Save-A-Lot, Rite Aid to Test Co-Branded Stores

ELLIOT ZWIEBACH

ST. LOUIS — Save-A-Lot here said last week it has signed a licensing agreement with Rite Aid Corp., Camp Hill, Pa., under which the drug store retailer will convert 10 Rite Aid stores in the Greenville, S.C., marketplace to co-branded locations with the limited-assortment food retailer beginning next month.

The Save-A-Lot sections will be located at the front of the Rite Aid stores, with existing pharmacies in the back and a reduced selection of health and beauty care items in between, Rite Aid spokeswoman Cheryl Slavinsky told SN.

“If we're going to put new merchandise in, we have to take something out,” she explained.

However, she declined to indicate how much space the Save-A-Lots would occupy in the drug stores, which range from 10,000 to 15,000 square feet. She said the total food offering, including fresh meat and produce, will be smaller than at a full-scale Save-A-Lot store, and the total selection of health and beauty care items will also be smaller than at a typical Rite Aid. She was unable to say how the addition of Save-A-Lot items would affect Rite Aid's current grocery offering.

Slavinsky said she could not speculate on whether the co-branding test in Greenville might lead to similar efforts in other Rite Aid geographies.

Gary Giblen, an analyst at Quint Miller & Co., New York — who follows supermarkets and drug stores — said Rite Aid personnel might face a learning curve in handling a larger number of perishables. “This may be an experiment by Rite Aid to see if it can be done,” he told SN.

“This will also require more diligence in handling and might require Rite Aid, which traditionally has tighter staffing at its stores, to broaden the employee base because handling fresh foods requires more time and labor, plus some skill,” he said.

Slavinsky said the chain already has programs in place to teach employees about handling such perishables as milk, bread, eggs and over-the-counter drugs with an expiration date.

Giblen said he doesn't believe the combination of the two formats is too much of a stretch, however: “If a combination store can work by adding nonfoods to a supermarket, why shouldn't a smaller combo work adding a supermarket to a nonfoods store?”

According to Bill Shaner, president and chief executive officer of Save-A-Lot, the new format “will provide added convenience and value to consumers” and is “an opportunity for Save-A-Lot and Rite Aid to test a co-branding strategy and the integration of Rite Aid pharmacies into our traditional Save-A-Lot grocery store model.”

Installation of the Save-A-Lot sections will begin this month, while the stores remain open. Once converted, the 10 stores will be co-branded Save-A-Lot Foods/Rite Aid Pharmacy.

The deal with Rite Aid follows the conversion in May of six El Ahorro Supermarkets in south Texas to the El Ahorro Save-A-Lot banner.

The move to expand the grocery offering at Rite Aid comes as similar efforts are under way at its larger rivals, Walgreens and CVS (see “Mixing Meals and Medicine” in the Aug. 9 issue of SN.)

Rite Aid's top three executives are former food executives — Mary Sammons, chairman, formerly of Fred Meyer; John Standley, president and CEO, formerly of Pathmark, Ralphs, Fred Meyer and Smith's Food & Drug; and Ken Martindale, chief operating officer, formerly of Smith's and Pathmark.

“It would be easier for a Sammons, Standley or Martindale to see the advantages of adding a fresh-food format than it would be for an executive with a background in drug stores only,” Giblen pointed out.

Martindale said Rite Aid chose to add Save-A-Lot to the stores “because of its strong sales record, wide selection of attractively priced exclusive brands and solid reputation for discount groceries, plus it's a model that's efficient for Rite Aid associates to operate.”

The 10 stores are part of a 16-store group serving the Greenville area that were acquired from Eckerd in 2007.