Walgreen Taking on Target, Kroger With Freshly Prepared Salads, Sandwiches‏

Bloomberg

Walgreen Plans to Offer Fresh Food, Prepared Meals

Walgreen Co. plans to offer fresh foods and prepared meals to draw “time-starved” shoppers to its more than 7,000 stores, taking on retailers such as Target Corp. and Kroger Co.

The drugstore chain has been talking with foodmakers including Unilever NV, Nestle SA and Sara Lee Corp. about creating private-label and branded products, said Bryan Pugh, vice president of merchandising.

“Everyone is time-starved and we have the most convenient 7,000 locations in the U.S.,” Pugh said in a Jan. 11 telephone interview. “They’re on-the-way-home destinations that are easy to get in and out of and will provide a good value.” He declined to say when the project will be implemented or how much it costs.

Walgreen, based in Deerfield, Illinois, must sort out supply and distribution issues and test in some markets before introducing freshly prepared foods such as salads, cut fruits, ready-to-bake pizzas and sandwiches into more stores, he said.

The goal of the program, along with the sale of beer and private-label wine, is to boost revenue, Pugh said. Same-store sales declined in November and December as 10 percent unemployment and falling home values blunted consumer spending.

“If they can get consumer acceptance, this would be good for sales,” said Andrew Wolf, a Richmond, Virginia-based analyst with BB&T Capital Markets, which recommends that investors buy the shares. “Consumers aren’t used to buying salads from a drugstore chain. That would have to change.”

One-Stop Shopping

The move will push Walgreen into competition with supermarket chains Kroger and Safeway Inc., membership warehouse clubs operated by Costco Wholesale Corp. and Wal-Mart Stores Inc., and retailers such as Target. Walmart’s supercenters sell prepared foods including ready-to-bake pizzas.

“You’ve also got convenience stores and gas stations trying to go in that direction,” said Bob Goldin, an executive vice president at Technomic Inc., a Chicago-based food industry consulting firm.

Walgreen “does have a lot of stores, but I don’t see it as being a venue of choice for consumers,” Goldin said. “It will be hard for them to establish credibility in freshness and variety. I don’t see it as being a big business driver.”

Target, the second-largest U.S. discount store, is expanding its food offerings in general merchandise stores under the name PFresh. PFresh stores will have fruit, ground meat and other fresh foods, as well as pre-made sandwiches, salads and other prepared meals in the store’s Food Avenue area, said Jana O’Leary, a spokeswoman.

Adding PFresh Stores

“Our customers asked for an expanded food section,” she said. “We want it to be a one-stop location for all their needs.”

Target has 108 PFresh stores and plans to have 350 by year’s end.

Walgreen hired a director of fresh foods, who will begin work in several weeks, Pugh said. He wouldn’t name the person.

“We won’t get our customer every day on the way home, but if we could get 50 percent of our customers one day a week on the way home, that would do wonders for our sales,” he said.

Pugh, 47, previously worked for Tesco Plc, the U.K.’s largest retailer, and helped design Tesco USA’s Fresh & Easy Neighborhood markets, which offered freshly prepared meals.

“Fresh & Easy conceptually was a home run, but it hasn’t worked out in the field,” BB&T’s Wolf said. “The stores lacked ambiance and were in low-rent, C locations. Walgreen’s has A locations. They really do have the best locations in the U.S.”

Private-Label Wines

Walgreen is selling private-label wines at about 1,500 locations. It sold more than 200,000 bottles, at $2.99 a bottle, since the line, which includes chardonnay, cabernet, zinfandel and merlot, was introduced in December under the Southern Point name, Pugh said. A $5.99 private label will be offered in April, he said.

Stores carrying beer and wine have higher average sales per person, he said. That purchase alone pushes up sales in a shopper’s grocery cart as much as 60 percent, he said.

“Beer and wine are proven winners for drugstores, but not proven fixers,” Wolf said. “What’s for dinner will be much trickier to pull off.” The challenge is attracting enough customers to keep the fresh food turning over and finding space for the new products in already crowded venues, he said.

Walgreen fell 51 cents to $36.60 at 4:15 p.m. in New York Stock Exchange composite trading. The shares rose 49 percent last year.

Taking the Gross Out of the Grocery Store

When Brad Blaine grabbed a cart on a recent run to the Chevy Chase Supermarket in suburban Maryland, he noticed it was a little moist.

He was puzzled, he says, until he figured out that the cart had been pushed through a sort of car wash for shopping carts -- a hut set up at the store that mists a disinfecting peroxide solution onto carts as they're pushed through.

"As soon as I realized what it was, I felt, 'Here's a store that's going through the trouble to make sure customers feel safe,' " says the 48-year old dad.

Supermarket carts are a haven for germs. WSJ's Anne Marie Chaker looks at one Chevy Chase, Maryland supermarket's efforts to take the gross out of grocery carts. (Nov. 11)

The cart wash represents the latest effort from both entrepreneurs and grocers to take the gross out of grocery carts. Though hardly Public Enemy No. 1, shopping carts are gaining a reputation as one of the dirtiest public places, with some found to harbor such microbial villains as the diarrhea-causing Campylobacter and the potentially deadly Salmonella.

Cleansing-wipe dispensers have been appearing next to shopping carts at grocery stores for some years now. But a host of other products have emerged to appease germophobes who shop. These new offerings include protective covers that minimize infants' contact with the seat, full-cart liners and portable, snap-on handles carried by consumers.

