Tuesday, September 10, 2013

Walgreens Grabs Kerr Drug

Another one bites the dust! Walgreens continued its industry roll-up with today’s surprise acquisition of Kerr Drug’s retail drugstores and specialty pharmacy business. (Kerr is keeping its long-term care pharmacy business.) Here’s the press release: Walgreens to Acquire Kerr Drug’s Retail Drugstores and Specialty Pharmacy Business.

Kerr, a high-profile regional drugstore chain, adds only a small percentage to Walgreen’s revenues. (See the table below.) However, the deal boosts Walgreen’s North Carolina presence, where CVS is much larger. Kerr is also a good fit with Walgreen’s Well Experience strategy.

Kerr’s owners understand industry consolidation’s key rule: Get big, get focused, or get out. Winning in the retail pharmacy industry requires scale or differentiation. Otherwise, cash out gracefully.

Kerr is the third-largest regional drugstore chain. The table below extracts the 10 largest regional drugstore chains from the Drug Store News Top 50 pharmacy list. According to today’s press release, Kerr Drug's retail drugstores and specialty pharmacy business had total sales of $381 million in its 2012 fiscal year.

Kerr has industry-leading patient care services, including Medication Therapy Management (MTM) and refill programs. In March, Outcomes MTM, a medication therapy management delivery system, named Kerr Drug to be the “top regional pharmacy chain.” See OutcomesMTM names top pharmacy-based MTM centers across the country.

The top national chain, according to Outcomes MTM? Walgreens.

Hey, Walgreens gonna get you, too.


  1. As a long time customer of Kerr I finally had to switch a couple years back. The lack of competitiveness with the big chains caught up with it. It will be interesting to see if Walgreens can bite into CVS marketshare now or if it is just more of the same. Kerr Drug has almost NO drive through locations which has to hurt it's appeal to consumers. I wonder if Walgreen will utilize existing locations or build "traditional" stores to replace them?

  2. True, but it's a small hit. Kerr probably accounted for less than $5M of Cardinal's EBIT, or less than $0.015 per share. The business will now shift to ABC, which will earn much less under its Walgreen's contract.

  3. As an independent pharmacy owner, I am saddened by all this consolidation, albiet an inevitability in today's day and age. I worked for Medco Health Solutions at the corp level for 20 years before going "back to roots" of the Mom and Pop store. I will enjoy it while it is still viable, then cash out. Know this...when we only have the huge soul-less big box black hole corporations left...only the public will suffer.

  4. Actually, 60% of our stores ----46 to be exact --- have drive-through pharmacy windows. And those are also "traditional" 10,000 - 12,000 square foot stores that will not have to be replaced.

  5. Actually, Kerr has almost fifty locations with a drive through option. Well above, two thirds of the company.

  6. How can you complain? If you worked for Medco for 20 years at the corporate level, then it's likely that you helped enable this demise.