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NewsSUPERMARKET AISLE

W i l d O a ts p u rs u e s S t o p & S h o p , P e a p o dBOULDER, Colo. Wild Oats Markets has reached anagreement to test two new alternative retail concepts.The first, which will begin in late 2004 or early 2005, is athree- to five-store test of a Wild Oats branded store-with-in-a-store boutique with northeastern food retailer Stop &

Shop, a division of Ahold USA.In addition, in the fourth quarter of 2004, Wild Oats willinitiate anonline retailing test of Wild Oats private labelproducts w ith Peapod, a leading U . S . Internet grocer."By pursuing other, non-traditional retail channels, ourbusiness would be more diversified to drive improved val-ue for our shareholders," stated Perry Odak, president andchief executive officer of Wild Oats Markets.In addition to expanding through partnership, the com-pany intends toaccelerate organic growth by opening upto 20 stores in 2005 and 40 stores in 2006.S u r v e y : T h e f t , f r a u d s t i l l v e x e s g r o c e r s

WAS HINGT ON Shoplif t ing, employe e theft andcheck fraud remain a big source or concern and the great-est sources of annual losses for food retailers and whole-salers, according to a recently released report from theFood Marketing Institute.The report, released under the 2004 Security and LossPrevention Issues Survey in the Supermarket Industry, re-veals that supermarkets apprehended an average of nearly23 shoplifters per store in 2003 and that the average valueof merchandise recovered rose $6.41, to$51.71. Nearly 3-out-of-4 suspects were adults. Among the top categoriestargeted: health and beauty care, meat, analgesics, babyformula, razor blades and cigarettes-Theft by insiders also plagued the industry last year. Al-though food retailers reported a slight drop in the num berof detected employee theftswhich averaged 615 percompanythe average value of merchandise recoveredjum ped to $622.90 from $452.10 in 2002.

I l l i n o i s a n t i- a b u s e la w l i m i t sO T C c o u g h - c o l d p u r c h a s e sSPRINGFIELD, 111. Legislation signed late last month es-tablishes Illinois as o ne of the toughest states in the nation incurbing access to key ingredients used to n:iake speed, ormethamphetamine. Retail pharmacies may feel the effect, asthe law signed Aug. 24 says retailers cannot sell more thantwo packages of cold medicine at a time and that the pack-ages cannot have more than 3 grams of a targeted metnam-phetamine-manufacturing chemical . The law also createss tandards for how drugs containing ephedrine and pseu-doephedrine, found in over-the-counter cough-cold products,can be packaged and sold.Drug stores and other retailers caught violating the law willbe charged with a misdemeanor and , on second offense,charged with a felony. But also under the law, retailers canrefuse to sell cold remedies to customers if they believe itwillbe used to make m ethamphetamine.The highly addictive stimulant isknown byvarious streetnames like 'speed," "meth," "crank" and "ice." Illinois Gov.Rod Blagojevich passed thelaw to cut down onclandestinelabs where illegal drug makers use legitimate, brand-nameand store-brand medicines containing pseudoephedrine tomanufacture the drug."This law takes an important new step in cutting off th esource of meth makers' ingredients for their deadly recipe/'said Illinois Attorney General Lisa Madigan."Meth use is rising throughout Illinois, putting our youngpeople and our communities at risk," said Blagojevich. "Thisnew law will make it harder for meth manufacturers toge tthe ingredients they need to make the drug and, ultimately,may cut down on the number of dangerous meth labs thathave sprimg up around the state."In July, theConsumer Healthcare Products Associat ionlaunched a national Meth Watch program that helps retailersand law enforcement agencies work together to deter the theftor suspicious sale of over-the-counter medicines containingpseudoephedrine and ephedrine. The program offers retailerstraining and information for managers anclemployees.

