Walgreens’ approach to marketing: Then and nowTiffany Regaudie
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The U.S. Pharmacy Battles have been raging for years, and there are two main contenders left standing.
In one corner, there’s CVS: health acquisition monster, $180+ billion in revenue, American market share champion.
In the other corner, there’s Walgreens: product innovation master, $130+ billion in revenue, late bloomer on the health acquisition scene—but making some moves worth watching.
DTC healthcare: An acquisition tidal wave
In 2006, CVS started an acquisition spree that forced Walgreens to act. While Walgreens has a longstanding tradition of investing heavily in multiple revenue streams — more on that later — the pharmacy acquisition bonanza of the mid-aughts transformed Walgreens in ways they’re still grappling with today.
But it’s not just Walgreens. The business of healthcare in the U.S. is evolving faster than same-day delivery for your medications.
When you think “direct-to-consumer healthcare”, you may think “healthcare consumer products” like toothbrushes by Quip or vitamins by Ritual. But in reality, the DTC healthcare landscape is an extensive web of private healthcare giants like Ro, at-home diagnostics companies like Everlywell, and pharmacies that are more than pharmacies, like CVS and Walgreens.
Walgreens isn’t on this DTC health map – but that’s about to change.
The patient is now the customer, and they’re demanding convenience.
In response, CVS and Walgreens are becoming one-stop shops for healthcare, which means acquiring clinics, creating apps, and overhauling their digital strategy for accessibility.
CVS may have gotten a head start with their MinuteClinic acquisition in 2006, but Walgreens’ history as a product innovator may just help them pull ahead. Keep reading to find out more about how Walgreens has evolved since it was established in 1901, and how a longstanding culture of innovation is helping them regain market share now.
Walgreens' brand timeline
Charles Walgreen Sr.’s lifetime
1873: Walgreens founder Charles Rudolph Walgreen Sr. is born in Dixon, Illinois as the son of Swedish immigrants.
1893: Walgreen becomes a registered pharmacist in Chicago.
1901: Walgreen buys Isaac Blood’s pharmacy on Chicago’s South Side. The first Walgreens is established.
1909: Walgreen Co. is formed with the opening of its second store.
1919: Walgreens has 20 stores.
1920s: Walgreens sells prescription whisky during prohibition, which allows them to expand beyond residential areas and to other states such as Minnesota, Missouri, and Wisconsin.
1922: Walgreens soda jerk Ivar “Pop” Coulson invents the malted milkshake, which leads to the company’s ice cream brand and soda fountain/food counter expansion.
1930s: Walgreens begins selling their own products to competing pharmacies.
1934: Walgreens operates in 30 states with 601 stores.
1939: Charles Walgreen Sr. dies, and his son Charles R. Walgreen Jr. takes over the business.
Walgreens’ slow expansion
1943: Walgreens opens a pharmacy at the Pentagon after years of good standing with the U.S. government for promoting war bonds.
1950: Walgreens begins their transition to self-service as a strategic response to competing pharmacy Sav-On Drugs.
1960: Walgreens fills its 100 millionth prescription.
1968: Walgreens becomes the first pharmacy to use child-resistant containers, long before it’s required by law.
1975: Walgreens reaches $1 billion in sales.
1981: Walgreens installs the first pharmacy computers in Iowa. Three years later, all Walgreens pharmacies are connected via satellite — a big move for convenience in filling prescriptions from anywhere.
1984: Walgreens opens its 1,000th store.
1991: Walgreens opens its first drive-thru pharmacy.
1998: Walgreens launches their website, which allows people to pre-fill their prescriptions online.
2002: Walgreens becomes the first pharmacy to offer prescription labels in multiple languages.
2009: Walgreens launches their app.
2009: The H1N1 flu pandemic paves the way for pharmacists to deliver immunizations, which Walgreens has been piloting since 2004.
Walgreens mergers, acquisitions, and product expansion
2010: Walgreens acquires New York City-area chain Duane Reade for $1 billion.
2011: Walgreens acquires Drugstore.com and Beauty.com, which is on a top 100 online retail sites list in 2013.
2011: Walgreens launches its Nice! store brand of food and household products.
2014: Walgreen Co. and Alliance Boots GmbH merge to become Walgreens Boots Alliance (WBA), “the world’s first global pharmacy-led, health and well-being enterprise.”
2015–2017: After several attempts, Walgreens acquires 1,932 Rite Aid stores for $4.38 billion.
2016: Walgreens shuts down Drugstore.com and Beauty.com to focus on Walgreens.com.
2017: Walgreens announces the closure of 600 stores in two years, mostly Rite Aid locations.
2019: Walgreens becomes the first U.S. retailer to test on-demand drone delivery.
