Brooks firms up its Boston position and hints at future expansion

Drug Store News,  May 20, 2002  by Michael Johnsen

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WARWICK, R.I. -- They say good things are worth the wait, and so it is for Michel Coutu, president and chief executive officer of Brooks Pharmacy.

Coutu, whose Brooks' chain recently converted 80 former Osco drug stores to the Brooks' banner, noted that he has had an eye on these former Albertson's-owned units for quite some time. "It took me nine years to get this deal done," he said. "That was for us the perfect fit."

But more than increasing Brooks' store base by one-third, the Osco purchase firmly entrenched the Brooks brand into the Boston metropolitan market. Before the deal, Brooks had just seven locations serving the Boston area. Now it has 65. "When I see what we have, I see the word 'opportunity' everywhere," Coutu told Drug Store News in a recent interview.

"We are [positioning] ourselves as the alternative," to CVS and other drug stores in the New England market, Coutu commented. There are approximately 200 CVS locations serving Boston and its vicinity. "I could place another 100 stores in Boston [without] cannibalizing any of the [Brooks] stores that are there," Coutu noted, suggesting that the chain will be making a strong push into the Boston market once the merchandising mix between the old and the new Brooks are worked out. As it is, the Osco purchase would have cannibalized two smaller Brooks locations in the Boston market, which were consequently closed. Four Brooks locations outside the Boston area also overlapped with the former Osco locations, and those units also were closed. The former Osco stores, which average 14,000 square feet, are larger than most typical Brooks' units.

Coutu plans to have the merchandising puzzle between the old Brooks and the new stores sorted out by the time the fall back-to-school season hits. "By that time, we'll have a very good story to talk about," he said.

The chain is in what Coutu described as a "detailing" phase, where every product in the store is being tracked in order to maximize unit sales and profitability between the two formats. In fact, Coutu hired two data analysts to optimize each planogram and define the best possible product mix throughout the chain. For instance, the traditional Brooks stores had a larger selection of candy than the former Oscos, something Coutu plans to rectify. "A lot of seniors eat their candy," Coutu chuckled. On the other hand, the former Osco locations had an "unbelievably good" summer time seasonal program Coutu hopes to duplicate throughout his chain.

The Brooks chain also is looking to develop a uniform pricing strategy between the new and old Brooks. For example, the former Osco locations drove customer traffic by aggressively positioning beverages against the competition using sharper price points. Coutu, however, does not subscribe to any "loss-leadering" strategies.

A quick glance at average store size between the recently converted locations and the traditional Brooks stores--14,000 square feet versus 7,500 square feet--suggests that quite a bit of tinkering might have to be done to reconcile those differences in merchandising mix. Au contraire, argued Coutu, noting that the selling space between the converted locations and the new Brooks prototype only differs by some 500 square feet--10,000 square feet versus 9,500 square feet. In addition, the new prototype will measure between 11,000 square feet and 12,800 square feet, Coutu noted, while the Boston prototype will total 13,500 square feet.

There are other challenges however. Brooks affords its customers a lot more elbow space--and consequently more space for bulk promos--with aisle widths ranging from 5 feet to 14 feet as compared with an average 5 feet 3 inches between aisles at the former Osco locations. On the other hand, the former locations generally had more space dedicated to its behind-the-counter pharmacy space and re-sizing the pharmacy box into a space more suitable to Brooks may prove to be the biggest challenge, Coutu said.

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