Reference no: EM132307764

Title: Part III Case Study: CVS Takes Next Step in Health Push

You just need a few things, some food essentials. The grocery store is so big and would take too much time that you just can’t spare. Luckily, there is a “drugstore” on the corner, but drugstore is not an accurate term anymore because stores like CVS and Walgreens also sell food, school supplies, and makeup, in addition to health and hygiene products.

Over the last several years, a gap has been growing between the offerings and approach of drugstore giants CVS and Walgreens.

In 2014, CVS, the second-largest drugstore chain by sales, shifted their focus away from just convenience but also to health by adding “Health” to its name and, more controversially, stopping the sale of tobacco products. This caused a drop in non-pharmacy sales for the chain.

Next, the chain quietly stopped selling tanning oils or sunscreens with an SPF under 15. Plans also began to remove all foods containing trans fats before a nationwide ban went into effect.

Now, CVS is renovating its store and redesigning the layout to devote more space to nutritious foods, particularly near the checkout. One quarter of the space at the checkout will now be devoted to healthier snacks. Candy bars and gum will still be impulse items near the register, but larger packages of candy, chips, and munchies will be moved to the middle of the store. Some sodas in beverages cases are also being replaced by more water and juice options.

Stores will also include new “Trend Zones” promoting healthy eating trends such as raw, vegan, and paleo. Shelf tags are being redesigned and expanded to clearly mark dietary preferences such as “gluten-free,” “organic,” and “sugar-free.” CVS is also adding 25+ new healthy items to their Gold Emblem Above line of products, featuring foods like nuts, snacks, and drinks with no preservatives or artificial colors.

The new offerings are partly in response to the shift among American customers to five smaller meals per day, over three big meals, said CVS Senior Vice President Judy Sansone.

The changes have already been introduced in 800 CVS locations, which have seen sales rise by 2.5 percent since the renovations.

Unlike CVS, Walgreens is leaving the choice entirely up to customers, but offering rewards for making healthier selections. Walgreens stores continue to sell tobacco, though it is no longer as prominently displayed. They also still have candy and cookies at the front of the store, but are adding more healthy snack options.“How do you still give customers the choice and not tell them what is good for them, but help them make healthier choices?” the co-operating chief for Walgreens Boots Alliance asked the WSJ in an interview. “There’s a level of making things available so it’s the customer’s choice, and there’s a level of incentivizing the customer.”

Walgreens customers receive rewards through the chain’s customer loyalty program when they make healthy purchases.

1. What type of modification did CVS make to its products when they removed preservatives and artificial colors? Explain your answer and provide examples.

2. Explain some of the different categories of “new products” CVS is offering. Explain when is beneficial to expand and to shrink product categories.