2020: Walgreens administers its first COVID-19 vaccines.
2021: Walgreens launches on-demand drone delivery in Dallas-Fort Worth.
Charles Walgreen: Pharmacist entrepreneur
Charles Walgreen didn’t find his life’s calling until he lost part of his finger.
While working at a shoe factory, Walgreen accidentally severed the top of his finger. The doctor who treated him convinced him to become an apprentice for a local druggist, and Walgreen soon got a job working at Horton's Drugstore.
He hated it and quit. But after a series of jobs, Walgreen was a registered pharmacist working for a man named Isaac Blood. At the time, pharmacies in Chicago faced stiff competition, with 1,500 of them operating in the area. When Walgreen expressed his desire to buy Blood’s pharmacy, everyone told him not to.
But Walgreen had been working in pharmacies for several years at that point, and he knew he could create a better offering. Before becoming a pharmacist, Walgreen had attended Dixon Business College and knew exactly what he would change about the pharmacy business: better customer service, better selection, better displays, and better prices.
Walgreen’s “Two Minute Drill” to stimulate word of mouth
After Walgreen purchased Blood’s pharmacy for $6,000 in 1901, he knew he’d have to find a way to differentiate — so he came up with the two minute drill.
Walgreens first store location in Barrett's Hotel on Chicago's South Side.
It went like this: A customer would call Walgreen for a non-prescription order. Walgreen took down the customer’s information and passed a slip with that information to his assistant. The assistant would prepare the order and run over to the customer’s home, all while Walgreen kept them on the phone talking about the weather, their family, current events — anything that would distract them.
Soon enough, the customer would say they had a knock on the door and voilà — their order had arrived. A full century before Amazon same-day delivery, too.
Walgreen could of course only deliver on this service for a select few customers who lived close to his pharmacy. But the strategy was more than enough to stimulate word of mouth beyond his catchment area, and boom — Walgreens won against the competition with stellar customer service.
Creating a better drugstore experience: Inventing the malt shake and expanding foodservice
On top of great customer service, early Walgreens was known for something else: the malt shake.
First, a crash course in pharmacy history: Drugstores used to be soda fountain hubs. The 1760s saw the invention of carbonated water, which was believed to have therapeutic effects for all sorts of ailments, from scurvy to dysentery. From then on, apothecaries distributed mineral water for medicinal purposes and it persisted as a norm well into the nineteenth century.
The 1850s saw massive innovations in pharmaceuticals, which were dosed in soda to make them more palatable. As a result, the soda fountain also became a staple of every pharmacy in America.
People loved to hang out at their local drugstore soda fountain. Back then it was legal to treat a headache with cocaine-laced soda, which for some reason created a lot of repeat customers at pharmacies across the country.
By 1912, Walgreens had expanded to three stores, each with a pharmacy, a soda fountain, and a lunch cafe, all staffed by young, cool people who were paid higher wages than at competing drugstores. The lunch counter and cafe, decorated with beautiful marble countertops, were separated from the drugstore by an ornate archway, creating a luxurious experience that made people want to spend time in the space.
Walgreens soda fountain.
Walgreens wasn’t just a pharmacy—it was a place where people wanted to hang out and socialize. The experience was what drew people back to Walgreens locations, over and over again.
In 1914, when the Harrison Act banned the use of cocaine and opiates in over-the-counter pharmaceuticals, soda fountains continued to exist—they were just a lot less peppy.
Pharmacists couldn’t dose their sodas anymore, but that didn’t mean they couldn’t jazz up the soda counter with new flavors to draw customers. And this is what happened in 1922 with the invention of the malt shake at Walgreens.
Walgreens soda jerk—a slang term for “soda fountain operator”—Ivar “Pop” Coulson made a new kind of milkshake when he added two scoops of vanilla ice cream to the standard malted milk drink recipe (milk, chocolate syrup, and malt powder). People loved it so much it became a Chicago staple, and Walgreens was forever associated with it.
Learn more about what pharmacy soda fountains looked like here:
Key takeaway: Companies that empower staff members to innovate are more likely to see success with product differentiators. Another example: Assembly-line worker Gunpei Yokoi developed the Ultra Hand for Nintendo, which ended a years-long product funk and triggered their future success in video games.
Product innovation = growth during hard times
Where there’s difficulty, there’s opportunity—and no company embodied that mantra quite like Walgreens in the early twentieth century.
In 1919, the Volstead Act prohibited the manufacture, sale, or transportation of alcohol in the U.S. But there was one loophole—you could still get alcohol for sacramental or medicinal reasons. If your physician prescribed you some whisky for whatever ailed you—and sometimes that just meant knowing the right doctor—you could purchase it at your local pharmacy.
