Think drugstores and the first image that will pop into your mind will be of Walgreens, right?
With operations, not only in every state of the US but also around the globe, Walgreens Boots Alliance stands amongst the topmost pharmacy companies in the world.
Here are some statistics to give you a glimpse of just how expansive the Walgreens brand is:
- One of the world’s largest purchasers of pharmaceutical and healthcare goods
- Revenue amounting to $139.5 billion FY2020
- Workforce consisting of 450,000+ members
- Presence in more than 25 countries around the world
- Extensive network of 21,000 stores and 425 distribution centers
- Delivering pharmaceuticals to 250,000+ pharmacies, doctors, and hospitals
This success wasn’t achieved overnight. In fact, Walgreens has been operating since 1901 and gradually and strategically has expanded its business around the world.
So, without further ado, let’s explore how this pharmacy company became the global giant it is today.
The Pharmacist At The Neighborhood Drugstore
Today, Walgreens drugstores are recognized by customers all over America as their go-to place for pharmaceutical needs.
But when Charles Walgreen started this business, it was just a small neighborhood drugstore – measuring no more than 50 feet by 20 feet.
In fact, Walgreen was only a pharmacist there at first. However, soon, he was opening one store after the other, laying the foundation for the large corporation.
Charles Walgreen’s Origins
As a young, athletic individual, Charles R. Walgreen was hardly dreaming of opening up drugstores and selling medicine around the country. In fact, his first love was sports.
Unfortunately, destiny had other plans for him. He cut off the top joint of his middle finger while working in a local shoe factory. Thus, at the mere age of 16, his sports dream was already over.
Soon, he found himself working at Horton's Drugstore for $4 a week. It wasn’t the brightest of starts with Walgreen leaving after a year and a half, but it was his first exposure to the industry that he would one day dominate!
Stepping Out Into The Big City
Born in Galesburg and raised in Dixon, Charles Walgreen hadn’t really seen the thriving life and opportunity of large cities. So, in 1893, determined to become a successful businessman, he stepped out of his town and into the big city of Chicago to explore the potential in the pharmaceutical industry.
Now, success wasn’t going to come overnight. Chicago already had 1500 drugstores – all doing more than well. There was no reason why customers would flock to the 1501st. If Walgreen was to achieve something, it would require a lot more than just ambition.
Working His Way Up
Walgreen had the opportunity to work at several leading pharmacists in the city, including Samuel Rosenfeld, William G. Valentine, Max Grieben, and Isaac W. Blood. This allowed him to truly understand the landscape and, most importantly, what the stores were lacking.
He realized that all these drugstores were too old-fashioned, didn’t pay attention to customer service, and had no goals to enhance their operations or invest in merchandising and store displays.
All this made one thing very clear to Walgreen: if he was to change the way pharmacists operated, he was going to have to open his own store!
The First Walgreen Drugstore
Charles Walgreen planned to purchase the store he worked in at the time: Isaac W. Blood. Although he shared a decent relationship with the owner and had often counseled him on essential matters, Walgreen could not convince Blood to lower his asking price from $4000. In fact, it was raised to $6000.
Of course, Walgreen did not have the capital to set up a store straight away. But he was determined enough to save up for the down payment, and finally, in 1901, the first Walgreen drugstore was open for business.
Putting His Ideas To Work
This particular store was located in a thriving neighborhood of Chicago's South Side. However, it was barely performing and presented Walgreen with the opportunity to really test out his ideas of how a drugstore should be operated.
He started off by lighting up the place to provide customers with a warm, welcoming ambiance. The aisles were widened, and new merchandise included pots and pans, were added. He or his partner Arthur C. Thorsen even greeted each visitor personally.
Walgreen’s customer service extended beyond the store. Customers living nearby would call to have their order delivered, and Walgreen would prolong the conversation in such a way that the order would be at their doorstep by the time they put their phone down!
Onto The Next Store
It came as no surprise when in 1909, Walgreen opened their second store in the Chicago South area. Now, the pharmacist had cracked the customer service code, but he was determined to change things around a little more to entice more customers to his stores.