According to Virginia Cox, vice president of comm unicationsGONTINUED ON PAGE 31

S e r v ic e d r i v e s IT s p e n d i n gB Y MICHELLE L. KIRSCHE

FRANKLIN, Tenn. The top three chaindrug retailers collectively spend $900 millionon information technology systems, account-in g for half of the $1 .8 b i l l ion combinedspend on IT by the 20 largest North Americanchain drug stores. Competition from big-boxretailers like Wal-Mart, with one-day salesvolume surpassing the gross domestic prod-uc t of 38 countries, is forcing chain drug toc o mp e t e on a new level , with technologyserving as a platform for differentiation ana afacilitator for elevated levels of customer ser-vice. But while Wal-Mart has more dollars todevote toIT and is a trailblazer in the adop-tion of technology like radio frequency iden-t i f icat ion, at the end of the day it is stillknown for its every day low prices and not itscustomer service."In this market, the key driver for changeand IT spending is 'service, service, service,'"sa id Greg Buzek, pres ident of Fr a n k l i n ,Tenn.-based IHL Consulting Group and co-author of the newly released report "IT andthe North Am erican Drug Store.'

"[Drug store] retailers are faciri^ relentlesscompetition ... [and] areusing IT dollars tofortify supply chain and pricing solut ions,and to support increased customer service so-lut ions to improv e pharm acy effect ivenessand customer reach.'Currently chain drug retailers spend about1.5 percent of their previous year s revenueson IT systems, according to the IHL report.Walgreens, CVS and R ite Aid lead the pack inIT spending, with Eckerdbased on sales es-timates prior to its divestiture from J.C. Pen-nyranking a close fourth.Integrating IT systems in mergers and ac-quisitions can be a costly proposition. But inthe case of CVS and Fckerd, both for instance,use an IBM platform at the point of sale, whichshould facilitate a smo other IT integration andcreate a hom ogenous look at the point of sale.A big portion of IT spending is earmarkedfor propos i t ions l ike RFID. It's also ear-marked for capital outlay for new store sys-tems that work within newly built or upgrad -ed drive-through services and updated mer-chandising programs that manage and sup-port an increasingly wider array of perishable

as well as traditional drug-related pro ducInf ras t ruc ture des igned to meet funeeds, and hardware, software and in-systems, also are included in IT spendingstore systems can directly touch a custosuch as self-checkout units, or they canc l u d e e mp l o y e e - f a c i n g t e c h n o l o g y serves, for instance, store employees thanot have a company e-mail account thrwhich he or she can receive correspondfrom headquarters.

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Top drug storeinvestors in technoiogAccording to a recent report, drug chatypically spend about 1.5 percent of pryear sales on IT^which means the topchains will spend about $1 .8 billion this yeChainWalgreensCV SRite AidEckerd*Longs DrugShoppers Drug MartKatz Group**Jean Coutu GroupMedicine ShoppeBrooks Pharmacy***Duane ReadeLondon DrugsKerr DrugUniprixSnyder**PharmasaveDiscount Drug MartHappy Harry'sKinney DrugsBartell Drug

'Projected in millions'Eckerd's figures are estimates calculated prior to divestitfrom J.C. Penny." S n y d e r is a subsidiary of Katz, and revenues are reporteseparately here. Revenues for both are estimates.' " B r o o k s is a subsidiary of Jean Coutu. and revenues arereported separately fiere. Revenues for both are estimateto fiscal year ending after the report was published.Note: Exchange rate of 0.773 was used for Canadian compSource: IHL Consulting Group

2004 IT spen$487.7398.9249.0227.168.067.867.157.039.630.220.819.413.212.311.09.68.36.45.93.6

Retailers a id Floridians in storm's wakeNEW YORK AsHu r r i c a n e Ch a r l e yripped through Floridalast month. Kil l ing atleast 2 1 people, destroy-ing homes and bu siness-es andcausing hillions

of dol l a r s of d a m a g e ,ma n y r e t a i l e r s in thearea did the i r bes t tos e r v e c u s t o me r s in atime of crisis.Walgreens' 620 pharmaciesin the state filled emergencyprescr ip t ions for res ident swho were d i sp laced , los ttheir homes or were unableto get m e d i c a t i o n at the i rusual pharmacy. Inaddition,several locations in hardest-hit areas received truckloadsof water that were donated toconsumers, said spokesmanMichael Polzin.He added that none of Wal-greens' stores was damaged to

the extent of not being opera-tional. Those Walgreens stores

that did lose power operatedon generators.' Customers are coming toour stores with no cash, noc r e d i t c a r d s t h e y ' v e l o s te v e r y t h i n g , " s t a t e d Wal-greens district manager MattMcLaughlin just days af terCharley pummeled tfie area.At C^VS, the integration ofi t s newly acqui red Eckerdstores was evident already asboth CVS and Eckerd deliv-ery t rucks were on hand topass out bottles of water toFlor ida res ident s . A testa-

