ROSAUERS REACHES OUT

JANICE ZOELLER

SPOKANE, Wash. -- When Grant MacLean first became the pharmacy manager at a Rosauers supermarket in 1974 in Kalispell, Mont., the pharmacy wasn't doing that well. So instead of staying inside the pharmacy waiting for customers to come by, MacLean went out to where the grocery customers were. He started bagging groceries at the checkout, even helping carry out groceries to the parking lot, all the while talking up the pharmacy and handing out pharmacy coupons.

"The idea was to get across that we have a pharmacy," and to encourage grocery customers "to give us a try," recalls MacLean.

Twenty years later, as buyer/merchandiser for pharmacy as well as health and beauty care, MacLean still believes in reaching out to customers to build the pharmacy business.

"The most important ingredient in the success of a pharmacy is that pharmacist working there," says MacLean. He says he encourages his 35 pharmacists to talk to customers and counsel them on their medications. "Patient counseling builds loyalty," he explains.

The 16-store supermarket chain based here operates 15 food stores with pharmacies in Washington, Idaho and Montana, and one supermarket without a pharmacy in Oregon. Rosauers, an employee-owned company since July 1990, got into the pharmacy business in 1970 when it purchased pharmacies that were located alongside its supermarkets, later relocating these pharmacies inside the food stores.

MacLean views the pharmacist-patient relationship as so important that he says he loses sleep when one of the company's pharmacists leaves. "The customers' loyalty to the pharmacy can disappear quickly." Fortunately, he says, Rosauers has had a low turnover rate "because we treat our pharmacists well," paying half of their pharmacy association dues, for example.

MacLean tries to hire pharmacists who are "outgoing and patient-oriented. I look for personality. I joke with them. I want to know, what are they like? How do they relate to people? I'll talk to someone who knows them.

"If the pharmacist develops a relationship with a customer, price is further down on the list" of factors influencing choice of a pharmacy, MacLean observes. "If choice of a pharmacy was solely based on price, the lowest price would prevail, and that's not the case," he says. "Someone will always beat you on price if that's all you have.

"Supermarket pharmacy is an ideal format," MacLean maintains. "We offer convenience, price and a pharmacist. We will win on convenience and we can compete on price."

Rosauers is about to bring new meaning to the idea of convenience of a pharmacy in a food store. Its Moscow, Idaho, store is being remodeled to include a drive-up window for the pharmacy.

Harking back to its beginnings it pharmacy, Rosauers recently purchased a Drug Fair in Moscow, located next to its supermarket. That store is being remodeled and the pharmacy relocated to the front right corner. But this time, Rosauers is adding a new twist. Expected to be completed by the fall, this pharmacy with its drive-up window will be something of an experiment for Rosauers. If successful, it may be added to other stores.

MacLean explains that while a pharmacy inside a supermarket is convenient for grocery customers, it is not ideal for a patient coming from the doctor's office with a prescription, the occasional prescription drug customer or the harried mother with small children in the car. This device will make the pharmacy convenient for customers who don't shop the grocery store or can't at that particular time, he explains.

"Typically supermarkets fill more prescriptions for maintenance drugs," says MacLean. "The supermarket is usually not as easy to get in and out of quickly. We want to go after both segments of the market." One factor that influenced the timing of Rosauers' decision is that Deerfield, Ill.-based Walgreens has recently expanded into this market with a smaller format that has drive-up windows.

Besides, getting a customer to try the pharmacy through the drive-up window could later result in that customer coming in and shopping the whole store, says MacLean.

MacLean and Rosauers are breaking down physical barriers elsewhere as well to make communicating with the pharmacist easier and more convenient. The Rosauers pharmacy at Heritage Village in Spokane, for example, will be remodeled soon to include a sliding glass window to improve pharmacist-patient communication.

Most of Rosauers' pharmacies are in the front on the left side of its supermarkets, which average between 40,000 and 55,000 square feet. Location of the pharmacy, or at least its prominence, matters, MacLean says. "Customers aren't going to search the store for the pharmacy the way they might for produce."

The Rosauers pharmacy in Libby, Mont., was "out of sight and out of mind" in its location at the back of the store, MacLean recalls, despite being in a high-traffic corridor between ice cream and beer. Four years ago, the pharmacy was moved to the left front corner. It soon grew from having the worst distribution of sales of all the chain's pharmacies to among the highest, and remains the chain's fastest growing pharmacy in prescription sales.

Even when it's not possible to move the pharmacy, much can be done to increase the pharmacy's visibility. The pharmacy needs to stand out in the store, MacLean says. Creating such a perception doesn't necessarily require a lot of space but can be achieved with facades and signs that can be seen throughout the store.

To help build business in a new store, Rosauers will look to hire a pharmacist who already has strong ties in a community, sometimes buying an existing business as well. "If you have the right person, it can eliminate two years of building the business," MacLean says.

This strategy worked well at Rosauers' newest store in Lewiston, Idaho, which opened in November. Rosauers bought an independent pharmacy and hired the owner, who brought many customers with him. "It helped us build a relationship with patients more quickly," MacLean says. "There's traffic to that department."