Most drugstores at the time had a soda fountain that would serve cold drinks and ice creams and generate significant revenue during the summers. However, these cold items couldn’t be served in the Chicago winters.
This prompted Walgreen to come up with the idea of hot food items during winters. Although, common sense, it hadn't occurred to the 1500 other stores in the city, and Walgreens was going to capitalize on it.
Myrtle Walgreen, Charles' wife, prepared home-cooked meals, starting from simple sandwiches and soups to chicken and egg sandwiches, pies, and much more.
The hot food in cold winters venture was a huge success, enticing customers to visit both drugstores and purchase much more than simple medicine throughout the year.
The Walgreen Chain Continues To Grow
It had taken nearly eight years for the second Walgreen store to open. But the next eighteen were already covering the whole of Chicago’s South within the next decade.
The chain was growing at an exponential rate, and it was all due to its superior customer service and excellent management.
Key Takeaway 1: Understand What Makes Loyal Customers
Charles Walgreen didn't have enough funds to start his own drugstore when he came to Chicago immediately. This gave him the chance to work at different stores around the city and identify what areas he could improve upon when he opened his store.
Eventually, when the first Walgreens store opened, he designed the layout to provide customers with a welcoming ambiance, along with paying special attention to customer service and introducing a variety of merchandise. The introduction of hot food from the soda foundation and quick delivery were ideas along the same lines.
This meant that customers preferred Walgreens not just because of products, but the service and extra offerings were what kept them coming back. Resultantly, Walgreens' grew rapidly, opening up 20 stores in less than two decades and taking over the Chicago South Side.
The Milkshake & The Great Depression
Continuing on from its initial success, in 1921, Walgreens ventured outside residential areas and opened its first store in the Chicago downtown area – the 21st overall.
This was just one small achievement in which would go on to be another very successful decade defined by two very important events that shook America – Walgreens milkshake and the Great Depression!
The Immortal Malted Milkshake
Soda fountains serving customers throughout the year were a hot feature for Walgreens drugstores across Chicago. One man named Ivar "Pop" Coulson had played an integral part in their success, but the idea he was about to introduce was going to literally change the course of Walgreens.
Ice cream and milkshake were both popular items at the soda fountains. So much so that Walgreens has established its own ice cream manufacturing factories. On the other hand, malted milk drinks were just about the same at any fountain – nothing unusual or extraordinary.
One very hot summer day, Pop Coulson decided to add a scoop to his malted milkshake and then one more. This seemingly simple addition was a stroke of genius, catching on at every Walgreens store.
It made newspaper headlines and became the topic of conversation around the state as people lined up in the thousands outside Walgreens to try out this new drink.
From Chicago To Nationwide
The milkshake was making waves all over while Walgreens was opening store after store and venturing outside Chicago. By the end of 1925, it had 70+ stores driving an annual revenue in excess of $1.2 million in cities including Milwaukee, St. Louis, Minneapolis, and St. Paul.
In 1927, Walgreens also entered the East Coast with its store in New York. In the same year, the company went public, welcoming a larger influx of capital to finance its growth further.
By the end of 1929, the company had quadrupled its stores (387 outlets in 87 cities) and achieved a stunning $47 million in annual sales. By far, these two years were the best Walgreens had seen since it first started.
Response To The Great Depression
The Great Depression was a very difficult time for almost every business in the USA. However, surprisingly, Walgreens continued to expand with more than 500 stores across the country by 1930.
Moreover, the company invested in a 224,000-square-foot warehouse and laboratory along with initiating an agency system to allow other stores to sell its products.
Of course, Walgreens wasn't wholly immune to the effects of the Great Depression, experiencing a slight dip in its profits. But the company, known for its innovative methods, responded strongly.
It ran one of the largest promotion campaigns at the time – an investment of $75000. It also became the first drugstore chain to advertise its products on the radio.
Thereafter, Walgreens underwent significant developments, paying dividends on stock for the first time, acquiring licenses to sell liquor in its stores, and Charles Walgreen Jr. taking over the reins as Vice President of the company.
Walgreens’ growth was far expansive than any other drugstore had experienced before. Thus, with typical local stores, the company also introduced the concept of superstores with larger space, better fountains, and countless more offerings.
