GIANT EAGLE TO BRAND PHARMACIES IN DAVE'S

DAN ALAIMO / Additional reporting: Wendy Toth

PITTSBURGH - In what many see as an industry first, Giant Eagle will own, brand and operate the pharmacies in four stores of another retail banner, Dave's Supermarkets, Cleveland, in an market area where Giant Eagle is the dominant grocery chain.

The four stores are among the 18 in northeastern Ohio being sold by Ahold USA's Tops Markets, which is run by Giant Food Stores, Carlisle, Pa. Of the other 14, 13 will be Giant Eagle corporate stores, and one will be an independently owned Giant Eagle supplied by the Pittsburgh company on a wholesale basis. Giant Eagle also is Dave's wholesaler.

All 18 stores have pharmacies that will remain open while ownership changes and the stores are remodeled, according to Giant Eagle spokesman Dan Donovan. All Giant Eagle pharmacies also will offer customers the chance to earn credits in the company's fuelperks! program, he said. Giant Eagle would not reveal details about the financial arrangement with Dave's, including whether the pharmacies would be operated on a leased-space basis, he said.

"Dave's had a strong interest in the locations, but they were willing to allow us to operate the pharmacies and generate that business for Giant Eagle as a result of this acquisition," Donovan said.

"It was mutually agreed upon, and we think it could be a good relationship," said Burt Saltzman, chairman of Dave's, which is now a nine-store operation that has two existing pharmacies. "Someday it could be even more beneficial to us than one would think."

Of the four stores, there are a total of six Giant Eagles within a five-mile radius, and only one has a pharmacy, SN found through an Internet search.

The reason Giant Eagle is doing this is because pharmacy has become one of the company's top three priorities, Donovan said. These are "increasing variety and quality of our perishables; building our corporate brands; and pharmacy is the third pillar of our strategic growth," he said.

"Pharmacy is a very important business for Giant Eagle now and for the foreseeable future. We are looking for opportunities to increase that business," he said.

Running pharmacies in the buildings of other retailers is not new to Giant Eagle, as all pharmacies in Giant Eagle independent stores are run corporately, Donovan said. Giant Eagle has a total of 216 stores; 144 are corporate and 72 are independent; 112 are in Northeast Ohio. Of the corporate stores, 129 have pharmacies, while 63 of the independents have pharmacies, Donovan said. The Tops acquisition will add to this number.

No industry sources contacted by SN could confirm the existence of a pharmacy arrangement like the one Giant Eagle will have with Dave's. "It's an upside-down twist," said consultant Bruce Kneeland, president, Pharmacy Connections, Valley Forge, Pa. "I've seen the wholesalers go in behind the scenes and support the retailers [with their pharmacies], but I have not seen the wholesaler go in with their brand and take it over."

Giant Eagle has no plans to operate the existing two pharmacies of Dave's, or those of any other retailer, Donovan said, and Dave's has no plans to relinquish them, Saltzman said. "Right now we are going to keep our pharmacies. I don't see that changing unless something dramatic happens," he said.

At Giant Eagle, Donovan said, "We will absolutely monitor the success of the in-store pharmacies at Dave's with a particular interest. If this proves to be a huge success, anything is possible." All new Giant Eagle stores will have pharmacies, he added.