While Walgreens officially credits their 1920s growth to superior customer service and innovative store design, some people think whisky sales should get more credit than they do. In 1919, Walgreens had 20 stores. During Prohibition, however, growth skyrocketed to unfathomable new heights. By 1929, Walgreens had more than 525 locations.
(Fun fact: You can buy Prohibition-era prescriptions for medicinal whisky on eBay.)
And you may think the crash of 1929 and subsequent Depression era would have hit Walgreens where it hurt, but they managed to come out of it relatively unscathed for two reasons.
First, Walgreens cut all wages by 10% to avoid layoffs. Senior executives cut their wages by one-third.
Where Walgreens innovated, however, was with its agency system. For a monthly subscription, smaller pharmacies could join the Walgreens collective and gain access to more than a thousand Walgreens-owned products and operational support.
During the Depression, Walgreens went B2B.
Independent pharmacies began selling Walgreens products, which gave Walgreens some revenue, an expanded reach, and a lot of brand awareness that would carry through to more regions of the country. Without knowing it at the time, independent pharmacies paved the way for their own demise—and the quasi-monopoly Walgreens and CVS share today.
By 1934, there were 600 Walgreens-agency stores in 33 states.
The self-service breakthrough: Convenience as the ultimate benefit
Before the 1940s, pharmacies operated almost exclusively on clerk service. That meant you could only make a purchase by asking a clerk to hand you a product sitting on a shelf or behind a glass case. You couldn’t pick something up yourself and look at it.
Walgreens’ clerk service model—all products behind a counter.
But by the late 1940s, self-service retail had become a norm for many supermarkets. New pharmacy chains such as Sav-On Drugs followed suit, and soon the Walgreens clerk service model was starting to look old school.
Walgreens lagged because they didn’t believe customers would feel comfortable buying pharmaceuticals without the assistance of a clerk. But when Walgreens executives visited Sav-On Drugs in California and saw the prices they were able to offer due to a reduction in staff count, they changed their tune.
Customers also spent more in self-service stores because removing the clerk meant removing friction. Removing that friction, however, also instigated an overhaul of the standard Walgreens store design—and it was not without pain.
Walgreens soon realized the true commitment to self-service meant a redesign to store layout, displays, packaging, and checkout. Around the same time in the 1960s, fast food restaurants had begun to erode soda fountain culture, and Walgreens soon found themselves divesting of seven major divisions in 11 years, including its foodservice department with 500 soda fountains.
Walgreens first self-service sign, post-Sav-On Drugs acquisition.
From the 1950s to the 1970s, Walgreens spent most of their resources on modernization, rather than continuing their accelerating growth trajectory from decades prior.
Still, by 1979, Walgreens was operating 688 stores with revenues of $1.34 billion. In 1980, they were well-positioned to serve an ageing population, which was projected to grow by 36% over the next 20 years.
The nation’s most convenient drugstore: Pharmacy computers, drive-thru, and online prescriptions
The 80s and 90s were the beginning of a new era for Walgreens. During those 20 years, Walgreens was committed to one thing: becoming the “nation’s most convenient drugstore.”
In 1980, the 65+ crowd averaged seven prescriptions per person compared to younger folks who averaged 2.3. Before the era of the aging baby boomer, prescriptions had made up less than 10% of Walgreens sales, which is why it had been so smart to invest in other revenue streams like soda fountains and foodservice.
But by 1980, drug prescriptions had risen to 15% of sales, then 20% by 1985, then 24% by 1990. At the same time, however, new managed healthcare plans—contracts with healthcare providers to provide care at a lower cost—put pressure on all pharmacies to reduce prices on prescriptions. So Walgreens needed to find a way to make prescription delivery more convenient and efficient to maximize profits.
To start, Walgreens invested more heavily in other revenue streams like beauty products, photofinishing, and more over-the-counter drugs. They also opened larger stores that operated 24 hours a day, which they advertised in 1989 with this scary ad about a nighttime asthma attack:
But true efficiencies were unlocked when they adopted a computer system that would allow people to fill their prescriptions from anywhere in the country.
Walgreens Intercom: The first pharmacy computer system
Launched in 1981, Walgreens’ InterCom system was the first large-scale retail pharmacy computer system in the U.S. The system now links more than 9,000 Walgreens locations and, because of it, Walgreens is the largest private user of satellite transmission data in the world, second only to the U.S. Government.
IntercomPlus was first tested in five Walgreens pharmacies in Des Moines, Iowa, and it was such a success they expanded it to the whole country. At the time, the benefit of the connected system was truly a revolution: IntercomPlus made refilling a prescription at one Walgreens location no different than refilling at the customer’s original location.
