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An analysis of Walgreen's options after CVS drops tobacco from store shelves.
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Game Theory Presentation - CVS & Walgreens
Brannan Millard, Clarence Lee Jr., Lindsey Sin, Srikanth Rao
Top 5 Companies in the Drugstore Industry Segment*
RANK COMPANY MARKET CAP.
1 CVS CAREMARK CORPORATION COMMON (CVS)
$86.6 BILLION
2 WALGREEN CO. COMMON STOCK (WAG) $63.9 BILLION
3 RITE AID CORPORATION COMMON STOCK (RAD)
$6.3 BILLION
4 GNC HOLDINGS INC. CLASS A COMMON STOCK (GNC)
$4.5 BILLION
5 PHARMERICA CORPORATION COMMON STOCK (PMC)
$741.5 MILLION
CVS Company DetailsStrategic Goals: 1) Pharmacy Benefit Management Growth2) Driving Growth in Retail Pharmacy3) Continue MinuteClinic Momentum
CVS Company Details Revenue: $133 Billion projected for 2014 ($2 Billion from tobacco and tobacco related products)
Healthcare Product Offerings: Prescription Drugs, Retail-Based Healthcare Clinics,Contact Lenses
CVS Market Share
1) Total Revenue - $124 Billion for 20132) Store Locations - 6,2883) Pharmacy - approximately 20% market share ($73 Billion net revenue for CVS Pharmacy Seg.) -increased 24.7% from 2011
Strategic Goals:
● Create a Well Experience● Transform the Role of Community Pharmacy● Establish an Efficient Global Platform
Walgreens Company Details
● Total Revenue - $73.23 billion*● Store Locations - 8582 nationally● Pharmacy - 19.1% of Prescription Market
Share*● $46 billion of total net revenue is prescription
sales*
Walgreens Company Details
Prescriptions, Clinics, Contact Lenses
Walgreens Company Details: Health Care Services
A Quick History...1967: CVS opens first
store with a pharmacy
1970s – 2000s: CVS acquires or purchases hundreds of
other pharmacy
stores
2006: CVS acquires
Minneapolisbased
MinuteClinic
2007: CVS stops selling cigarettes in pharmacies
2014: CVS stops selling
cigarettes in all stores
1901: Walgreens opens first store
in Chicago
1922: Introduced a malted
milkshake, which led to it
establishing ice cream
manufacturing plants
1950s: Modernizes by
switching to barcode scanning
1986: Acquires the MediMart
chain from Stop & Shop
2011: Walgreens acquires
Drugstore.com
Growing Market Share
• Aging Population
• Affordable Care Act - new customers (30mill. users by 2015)
• Chronic Disease - ½ the U.S. population suffers from 1 or more chronic disease
StrategyClinical Focus - MinuteClinic
● Pri. Care - Rx Plans - Formulary ExpansionAmerican Care Act - Smoker Health Insurance Premium Increase2
Distribution Focus - Express Scripts● Global Expansion - Foreign Alliances
Sell Tobacco - Public Educational Programs1
Brand Image: “Making Healthcare Better”
Medicaid
Brand Image: “Corner of Happy and Healthy”
Medicare
What will Walgreens do?Tobacco Market Share Health Care Market Share
CVS announces removing tobacco
from shelves by October
2014
Walgreens announces a wait-and-see
approach
Compete
Keep Tobacco (announcement)
Phase out Tobacco
Drop Tobacco & Other Harmful Products
Do NOT Compete Keep tobacco
(no announcement)
Walgreens Decision TreeROUND 1 ROUND 2February 2014 ...shortly after October 2015
Next StepsSHORT TERM: • Choose not to compete - make no
announcement - keep tobacco• Preserve revenue sales from tobacco• Monitor CVS, health care environment under
American Care Act, tobacco sales• Increase reduced risk products
Next StepsLONG TERM: • Phase out & eventually drop tobacco• Increase reduced risk products• Focus on aging population• Focus on global expansion
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