The first such branch opened in Tampa, Florida, in 1934, and very soon, superstores were springing up in almost every state. The company flourished, reporting sales worth $69 million by 1938.
However, Charles Walgreen, Sr., the man behind this incredible transformation, was ready to resign given his declining health. His son now assumed complete control, with Justin Dart becoming General Manager.
It signified the beginning of new age for the USA's largest drugstore chain.
Key Takeaway 2: Focus On Building The Brand
Walgreens had overtaken all its competitors in the pharmacy world. Of course, its affordable products and customer service had a lot to do with it, but what was the single most popular item it offered during the last decade?
The malt milkshake!
Despite being a drugstore, Walgreens’ success lay in curating an image of a brand that had much more to offer than medicine. From experimenting with food items to investing heavily in marketing campaigns, its strategies were aligned to achieve this one goal.
Hence, not only did it navigate the Great Depression with relative ease, but it also established itself as the pharmacist brand of the country.
Establishing Goodwill & Transitioning To Self Service
Carrying on its excellent run from the 1930s, Walgreens entered the 1940s by opening multiple first-of-their-kind superstores in the US. The company also merged with Marvin Drug Co, adding another 8 stores and one warehouse to its portfolio.
However, the focus this decade wasn’t just on increasing its outlets and profits. With its dominant position in the industry, the company now planned to contribute in other meaningful ways. For instance, Charles Walgreen Jr. set up a pension plan for employees with the initial contribution of $500,000 from his father’s life insurance policy.
Walgreens Stands Firm
The US was not directly involved in the first few years of WWII. Thus, American businesses hardly faced any trouble until the Pearl Harbor attack in 1941.
After that, Walgreens played a more than an active part in the war cause, with 2,500 employees joining the army and 45 even failing to return home alive. Overall, the company faced food scarcity and a slowdown of its tobacco and film products.
However, despite the challenges, the company stood firm, even setting up a not-for-profit pharmacy in the Pentagon, which President Eisenhower formally recognized post-war.
As soon as the war ended, Walgreens returned to its growth trajectory, acquiring a 44% stake in a Mexican retail and restaurant company, opening several more superstores, and expanding its headquarters in Chicago.
In the year 1948, the company recorded a staggering $163.6 million in revenue.
The Self-Service Concept
In the 1940s, Walgreens had experimented with the self-service concept in its 3 of its stores, and by 1949, it was ready to introduce it to all of its stores.
In fact, the company even stopped plans to merge with Thrifty Drug Co. because it would be difficult to transition its stores to the new system.
The first full-service store opened in 1952, and by the end of next year, there were some 22 stores in operation. It allowed the company to close down several smaller traditional stores and significantly increase its profits. By 1960, there were more self-service stores than traditional ones, and Walgreens almost doubled its earnings from $163 million to $312 million.
Key Takeaway 3: Invest In Innovation
Walgreens was no stranger to doing things the unconventional way. In fact, it had literally transformed the concept of drugstores in the country. Its self-service concept was a pivotal instrument of its innovation strategies. It allowed the company to add multiple stores and close down loss-making ones without incurring additional costs of hiring employees.
Thus, its innovative growth throughout the 1960s reaped multifold profits and strengthened its stronghold in the industry.
Looking Beyond Drugstores
A company driven by constant innovation and growth, Walgreens was already a leader in the drugstore industry. However, this did not mean that the company would allow its growth to stagnate and be content with its position.
It was time for Walgreens to venture out of the drugstore world and explore the potential in diversifying its operations.
Walgreens Super Centers
In 1962, Walgreens spent $3 million to acquire United Mercantile Inc. and along with it came 3 Globe shopping center stores and department stores – the company’s first steps outside the pharmacy industry. This takeover proved immensely successful as the chain expanded to 13 Globe Stores generating $120 million in sales.
But this was only part of the larger picture. Through these Globe Stores, the company identified immense potential in taking its superstore concept to the next level with super centers. By 1969, there were 17 super centers successfully operating in the US.