Rosauers passed up an opportunity to buy a Drug Fair located near one of its supermarkets in Spokane, where it has a dominant market position. Instead, the chain hired one of the drug store's pharmacists and blanketed the area with coupons. The effort has boosted the pharmacy business.

Rosauers also offers coupons chainwide that tie in pharmacy to other departments in the store on about a monthly basis. Typically, the coupons are for food giveaways with a new or refilled prescription. "We tried a coupon for $10 off on a prescription, but it didn't really impress customers that the price of a prescription dropped to $89.99 from $99.99," MacLean says.

Customers seem to prefer "something more tangible," MacLean says. Items tried have included: flour, sugar, milk, a quart of orange juice, oatmeal, bread, eggs, milk, tuna fish and ice cream. The pharmacies also offer coupons good for a free cup of coffee while waiting for a prescription to be filled.

"We have a lot of corporate support for pharmacy," MacLean says, who reports to Bill Haraldson, executive vice president and chief operating officer. "It's been a gradual process of selling the value of pharmacy to management as we have increased our contribution to the bottom line. Once you make pharmacy profitable, then you get the respect," he says.

"Management sees the value of pharmacy in the loyalty that customers have for the pharmacy and the increased health and beauty care sales," MacLean says. "Pharmacy is not the little stepchild anymore. It's a very important segment of the supermarket. Pharmacy can be a draw itself. We can help the store," he adds.

The customer loyalty that's needed to build the business "is hard to get, but it's also hard to lose," MacLean says. "One of our district managers said that if we make a grocery customer mad, he or she will continue to shop the pharmacy. But if it's a pharmacy customer, that person will quit the whole store."

Poor relations with store management "are not a problem anymore," MacLean says. Trainees for the chain's store manager program spent one to two weeks of their six months training in the pharmacy department. Pharmacy managers are included in department manager meetings.

The volume of prescriptions at Rosauers pharmacies "is higher all the time," MacLean says, and exceeds the industry average of 3% to 4%. "We beat produce in sales," he says. Pharmacy is a growing market and it will continue to grow with the aging of the baby boomers, he adds.

"We encourage pharmacist interaction in recommending over-the-counter medications as well," MacLean says. "We want customers to ask our pharmacists for advice. We want to create a perception that the customer is in a drug store, and use the pharmacy to its maximum," he explains.

In every pharmacy store, the HBC department is adjacent to the pharmacy.

It wasn't always so. MacLean made that change when he first came into the office in 1980. When he was given responsibility for HBC in 1990, MacLean altered the layout of the department, putting health aids close to the pharmacy to make it easier for patients to seek the pharmacist's counsel.

MacLean, who also oversees the chain's HBC departments, plans an aggressive effort to market Aleve (naproxen sodium), the new OTC pain reliever. "We will have the product on the shelves as quickly as possible. We want to be as close as we can to No. 1 in our market," he says. "We'll have displays at the pharmacy. Our pharmacists will help educate customers that the product is available without a prescription."

Pharmacy at Rosauers continues to be a profit center, though less so than it once was. With 52% third-party business, Rosauers, like retail pharmacy operations around the country, has seen margins squeezed by falling reimbursement rates and the growth of third-party share of prescriptions.

To help it compete for third-party plan contracts, Rosauers recently joined Super Net, the pharmacy network formed by supermarket operators.

MacLean says he applauds the efforts of the National Association of Chain Drug Stores to form a network of retail pharmacies. "It will be open to all pharmacies. Pharmacy would process claims and earn decent reimbursement. It could be our salvation."

Right now, MacLean says, "we are at the mercy of [third-party plan payers and administrators]. They are squeezing the life out of pharmacy. Independent pharmacies and small chains are being driven out of business and it's not because of prices or the way they take care of customers."

The development of various formularies by managed care organizations has put pharmacists "in a no-win situation," MacLean says. "We have to call the doctor if the product he writes for is not on the formulary. There is no benefit for the patient or for the pharmacy. Only the third party benefits."

Additionally, managed care organization agreements with generic drug companies vary, forcing retailers to carry different lines of the same generic drugs.

MacLean worries about the eventual impact if there's not adequate compensation for pharmacist services. "If pharmacy doesn't make any money, corporations will naturally try to cut costs and personnel, and then the quality of pharmacy care will deteriorate."

MacLean worked in an independent pharmacy for a year after graduating from Washington State University College of Pharmacy in Pullman before joining Rosauers. "I thought supermarket pharmacies would be a growing segment," he says. "I enjoy the traffic in the stores. It makes my job [of building up the pharmacy business] easier."

Unusual for a pharmacist, MacLean has moved steadily into the merchandising side of the supermarket business. In addition to being responsible for the operation of Rosauers' 15 pharmacies and 16 HBC departments, he is also the buyer/merchandiser for candy and for paper goods. "I like the opportunity of growing beyond pharmacy," he says.

Rosauers, too, seems intent on growing beyond the traditional confines of a supermarket pharmacy operation to meet the needs of prescription drug customers, not just grocery customers, for convenience.