Roots of success run deep

Roots of success run deep

Bruce Buckley

As it begins the countdown to its 100th anniversary year in 2003, Kinney Drugs shows no signs of slowing momentum.

The Gouverneur, N.Y.-based chain just completed a record year, with sales up almost 18 percent to $296 million. Its 59 stores in northern New York State and Vermont are each filling an average of 245 prescriptions per day. And front-end sales are booming, up more than 9 percent last year from a stand-alone format that emphasizes shopper convenience.

Now Kinney is picking up the pace with three new stores and six remodels on the drawing boards, an enlarged and even more shopper-friendly prototype, and new automated prescription dispensing equipment that will allow pharmacists to spend more time with customers.

Kinney’s dominant position in its largely rural, low-density markets is built on cultivating a home-town image. The chain takes pride in the fact that it has deep roots in communities where customers and employees attend the same schools, sit on the same local government boards and go to the same places of worship. But no one would calf Kinney a hayseed operation. It brings big-chain efficiency and marketing savvy to the competitive playing field.

A good example is the new Kinney format recently unveiled in suburban Syracuse. High-demand items like beverages, snacks and convenience grocery products have been moved to the front of the store in order to build on Kinney’s strength as a destination shopping location. Built-in coolers line the wall just adjacent to the front entrance for quick access to in-and-out shoppers. Gondola runs are no longer positioned diagonally to the front entrance. They have been straightened from front to back and aisles have been widened to allow clear sight-lines to the pharmacy and more room for customers to maneuver shopping carts.

Craig Painter, chief operating officer, said the new emphasis on consumable items and convenience is part of a strategy designed to multiply the number of shopping trips that customers make to Kinney stores. “It’s a way to increase the customer count,” he said, “and also to add more value to the shopping experience while customers are coming in to pick up their prescriptions.”

Painter is a Fay’s veteran–as are several other Kinney executives, including vice president of store merchandising Joe Lalonde–and he believes the changes will make Kinney even more convenient as a shopping destination than the supermarket, but will add other category attractions, such as pharmacy and hair care, that are unavailable in a convenience store.

In the new prototype, the pharmacy has also been given a new look, with warmer colors and more wood paneling, lower counters for easier access to pharmacists, and carpeted waiting areas complete with free blood pressure machines and public restrooms. Even in its prescription departments, convenience is a strong element in the chain’s approach, with 32 locations having drive-through pharmacy windows.

Profit centers like cosmetics, bath & body, and greeting cards have been moved to the front of the store, and the one-hour photo department has been enlarged.

“We have seen increases in a lot of areas we changed in the store,” Lalonde noted in a written response to questions. “Our front-end categories have shown a substantial increase in sales. Our photo department has seen a double-digit increase. With consumables and general merchandise being profit areas, we have capitalized on their location in the store.”

While the chain’s new format and merchandise offering are designed to appeal to customers in all of its markets, Kinney also has the ability to respond to individual community preferences very quickly. And, in fact, said Painter, stores in different areas already cater to particular market needs. For example, the chain does a substantial giftware business in most locations, but in urban areas like Syracuse “we have pretty much given up on a category like that,” Painter explained. And in Vermont stores where alcoholic beverage sales are permitted, unlike New York, the chain offers a selection of wines.

Painter said that stores used to be more individualized in their approach, “but we got away from that and became very centralized, and now we’re moving back to getting item-specific to a unique marketing area.”

As this year unfolds, the chain expects to increase the size of its prototype format by 1,000 square feet to 2,000 square feet, adding even more square footage to convenience and profit categories and opening up the pharmacy to make it more noticeable and to give more privacy to consultation areas. The added space also will give chain buyers the opportunity to be more flexible in trying out new products in their categories.

Kinney also is upgrading its technology, especially in the all-important pharmacy area, which accounted for $206 million in sales last year, or approximately 70 percent of the chain’s dollar volume. Painter said the chain is evaluating a replacement for its retail pharmacy system and should come to a decision shortly. “The types of things we’re anticipating out of the new system would be workflow improvement in our pharmacies and improvement in the inventory management component,” he said. In assessing the system, he adds, the chain also is looking forward to “opportunities with central fill and central processing” of prescriptions.

Pharmacy automation

In two higher-volume New York stores, the chain recently installed an automated prescription dispensing system. The Script-Pro SP 200 is a robust system that uses barcode technology and advanced robotics to count and pour prescriptions accurately and affix printed labels to vials. The system can handle up to 100 prescriptions per hour.

What’s more, the chain’s Web site, kinneydrugs.com, recently added prescription refill capability. While the service is new, the chain has already begun to get some refills, according to Painter.

As for future growth opportunities, Painter said: “I think our volume numbers are going to speak for themselves. We have a nice solid growth program that would show us adding three or four new stores next year. When we selectively look at locations, we still feel there is a fair amount of opportunity to expand some of our market areas. Right now we’re focusing on markets around the Syracuse area where there’s more concentration.”

The chain is also looking forward to its 100th anniversary year in 2003.

Painter said the chain is developing an advertising and marketing program as part of its celebratory year that emphasizes the chain’s deep local roots. “We’re combining our 100th birthday with some local community events,” Painter said. “We’re pairing up with some local companies like our local Harley-Davidson dealer. Our style is to have a community touch, so we’re putting a strong emphasis on the local community aspect.”

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Headquarters: Gouverneur, N.Y.

2001 sales: $296 million

Percent change versus 2000: +17.5 percent

No. of stores: 59

Average store size: 11,000 square feet

Pharmacy sales: $206 million

Percent of sales from pharmacy: 70 percent

Source: Drug Store News research

COPYRIGHT 2002 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2008 Gale, Cengage Learning