Grocers hope the efforts boost perception of their stores. A 2007 study by IBM says consumer attitudes toward grocery stores can have a big impact on sales. Arguing that grocery shopping is a "cultural and social event" that people like to talk about, the study points to University of Pennsylvania research showing that a third of customers tell multiple people about a bad experience.

But stores that build "consumer advocates," the study adds, can get ahead of competitors without having to depend on "the same old levers of being bigger or cheaper."

No one disputes that carts harbor microbes. In a study released last year, University of Arizona researchers who sampled bacterial content on 60 grocery-store shopping carts in the Los Angeles area found that cart surfaces had exponentially more bacteria than what they had measured in about 100 public restrooms, from toilet seats to flush handles.

And a 2006 study of 442 infected infants in eight states by the Centers for Disease Control showed that riding in shopping carts next to meat was one of the biggest identified risk factors for Salmonella infection in infants, right below reptile exposure and consumption of partially cooked eggs.
Washing Still Wise

Still, some public-health experts scoff at the emergence of cart-sanitizing products, saying the best flu prevention comes from remembering to wash your hands. "It is a futile endeavor to strive for an antiseptic environment," says Rolf Halden, professor at Arizona State University who is an expert in public-health issues. "The consumerism of producing more and more products to try to achieve something unsustainable makes no sense."

Elaine Larson, a professor at Columbia University School of Nursing, adds: "Common sense says that shopping carts should be cleaned every now and then." But, she says, "in the relative risk of things, it's way down on the priority list."

So far, it has been hard to gauge the appetite for this arsenal of new cleaning products. With sales of $25 million a year, wipes provided at the grocery store are still a small part of the entire $1.8 billion wipes industry, but are growing about twice as fast as other types of wipes, estimates Mike Richardson, industry analyst for the Freedonia Group in Cleveland, which has studied this market.

Still, relatively few grocery shoppers are reaching for the wipes they see in stores. Purell wipes, made by GoJo Industries Inc., are used by only 5% of customers in the first year the dispensers are installed in a store, though more shoppers tend to use them in subsequent years as the behavior "normalizes," says John DePace, GoJo's director of market development for grocery. Another brand of wipes, called SaniCart, is used by between 15% to 20% of customers in stores where the wipes are provided, a spokesman for manufacturer Nice-Pak says.

The wipes have their drawbacks: Those intended to kill germs on cart surfaces may carry potentially scary labels. SaniCart wipes come with a number of precautionary messages: "Hazards to humans and domestic animals," for instance. The warning is due to the concentration of ammonium chlorides, which can cause eye irritation.

Matt Schiering, vice president of marketing for the company, says that such warnings are required by the Environmental Protection Agency in order to market products that disinfect surfaces, rather than just clean them. "If you want something with lower toxicity, you might have to take into account that it doesn't kill, say, the Hong Kong Flu virus," Mr. Schiering says. "If you want to clean your hands with a baby-wipe, you're free to do so, but you're probably not killing germs."

Purell says that its wipes are intended for hands rather than the cart, and therefore don't carry the same EPA warnings. The company says its hand wipes kill 99.99% of germs, similar to what Nice-Pak says its SaniCart wipes achieve when used on carts.
A Message to Shoppers

Meanwhile, the manufacturer of the cart wash Mr. Blaine used argues that grocers -- not customers -- should ensure the cleanliness of carts. "We like the idea of wipes, but what's the message?" says Jim Kratowicz, president of PureCart, Green Bay, Wis. "Our carts are dirty, here's a rag, go clean it?"

PureCart's cleaning devices, launched two years ago, are now in 21 grocery stores in the U.S. Each machine costs about $7,500 a year for a store to rent; the company tells grocers that stores that provide the machines will draw more customers.

Bashas' Inc., a chain of 160 grocery stores mainly in Arizona, has begun offering the PureCart-washing system in four of its stores and is looking to roll out at least 10 more in the next couple years.

Other products are targeted directly to consumers. A number of Whole Foods Market Inc. stores sell protective liners for mothers who put babies in carts. Made by Pelham, N.H.-based Babe Ease LLC, the Clean Shopper is a coverlet that allows the baby to sit in the cart without coming into direct contact with it. The product retails for about $30.

Marge Dandy and her husband came up with the idea for another variation on the theme, the Healthy Handle, after Ms. Dandy, who had just completed cancer treatments, cut her hand on a plastic shopping cart handle. The product is made from plastic and snaps over the handle. The Dandys, who live in Shawnee, Okla., have sold about 5,000 Healthy Handles since launching their Web site, thehealthyhandle.com, two years ago. The handles retail for about $10 each.

That some customers and retailers embrace such products marks a shift in attitudes from years ago. When Missy Cohen-Fyffe, founder of Babe Ease, first developed the Clean Shopper coverlet in the 1990s, she says, grocery-store managers "would laugh me out of their offices." Now, she says, she sells about 250,000 a year, both on her Web site cleanshopper.com and in stores. This month, the site is launching new "chic" and "luxe minky" lines, which retail for about $36 and $65, respectively.

A different twist on the cart liners comes from Phoenix-based Access International Media Inc., which came up with the idea of a disposable liner that grocery stores could offer customers while reaping profits: The so-called SmartLiners would not only be paid for by the advertisers who buy space for coupons and ads on the liners themselves, but Access International would also return a percentage of its profits back to the store. The concept was successfully tested earlier this year in eight Pennsylvania supermarkets, and Access International co-owners Tom Gryniewicz and Aaron Clark are now looking to expand it.