Cardinal’s advantage, given the company’s massive generic purchasing and distribution capabilities and economies of scale.


On the other hand, Fein said, “Cardinal … has numerous challenges in rebuilding a position in the independent market,” given its efforts to rejuvenate its Medicine Shoppe franchise program. With Kinray, “they’ve acquired a company that has a reputation, culture and heritage in serving that customer very well. That’s a big net positive for them,” Fein added.


Cardinal also is restructuring its Leader marketing program for independents, Fein noted. “Their over-focus on large customers, and the big competitive threat from Health Mart, has really put them in a defensive posture. So they’re trying to go on the offensive by restructuring Leader, bringing new management to Medicine Shoppe and acquiring 
Kinray,” he said.


Wall Street endorsed the deal. Standard & Poor’s upgraded its investment rating on Cardinal to “buy,” noting that the acquisition provides the wholesale giant with “needed diversification, since 57% of [Cardinal’s fiscal 2010] revenues comprised only five customers.”


Morgan Stanley Research called the Kinray acquisition the “optimal use of cash” for Cardinal, giving it “greater exposure to independent pharmacies … and to generics.”

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