Fountains No More
Soda fountains had contributed to Walgreens success as much as the drugstore side of operations had. However, after conducting a detailed assessment of the foodservice, the company came to the conclusion that now, the fountains were not as profitable as they used to be.
Thus, Walgreens did not include them in its new store layout and gradually, began closing down existing ones from its old stores.
However, this did not mean that the company was eliminating food from its operations. In fact, the company took a full-restaurant approach this time by introducing the Villager Room and acquiring fast-food chain Corky's and Robin Hood restaurants.
At the end of the 1960s, there were close to 300 restaurants in Walgreens stores.
In 1974, it acquired 29 drugstores of the Liggett chain as well as introduced the wag’s free-standing restaurants in its stores.
Thus, in the 1970s, the company was rapidly growing and it required several key changes to be made. C.R. (Cork) Walgreen II, now the president of Walgreens decided it was time to move its corporate headquarters to Deerfield to accommodate the company’s expanding operations.
He also oversaw the establishment of a drug and cosmetics laboratory in Kalamazoo, a distribution center in Berkeley, and new plants for photo processing.
These developments paved the way for Walgreens to register $1 billion in sales in 1975.
Soon after, the company sold the Globe chain and acquired Schnuck's, grocery store operator, to turn its stores into combined supermarkets and drugstores. Walgreens also added optical centers in many of its outlets.
Hence, by 1979 the $1 billion figure had now reached $1.34 billion with the company owning 688 drugstores in the US.
Key Takeaway 4: Diversify To Explore New Growth Opportunities
Walgreens had achieved considerable success through its drugstores and seemed there was little growth to offer now.
Thus, the company spread its radar and moved towards department stores and restaurant chains. Here, its mergers and acquisitions proved quite successful, which allowed Walgreens to introduce super centers, supermarkets, and in-store restaurants.
This meant that the company could offer an extensive variety of products and services all from the same outlets. Resultantly, not only hit the $1 billion revenue mark but surpassed it by quite a margin by the end of the decade.
Refocusing On Core Strengths
Although Walgreens’ ventures outside the drugstore industry were quite successful, it was not easy to sustain them in the long run.
Moreover, changing trends and demographics created more opportunities for the company to grow within the pharmacist arena.
Thus, Walgreens went back to its core business – drugstores – to drive its growth in the 1980s and 1990s.
The agency program which had been so successful in the early decades of the century now only contributed to 2% of the company’s total profits. Thus, after nearly half a century, the company decided to discontinue it.
Moreover, Walgreen ended its partnership with Schnuck's, subsequently shutting down 27 of its optical centers. The number of in-store restaurants was also reduced and wags were given preference.
Expanding The Drugstore Business
In the 1980s, Walgreens’ acquisitions and improvements were mainly focused on drugstore chains.
- In 1980, it bought Rennehbohm chain, acquiring its seven drugstores, two clinic pharmacies, and several other businesses.
- In 1981, it added 21 Kroger SuperX drugstores to its count.
- In 1983, all of its pharmacies were equipped with Intercom computerized systems.
By 1984, Walgreen opened the door to its 1000th store in Chicago but it showed no signs of slowing down whatsoever.
In 1986, it purchased 66 Medi Mart stores and 25 Ribordy chain stores, opened 102 new stores in the country. The company also introduced mini-drugstores by the name Walgreens RxPress to offer full-service pharmacy and non-prescription items to a larger market.
Simultaneously, Walgreens continued to cut down its non-drugstore businesses by selling 87 freestanding Wag's restaurants to the Marriot Corporation.
Growth in the 1980s was rapid but the 1990s saw a much larger boom for the pharmaceutical industry as a whole and for Walgreens, it meant a store count of over 2000.
There were more people aged above 50 meaning a significant rise in the number of prescriptions and demand for medicine. However, this also meant that more firms, such as Walmart, entered the competition, and managed care health plans forced pharmacists to offer items at lower prices.
Walgreens response to the situation was to invest in its technology and stay one step ahead of the managed care trend.
In 1991, it launched point-of-sale scanning equipment across its stores, and by 1994, it integrated the SIMS (Strategic Inventory Management System). In 1997, it provided the second-generation Intercom Plus system to customers to simplify prescription refills. All these tech advancements meant that the company could process significantly more purchases in considerably lesser time, and boost its earnings.