In true 1989 fashion, Walgreens advertised the new system as “friendly” with smiling animated computers that strangely evoke Microsoft Clippy vibes. But most importantly, Walgreens wanted customers to know the service was free, which was needed for an audience paying out-of-pocket for a high percentage of their healthcare costs.
Walgreens’ drive-thru: Convenient healthcare from your car
Walgreens didn’t invent the drive-thru pharmacy—that honor goes to Gary Clinton of Physicians and Surgeons (P&S) Pharmacy, who created it in 1971.
But when Walgreens opened their first drive-thru pharmacy in 1992, other drugstores followed. Drive-thrus had been around a long time since the dawn of the fast food industry, and Walgreens sought to replicate the speed and convenience of fast food for prescription drugs — an icky yet effective decision.
Check out this ad for Walgreens’ drive-thru, which shows customers what life would be like if every service was conveniently offered in their car:
In 2020, at the height of the pandemic, Walgreens’ drive-thru service became an even more important asset as a way for customers to social distance while accessing necessities.
No longer just for prescriptions, Walgreens drive-thru was used in conjunction with an order-ahead service wherein customers could pick up items that were deemed essential during the pandemic, including cleaning supplies, certain over-the-counter medication, grocery items, baby formula, and medical supplies.
Pre-filling prescriptions online in 1998
In 1998, as people were just beginning to live parts of their lives online, Walgreens launched an innovative new service: the ability to submit your prescription refill online.
While only available for prescription refills—customers still needed to get their original prescription from their doctor and fill that out in person—Walgreens’ online “prefills” service introduced a new level of convenience.
With the launch of their new website that would have 2021 web designers screaming at their screens, the experience at the time was a novelty not yet implemented by other pharmacies. Within two hours of filling out an online form, a customer could run other errands or stay at home while they waited for their prescription to be filled.
The website may be an eyesore to us now, but back then it did what it was supposed to do: position Walgreens as the nation’s most convenient drugstore. It’s an important reminder that, while design and experience shouldn’t be ignored, function wins over form when it comes to delivering on a staple product benefit—and novelty can go a long way.
Walgreens’ shift to omnichannel through Drugstore.com and Beauty.com
Founded in 1999, Drugstore.com was ahead of its time. From the beginning, the company was an internet retailer of health and beauty products, which we know today as two categories that see consistent success in ecomm.
Walgreens wasn’t the first pharmacy to see potential in Drugstore.com. The same year it was founded, Drugstore.com entered into a 10-year partnership with Rite Aid. The agreement allowed Drugstore.com customers to pick up their prescriptions at Rite Aid stores, while also allowing Drugstore.com to sell Rite Aid products and gain access to customers through Rite Aid’s online store.
Then, in 2011, Drugstore.com and its affiliate Beauty.com were acquired by Walgreens for $409 million. Under the Walgreens umbrella, Beauty.com grew to become a top 100 online retail site—and Walgreens’ omnichannel presence was written in cyberspace.
Five years later in 2016, after a lot of growth, Walgreens centralized its ecomm efforts under Walgreens.com — no doubt an important move for brand recognition and centralization.
“Over the past year, we have been focusing on building new omni-channel capabilities on Walgreens.com with initiatives that improved assortment and website user experiences, enhanced our digital coupon capabilities to provide more customer value and added digital tools into our stores to elevate our shopping experiences," Walgreens wrote in an email to Drug Store News. "Expanding on these efforts is an important part of our strategy."
Walgreens’ future: VillageMD and the healthcare destination
At the beginning of this article, we mentioned that CVS’ acquisition spree during the mid-aughts would force Walgreens to act. What we didn’t mention was how long it would take them.
CVS’ 2006 acquisition of Minneapolis-based MinuteClinic, a chain of retail medical clinics that purported to offer affordable care, unlocked the kind of growth that would allow CVS to surpass Walgreens in market share. The acquisition transformed CVS from pharmacy to one-stop shop for healthcare.
In 2018, CVS owned 24.2% of the U.S. pharmacy market share; Walgreens owned 17.5%. While Walgreens unlocked international market share in 2014 when they merged with the UK’s Alliance Boots GmbH to become Walgreens Boots Alliance (WBA), they still haven’t been able to catch up to CVS in the United States.
Finally, in October 2021, Walgreens announced the acquisition of its own walk-in clinic powerhouse, VillageMD. After a $5.2 billion investment, Walgreens is now the majority shareholder and they plan to open at least 1,000 primary-care clinics in more than 30 U.S. markets by 2027.
Their goal? Turn your local neighborhood drugstore into a “healthcare destination.” The partnership will offer doctors who write prescriptions and drive foot traffic to Walgreens’ retail arm.
We have yet to find out what kind of success Walgreens will see with VillageMD, but we do know one thing: Healthcare is a business, and Walgreens is an aggressive contender in an evolving market.