Competitive Watch: Walgreens to Test Chilled Food

NEW YORK -- Walgreen Co. will test chilled foods at up to 12 stores this fall in a bid to become a bigger player in the growing fresh food sector, Dow Jones reported.

Company spokeswoman Tiffani Washington confirmed the test and said the fresh food initiative could help the drugstore chain eventually be seen as a "destination for tonight's meal." Walgreens stores may sell sandwiches, fresh cut fruit, soups and wraps.

While Washington said the test would be limited to 12 stores, several people familiar with the matter said it was likely occurring in about 50 locations in September in the Chicago area. These people also said Walgreens’ offering is expected to lead to a much bigger push into fresh food for the company, and in turn, Walgreens stores will likely be selling meals such as chicken marsala, macaroni and cheese and General Tso's chicken.

Watchers said the retailer has yet to sort out refrigeration and distribution issues --elements critical to any fresh food program's success, Dow Jones reported.

Washington wouldn't disclose the price range of items, but said quality and price are both important. She said the logistics of the program are also an important part of the test and are something that "any retailer getting into fresh [food] would have to address."

If executed properly, a successful rollout of a fresh program could mean a boost to the company’s same-store sales. That would be good news for the retailer, which like several of its competitors, has experienced lagging front-end results due in part to a downturn in consumer spending. Drugstores sell items such a cereal, toothpaste and over-the-counter drugs in the "front-end" of their stores, according to the report.

Walgreen Co. and several of its drug-store competitors, including CVS Caremark Corp., are boosting their food selections and retooling stores to better fit consumers' fast-paced lifestyles and need for one-stop shopping.

"Drugstores realize if they're going to survive in this marketplace, they can't be one-note songs. They need to have more things to offer consumers," said William Cross, vice president of restaurant and food brand licensing at Broad Street Licensing Group. He echoed industry sentiment that food, especially fresh and private-label packaged foods, are generally seen as a source of growth for drugstores.

Washington wouldn't confirm the length of the test, but said it will an important part of Walgreens’ learning process in the fresh business. To that end, the chain hired grocery and convenience store veteran Jim Jensen in January as divisional merchandise manager of fresh food. Jensen left Tesco PLC's Fresh & Easy Neighborhood Market chain, where he held a similar position to the one he assumed at Walgreens. Before that, Jensen worked at convenience chain 7-Eleven as a category manager, the report stated.

Walgreen Co. also completed its acquisition of New York City drugstore chain Duane Reade in April, which is partly known for its efforts in fresh food. Washington said while Walgreens was thinking about a fresh food before it acquired Duane Reade, it will take some "learnings" from the chain and likely apply them to Walgreens stores.

The company has yet to determine how the test will "evolve," she added.