On the managed care front, Walgreens launched its subsidiary to provide pharmacy mail service Healthcare Plus to managed care providers. Initially, the company could process 5,000 prescriptions a day, which it later increased to 7,500. The program was so successful that by 1998 the company was making close to $500 million in sales from it.
Expanding Into New Markets
While Walgreens was focusing on improving its inventory management and exploring managed health care, it did not forgo increasing its drugstore operations.
In fact, by 1995, the company has eight distribution centers in key locations.
It also opened up stores in Portland, Detroit, Kansas City, Philadelphia, and Las Vegas – markets previously unexplored. Much of this expansion was through convenient freestanding stores which eventually became the company’s preferred layout for most of its stores in the country.
During this period, Walgreens also entered the Japanese market by forming a joint venture, RX Network Inc. (RXN) with several local firms.
Key Takeaway 5: Leverage Technology To Enhance Operations
The 1990s presented pharmacy companies with a golden opportunity to expand their operations and boost their profits. But it also meant increased competition and a rise in managed health care.
Thus, to beat the competition while accounting for the managed health care trend, Walgreens focused on enhancing its systems to reduce its costs and increase its prescriptions turnover considerably.
Hence, Walgreens was able to make the most of the changing demographics which paved the way for the company to penetrate new markets and increase its earnings.
Steady Growth Into 2000s
The steady growth Walgreens had experienced in the 1990s sustained through the early 2000s as well with revenues jumping from $15.31 billion in 1998 to $32.51 billion in 2003.
During these five years, the company also reached its 3000th and 4000th store landmark, averaging nearly 350 new stores each year.
The success of the freestanding models had meant that Walgreens did not have to buy other drugstore chains to increase its store locations. Instead, it could conveniently set up its outlets with minimum costs.
Moreover, it provided Walgreens to strategically select its sites for most potential returns rather than having to deal with acquired stores in difficult/loss-making areas.
Hence, almost all of the company’s growth was organic during the 2000s and by 2005, this number was up to 5,000.
The late 1990s was also the time when the internet was rapidly growing in popularity. Thus, just as it always had embraced innovation and technology, Walgreens launched its online pharmacy, enabling online prescription-based purchase as well as providing customers access to healthcare information by Mayo Clinic.
Back To Acquisitions
While the early part of the 2000s was driven by organic growth, the company again saw more benefits in acquisitions and decided to revisit its strategy.
In 2006, it added 76 drugstores from the Happy Harry's drugstore chain. In the following year, it acquired Take Care Health Systems and Option Care. These takeovers not only increased the number of stores but also allowed Walgreens to set up in-store health clinics and specialty pharmacy and home infusion services.
By 2009, the company had a presence in all of the US’s 50 states by opening its first store in Alaska. The same year was also marked by Walgreens 7,000th store opening celebrations.
Move Towards Sustainability
In the following years, Walgreens continued to grow its operations by acquiring drugstore.com and Bioscrip's community specialty pharmacies, as well as opening its flagship stores in several cities.
Simultaneously, the company also focused on making its operations more eco-friendly by installing rooftop solar power systems and opening the first net-zero energy store in the country.
Key Takeaway 6: Realize The Right Time to Adjust Strategies
The key to Walgreens’ success in the 2000s was its ability to identify when it needed to change its strategies. Initially, it found success with minimum hassle in increasing its stores organically.
However, when it saw more potential in mergers and acquisitions it shifted its course and oversaw a series of successful takeovers.
Thus, Walgreens was able to capitalize on the best available options and significantly accelerate its growth.
For over 100 years, Walgreens was a key player in the US drugstore market and except for a few joint ventures, it had not ventured much into foreign markets.
This was all going to change with undoubtedly the most significant merger for the company in its entire history, forming Walgreens Boots Alliance.
Walgreens Boots Alliance
In 2012, Walgreens took its first steps towards the merger by buying a 45% stake in the Swiss company, Alliance Boots, Europe's largest pharmaceutical wholesaler, for $6.7 billion. The purchase included a clause for the acquisition of the remaining 55% later on.
