NEW YORK -- Prescriptions will play a key role in American Stores' growth in 1998, said Vic Lund, the company's chairman and chief executive officer.
Speaking here at the Donaldson Lufkin & Jenrette Food and Drug Retailing Conference, Lund said the company is looking to leverage its strength in the drug-store arena to drive sales in both food and nonfood categories this year.
American Stores, Salt Lake City, operates 805 food stores and 909 drug stores in 27 Northeastern, Central and Southwestern states under the banners Acme Markets, Jewel Food Stores, Jewel-Osco, Lucky Stores, Osco Drug and Sav-On.
About 170 stores are combination food-drug units, each of which is counted in both the food-store and drug-store totals.
Lund said American plans to incorporate more combination units in its upcoming remodels and new store constructions.
The addition of a drug store such as Sav-On to an existing supermarket, such as Lucky, increases food sales 5% to 10%, Lund said, adding that drug sales in the combination format jump as high as 40%.
In all, the company plans 87 new food stores and 70 drug stores in 1998.
The new stand-alone drug units will have drive-up prescription windows wherever possible to grab and hold prescription buyers, who form a profitable base of return customers, Lund said.
"Prescriptions are driving our drug store sales," he said. "We will offer convenience, and we will capitalize on those sales by selling food and general merchandise under the same roof."
In addition, the company plans to emphasize generic drugs, which are lower rings but generate higher gross margins.
Lund said the company's high-volume pharmacies fill as many as 1,500 prescriptions a week. Those stores will benefit the most from a new piece of technology called RX 2001, which allows customers to phone in their prescriptions and order refills using their touch-tone keypads, thus saving the pharmacists' time.
The company also plans to use consumer data collected through its frequent-shopper cards to identify combination-store customers who are exclusively food shoppers or drug shoppers and mail them money-saving coupons to get them to cross over to the other side of the store.
By mining the data and using direct mail to target specific customers, Lund said, American has been successful in reducing advertising expenditures and limiting unprofitable cherry pickers.
"The challenge isn't collecting the data," Lund told the conference. "It's how to use it. Smart marketing is the key to gaining sales and increasing ticket size."
The company is also using its direct marketing program in conjunction with national manufacturers to partner in national promotions. (Additional coverage of the DLJ conference begins on Page 1.)