New Proof That Drug Channel Is Mastering Food

Expanding fresh foods departments. Embracing a wider range of packaged foods. Entering underserved food markets.

These are all part of the drug channel's playbook in 2011, one that borrows liberally from the supermarket side.

It's getting a lot harder for supermarkets to dismiss drug store incursions into food. Sure, drug stores still have a relatively small share of total food sales. But consider how fast that share is growing, according to SymphonyIRI data for the 52 weeks that ended June 12 (this week's SN issue is devoted to an analysis of category trends).

In numerous large categories, food sales in drug stores are advancing faster than at grocery stores. In the beer category, for example, drug store sales rose 6.9% to $1.1 billion, vs. only 1.0% growth at supermarkets to $8.4 billion. For frozen dinners, drug store volume jumped 15.9% to $68.8 million vs. only a 0.09% rise at supermarkets to $5.9 billion. And check out dog food sales, which soared 17% in the drug channel to $129.7 million vs. a decline — that's right, a decline — of 0.04% to $3.1 billion at supermarkets.

“There's an accelerating impact on the drug side,” said Susan Viamari, editor, Times & Trends, at SymphonyIRI. “Drug stores have been building out food and beverage offerings and their timing has been perfect.”

Just how perfect? Drug store efforts have been boosted by the continued falloff of the economy, as Viamari pointed out:

The big question is whether drug store momentum will continue. The answer is likely to be yes in the near-term as the economy falls under greater pressure, although a recent softening of fuel prices could work against drug stores.

For the time being supermarkets will struggle to find an Rx to battle the drug store assault. That's partly because economic trends are still friendly to drug chains, but also because drug channel operators are still determined to make their marks in food.