Following through on the deal, on December 31, 2014, Walgreens completed the merger by putting up an additional $15.3 billion. Moreover, combined, the two companies now had 12,800 stores in 25 countries and a workforce of 370,000+.
This meant the newly formed company named, Walgreens Boots Alliance had access to four corners of the world, opening doors to unprecedented success.
For the next few years, Walgreens Boots Alliance experienced steady growth in its revenues as was expected.
But in 2020, the COVID-19 pandemic disrupted the global market and the company’s operations too took a significant hit. Its earnings fell by $700 million to $750 million during the stay-at-home period which continued for several months.
However, given COVID was a medical crisis, a pharma company as large as Walgreens was not going to stay down for long. Soon, with vaccines rolling out, the company was at the forefront administering around 26-34 million doses in 2021, which provided the boost Walgreens needed to return to its growth path
Key Takeaway 7: Strategic Acquisitions Accelerate Growth
Walgreens had been the leading drugstore chain in the US for the large part of the 20th century with its success carrying on to the 21st century.
But its growth had mostly been confined to the country and foreign ventures hadn’t garnered much success. As soon as the company merged to form Walgreens Boots Alliance it automatically cemented its presence in multiple continents – which could not have been achieved on its own.
Thus, today, Walgreens Boots Alliance is a global chain with few other companies in the industry to rival it.
Summary & Strategic Takeaways
From the first day that Charles Walgreen opened his drugstore in Chicago, the Walgreens brand has made a special place for itself in the hearts and minds of its customers.
Be it its superior customer service, strategic acquisitions, or the ability to change its approach when needed, Walgreens has always managed to find a way to retain its position as one of the largest pharmaceutical companies in the world.
Growth By Numbers
Over the course of its growth, Walgreens has implemented several instrumental strategies that enabled it to thrive during challenging times and establish itself as a dominating firm in the industry.
Here’s a recap of some of those strategies:
- Customer Service Is Everything
The lack of customer service in the pharmacy industry was one of the main motivating factors for Charles Walgreen setting up his own store.
From Day One, he planned out a more uplifting ambiance for the layout, paid special attention to customers’ needs, and offered something extra with new merchandise and hot food at soda fountains.
Thus, customers didn’t just come to Walgreens for medicine. They came for the whole Walgreens experience! Hence, the company generated revenues from multiple streams and accelerated its growth with its smart customer service.
- Curating A Brand Image
Before Walgreens, the idea of drugstores investing in branding and marketing was unheard of. But Walgreens had grown to a considerable size within a few years and its next natural step was to project itself as a nationwide brand.
Thus, it ran one of the largest marketing campaigns of the time, including radio advertisements. These moves helped it overcome the challenges of the Great Depression and cement its image as the go-to drugstore brand in the country.
- Stay A Step Ahead With Innovation & Technology
Throughout its history, embracing innovation and technology has been a constant theme for Walgreens.
The malt milkshake, the self-service concept, and inventory management systems, are all examples where the company was able to beat the competition, bring down its costs, and significantly boost its revenue by doing things in a modern or unconventional way.
Hence, through its innovative approach, Walgreens captured the market before others even got a chance!
- Diversification Opens New Pathways
While drugstores remained the core of Walgreens’ business, the company regularly sought opportunities from the outside the industry to support its growth.
For instance, its acquisition of Globe chain helped it enter the supermarket business which eventually allowed it to establish its own super centers and include much more than medicine at its outlets. Moreover, Walgreens invested in several food and restaurant endeavors which increased the lucrativeness of its stores.
Therefore, diversification was a way for the company to expand its target market and make Walgreens a brand with a lot more to offer.
- Applying The Right Strategy At The Right Time
Knowing when and what strategy works best for the company is the most vital strategy itself. For instance, at times Walgreens focused on organically opening up new stores to avoid hassle and select the best locations itself.
Other times, when acquisitions seemed more convenient and profitable, the company shifted its approach and even made multiple purchases within a year. Combined, the result was that the company rarely experienced a slow period in its growth.