Shawn Sloan (ieft) of WDixie Stores' witii JoeBecker of the AmericanCross, atWinn-Dixie'sSarasota, F ta., warehowhich was donated asRed Cross disaster reiidistrihution center. WinDixie provided residenand workers with truckloads of w ater.

ment, according to C V S cman, president and chiefecutive officer Tom Ryahow smooth the Eckerd sition has been since theclosed last month.Also, the Red Cross t r ibuted $10 ,000 wor tcoupons , r edeemable aFlor ida Eckerd and s t o r e s , for s u c h e s s e nitems as water and toiletrC V S , which opera tespharmacies in the state

cluding the stores it receCONTINUED ON PAGE 3Drug Store N

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Newst a t e s d e fy t h e F D A

"More tlian a million Ameri-

e in or-

Illinois' plan is open only tois expected

on certain pharmaceuticals ,the state claims. The programwould be managed by an as-yet-urmamed Canadian phar-macy benefit manager.President George W. Bushh a s , in fact, endorsed the ideaof importation, so long as dru gsafety could be ensurecf."What I don't want to do is bethe president that says we'll al-low for importation, and all ofa sudden, drugs that are man-ufac tured somewhere e l secome in over the Internet, andit begins to harm our citizens,"Bush said on the campaigntrail in Wisconsin last mo nth."The pres ident says i t

makes sense to impo rt drug s ifit can be done safely. It's al-ready be ing done , and theFDA nas done n otliing to helpmake it safer," Blagojevicrisaid. "That's why Illinois istaking the step of establishingand inspect ing i ts own net-work of foreign pha rma cies.... I urge the president to stopstudying and to start helping.'However, the inclusion ofIreland as one of the coun triesfrom which Illinois will im-port medicines raised ques-tion s int o th e ex ten t of Illi-noi s ' own impor t r esearch .Following the announcement,news broke that Ireland couldnot, in fact, participate in anysuch program. It is illegal tos u p p l y p r e s c r i p t i o n d r u g s

through mail order in Ireland.In Vermont, the state for-mally filed suit last monthagainst the FDA in the U.S.District Court in Burlington,Vt., hoping to accomplish onthe offensive what Rx Depotcould not on the defensive."Vermont will not sit backand watch as the cost ofh e a l t h i n s u r a n c e a n d p r e -scription drugs continues torise," Gov. Douglas stated. "Itis our hope and expectationtha t Vermont ' s l eadersh ipwill result in a legal prece-dent that benefits every Ver-monter and every A merican."Previously, Vermont hadsought unsuccessfully a tem-porary statewide importationwaiver so the state could con-

duct a pilot test on importiVermont is hoping to impment that pi lot through courts , if not the FDA.According to Vermont, Medicare Prescription DrImprovement and Modernition Act requires the fedegovernment to create rupermitting the importationprescription drugs by whosalers, pharmacists and stbenefi t programs. AlthouVermont pointed to inacton the part of the FDA, Depar tment of Heal th aHuman Services formed importation task force earlthis year that met six timwith assorted stakeholders.recommendation is due frthe task force in December.

a r t e l l p la n s n e w p r o to t y p eIn the grocery aisle at several Bartell stores, shoppers

Census Bureau, of Seattle's 563,374 residents, 13 per-7 percent of sales"Bartell Drugs is a neighborhood drug store, and they

ent locations, and it is hard to really talk about a stan-It may be difficult to put "standard" and "Bartell" in the

prototype as plaruied.The 114'year-old chain, which draws between $250 mil-algreen s, Fred Meyer and^ Safew ay man datory n:iail

petitive, is hoping that a fresh store prototyp e will re-

ROM PAGE 6 .

Walgreen Co., with its corporate headquarters in Illinois,The National Association of Chain Drug Stores also is aThe Meth Watch program first began in Kansas as a co-

design a uniform Meth Watch programWhile the Illinois law is restrictive, it is not as strin-

broke n do wn for the prod uct io n of

Clari tin-D.In May, U.S. Rep. Brad Carson, D-Okla., propose d feder-as a controlled substance.

