Cvs Annual Report

5. CVS’ additional competitor Walgreens is behind them by a market cap of roughly $10

Walgreen Co. (Walgreens) and its subsidiaries operate a drugstore chain in the United States. “The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America” (Walgreen Company). The firm currently operates two mail-order facilities and has 7,752 retail drug stores located across all 50 US states, Guam, Puerto Rico, and the District of Columbia (Walgreens). Prescription drugs account

The Pharmacy services have a full range of pharmacy benefits manager with more than 65 million plan members that enable people, businesses and communities to afford a healthy life style in an effective way. Pharmacy services segment of CVS offers mail order, specialty pharmacy and infusion services, formulary management, discounted drug purchase scheme, Medicare part D services, retail pharmacy network management services, prescription management services, clinical services and disease management services. CVS also provides health management programs for 17 conditions.

The Walgreens chain began in 1901, with a drug store on the corner of Bowen Ave and Cottage Grove, Chicago, Illinois, United States owned by Galesburg native Charles R. Walgreen, Sr.[6] By 1915, there were five Walgreen drugstores. He added several improvements to the stores such as soda fountains and luncheon service. He also began to make his own line of drug products and was then able to control the quality of the items and sell them at lower prices. By 1916, 19 stores were in operation, all in Chicago. And in that same year, all the stores were consolidated under Walgreen Co. The 1920s was a very successful decade for Walgreens. In 1921, the company opened stores

On the other hand, my son can only get his monthly medication at CVS Pharmacy and whenever I pick his medication up or he does, we are treated like brand new customers, there is no personalization. At CVS, after waiting an extended length of time, the pharmacy technician rarely asks me if I have any questions for the pharmacist and if I do she rushes me out, like I am disturbing the flow of operations. My family describes the pharmacy at CVS as a sterile machine; you are treated like a number not an individual. We have tried different CVS Pharmacies around Lakeland, but we get the same old treatment. Both Walgreens and CVS probably handle customer identification data very similar, but Walgreens emphasizes building positive customer relations

Throughout the next 20 years, CVS began buying out and taking over other discount clothing chain stores such as Marshall’s while beginning to expand their own pharmacies in store. Then in 1990, the big turning point that pushed them in to the pharmacy industry occurred when they acquired Peoples Drug Stores, and 490-store chain that CVS immediately incorporated in to their corporation. Throughout the 1990’s, they began to sell their clothing companies and focus more on being a drug and convenience store. Today, CVS still trails Walgreens in total revenue, but it is the leading corporation in number of stores and prescriptions filled throughout the pharmaceutical industry.

From 2002 to 2005, Walgreens reported a compounded annual growth rate of 10.1%, growing to $42.2 billion in total revenues. This strong revenue growth was primary driven by organic expansion through new store openings. Since 2002, Walgreens has added 1070 net new stores (22% increase) while CVS has added 1,384 net new stores (25% increase), of which 86%, or 1200 of CVS' store additions, were due to the 2004 acquisition of Eckerd. As a result, although CVS reported an impressive 21% increase in sales from 2004 to 2005 compared to Walgreens 12.5% (a decline from 15.3% in 2003 to 2004), it was primarily due to CVS experiencing the full effect of the mid-2004 acquisition of the 1200 Eckerd stores. Table 3 shows the year-over-year comparison of Walgreens total revenues to CVS'.

Walgreens is also mainly funded by store sales so the company sees long-term potential for about 13,000 U.S. stores. Additionally, the company long-term-expansion strategies are entering new markets, and improving customer service, investing heavily in technology enhancements that improve pharmacy efficiency and reduce costs.

Walgreens is the more established and older of the two companies. It was founded in 1901 and until recently it added stores from mostly internal organic growth. CVS is the newer company and started in 1963. The majority of growth at CVS has come from acquisitions of other companies like Revco, Arbor Drug, Eckerd and more recently Sav-On and Osco

Current Industry. The retail drug industry’s 2010 combined annual revenue was $277 billion, according to the National Association of Chain Drug Stores (Drug Store Industry…, 2011, par. 4).The big players in this industry are CVS Caremark, Corp. Walgreen Co., and Rite-Aid, Corp with Wal-Mart and Target developing more of a presence in recent years. According to the article, the drug store industry is very concentrated with the 50 largest companies generating about 70 percent of the industries revenue (Drug Store Industry…, 2011, par. 4). The industry had grown substantially in the last 50 years and will continue to innovate and develop well into the near future.

The competitive rivalry is moderate to high. The major competition is faced from other drugstore retailor that provides similar services. The two major competitors are Walgreen and CVS. These both companies has rapidly expended into this market. The both have more than 14,000 retail locations nationwide. Individually, the two companies have a market capitalization that Rite Aid four times over.

CVS, Wal-Mart, Medco Health and Rite Aid are Walgreens’ major competitors. Wal-Mart aggressively competes by its use of the $4 generic prescriptions promotion. CVS employs a similar strategy by offering a 90-day supply of generic medications for $9.99. Medco Health also competes with CVS by offering a 90-day supply of medications for a cheaper price than a customer would pay in-store. As of 2008, Walgreens and its major competitors were measured as follows10:

Mirroring its main market competitor, CVS, Walgreens has also added Envision Pharma, a pharmacy-benefit management company, to its portfolio. (CVS acquired Caremark in 2007) (Bells, 2016) Due to previous acquisitions and mergers, Walgreens is currently the most accessible pharmacy retailer in the U.S., servicing 8 million customers each day and filling approximately 894 million prescriptions and immunizations, every year. (Walgreens, n.d.)

Along with the company's strong market performance, the Walgreens Corporation continually shows considerable growth. 2006 ended with Walgreens' 32nd consecutive year of record sales and earnings ("Walgreen Co. reports..., 2006). Walgreens' 2005 sales of $47.4 were a 12.5% increase over the previous year and over $1.5 billion in earnings were a 15.5% increase over the previous year (Walgreens Corporation, 2006a). Furthermore, a new Walgreens store opens approximately every 19 hours (Carpenter, 2004). Consequently, the Walgreens name carries considerable brand equity as a nationwide retailer known for quality and convenience. In fact, Walgreens has positioned itself as the drugstore offering the most convenience (Walgreens Corporation, 2006c). As such, Walgreens offers drive-thru pharmacies in over 80% of its stores, and nearly 30% of stores are open 24 hours a day (Walgreens Corporation, 2006a). The company strives to offer a merchandise mix in line with this focus, providing customers with one-stop stopping for not only prescription drugs,

This Profit Margin ratio is acceptable, though not high. The result means that for each dollar of sales at Sears Co., the company earns only 3.27 cents in 1997, compared to 3.77 cents and 5.78 cents in 1996 and 1995 respectively. This slim and downward trend profit margin obviously won't make its investor happy.