K a tz u n v e i ls f l a g s h i pCONTINUED FROM PAGE 1in Toronto and Rexall Place, home of the Ed-monton Oilers-and has replaced its private la-bel programs across all its Canadian retail di-visions with a new Rexall product line.The proto type store is 12,500 square feet, but2,400 of that will be dedicated to a medical clin-ic , staffed by tw o doctors, slated to open behindthe pharmacy. The store features a redesignedand enlarged pharmacy under the company'sPharmAssist branding program, with lowercounters and a private counseling room. It alsosports widened^ aisles, improved sight lines, aredesigned cosmetics department and an en-hance d selection of convenience foods."This is our pro totype, w hich we w ill be us-ing on a go-forward^ basis as we open storesthroughout Canada," said Katz Group NorthAmerica president and chief operating officerAndy Giancamilli."This is the growth vehicle for our corpo-rate-owned busmess," added Jerry Kuske, ex-ecutive vice president and chief merchandis-ing officer.Kuske said the new format will expand un-der both the Rexall and Pharma Plus banners.

depend ing on location.'Our plan is for this look to appear acrCanada as Rexall, with the exception of Ontario province, where w e have this look hranded with Pharma Plus."Giancamilli and other executives acknoedged the format will provide the basis for ture Snyder's drug stores in the U.S. Katz pchased Snyder's in the late 1990s, and instala new management team under GiancamilliThe new prototype is the culmination of design efforts under way in the months since ancamilli, Kuske and Shoppers Drug Mart vetan Russell Cohen, Katz's executive vice presidand chief operating officer, joined the compaand began a top-to-bottom overhaul of merchdising, store design and retail systems. "This ptotype is Andy and his team's vision," said Kat'I t 's this management team's conceptsbringing together what we believe is best prtice for merchandising a drug store," Kuske plained. "Our strategy is convergence drug stmerchandising, focusing on health care needdon't want to put as much emphasis on the cmetics arena, but definitely make sure we hthe right solution in OTC and HBC and all yohealth care needs and that we wrap a connience umbrella around it to ensure we offefull one-stop shop for the customer."

D r u g ' s I T s p e n d i n gCONTINUED FROM PAGE 6According to Lee Holman, a co-author of thereport and vice president of product develop-ment for IHL Consulting Group, retailers likeStaples and Darden Restaurants (parent to RedLobster and Olive Garden) are using em ployeekiosks for human resources communicat ionpurposes. So is the U.S. Postal Service, which

also now offers customers the option to useAuton:\ated Postal Center, a self-service kilocated in the post office lobhy. The kiosoon may appear in other retail locations,cluding drug stores, said Holm an.Kiosks currently familiar to drug store shpers include those found in the photo depment; however, Holman said kiosks of theture may be found in the cosmetics departmwhere customers can test different shades colors of makeup using a virtual mannequin

R e t a i le r s a id F lo r id i a n sCONTINUED FROM PAGE 6acquired in the Eckerd dealin al l Floridamarkets, had most of its stores up and runningjust days after the storm hit. Generators werebrought in to the handful of stores that werewithout power immediately following the hur-ricane, according to spokesman T odd A ndrews.Overal l , CVS came through in good shapeaside from a few missing roof tiles and flood-ing in one store, which has since been resolved.Wal-Mart associates also pitched in, donatingmore than 3 00 truckloads of bottled water and 100truckloads of general merchandise to the impact-ed areas.Hurricane Charley also muddied Wal-Mart'sAugust sales results.

Tne storm forced Wal-Mart to shut 73 storesand, in al l , impacted about 200 locat ions

some of which are the company's most pitable locations. As a result, Wal-Mart reduits August same-store sales forecast to betwflat and 2 percent versus its original guidaof between 2 percent and 4 percent.The revised guidance did not sit well winvestors, as shares of Wal-Mart slipped ab1.5 percent to close at $53.80 on Aug. 23,day the news broke.On Sept. 2, Wal-Mart announced that its gust same-store sales rose 0.5 percent, comin at the low end of its expectation.In addi t ion , numerous re ta i l e r ssuchWinn-Dixie, Albertsons, Wal-Mart and Wgreensset up fundraisers as a way to rmoney for relief organizations."Our neighbors face a long and diff iccleanup, and w e want to do everything we cahelp them," stated Joanne Gage, vice presidenadvertising and marketing for Jacksonville, Fbased Winn-Dixie.

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