LEADING OHIO DRUG CHAIN INCREASINGLY STOCKING GROCERY ITEMS

DAN ALAIMO

BROOK PARK, Ohio -- A regional force in deep-discount drug retailing is getting heavily into food.

In an expanded store that opened last month, Marc Glassman Inc., here, devotes more than half of its 40,000 square feet to Center Store departments, including grocery, beverages, pet food and supplies, paper goods and cleaning products.

The North Olmsted, Ohio, Marc's Deeper Discount store also devotes about 3,000 square feet to produce and 54 linear feet to dairy, and store employees said the retailer plans to bring in case-ready meats in the future.

All this is in addition to the conventional drug store departments, such as pharmacy, health and beauty care, and the company's signature close-outs area. Marc Glassman, named for its founder and chief executive officer, operates 46 Marc's stores in northeast Ohio, where it is the leader among drug chains, and seven Xpect Discount stores in New England.

While the North Olmsted store does not have the variety, the amenities or the continuity of product lines expected in a full-service supermarket -- much of its grocery stock is comprised of in-and-out deal items -- the amount of food carried alongside the usual drug store offerings gives the appearance of a combination store, said industry observers.

But, apparently, this isn't an image the company is looking for. "We are not a grocery store," a spokeswoman told SN. She noted that although the retailer's food sales are growing, the grocery items are not stocked on a regular basis, and the retailer's pharmaceutical, HBC and close-out presence still accounts for a high percentage of the company's business. The retailer declined to comment further.

"'Drug store' doesn't even seem like an appropriate word for them anymore," said Thomas Jackson, president and CEO of the Ohio Grocers Association, Columbus. "They've got everything. They've got so many SKUs [stockkeeping units] of food that I'm not sure what they are."

Chuck Cerankosky, an analyst with McDonald & Co., Cleveland, agreed, adding that Marc's niche is "a price niche.

"It's certainly another indication that the alternative format competition is out there with new boxes all the time. And that means that the best retail food chains have to remain sharp, creative [and] competitive in every aspect of their business, including quality and product selection, not to mention convenience," he said.

The amount of space Marc's gives to groceries in its North Olmsted store goes far beyond what the national drug chains are doing, which is about 800 square feet, said Todd Hale, senior vice president, Consumer Insights, ACNielsen, Schaumburg, Ill.

Hale sees Marc's strategy as an attempt to increase the frequency of shoppers' visits. The average drug store gets about 15 trips per household per year compared to 75 trips per household per year to supermarkets, he said.

The strategy "will likely allow this retailer to drive higher frequency and drive larger baskets to a much greater degree than drug retailers traditionally have. We know that other deep-discount drug operations like Phar-Mor and Drug Emporium have generated larger baskets than a traditional drug store, but that's because they are larger stores with wider offerings. It sounds like this operation is going to expand those baskets even more," Hale said.

But Marc's is just taking a page from the supermarkets' book and is a further example of the blurring of the various retail channels, these experts told SN.

"You've got Safeway selling toys and Giant Eagle really loving the video business," said Cerankosky. "Over 20 years ago, the combination food-and-drug store was infringing on the drug stores' turf, and then they started moving into some general merchandise categories. Meanwhile, other formats are doing the same thing. Look at the membership warehouse clubs -- they picked everybody off."

Seeking to add convenience, supermarkets are now adding gasoline pumps, Jackson noted. "If we've got a pharmacy and all the over-the-counter products, if we've got a full selection of food and you can buy gas there, we are really becoming a one-stopper."

Undercover Price Comparisons

To gage the value Marc's is offering its grocery customers, SN's undercover reporter set out on March 19 to compare prices at various Ohio retailers.* For the sake of consistency, all prices checked were regular prices.

Quaker Oats Oatmeal, 18-ounce box Wal-Mart $1.99

Marc's $1.68

Tops $2.29

Giant Eagle $2.29

Folger's coffee Classic Roast, 39-ounce can

Wal-Mart $4.42

Marc's $3.95

Tops $6.49

Giant Eagle $6.29

Coca-Cola products, 2-liter bottle

Wal-Mart 98

Marc's 79

Tops $1.39

Giant Eagle $1.29

Gatorade 8-pack, 20-ounce bottles

Wal-Mart $4.32

Marc's $4.98

Tops $6.99

Giant Eagle $6.99

Torengos two-pack, 5.6-ounces each

Wal-Mart $2.50

Marc's $2.48

Tops $2.99

Giant Eagle $2.99

Groceries In Drugstore Land

NORTH OLMSTED, Ohio -- Highlights of the expanded Marc's Deeper Discount store, which opened last month, include:

Beverages: 2,500 square feet

Pet food and supplies: 1,000 square feet

Cereals: 66 linear feet

Salty snacks: 126 linear feet

Snacks and miscellaneous groceries: 120 linear feet (a two-sided gondola run)

Bagged candy and gum: 60 linear feet

Paper goods: 100 linear feet combined (in two areas)

A 4,000-square-foot Center Store grocery area immediately behind the checkouts included:

Frozens: 54 linear feet of upright cases

Pastas and sauces: 48 linear feet

Canned soups: 16 linear feet

Pickles: 16 linear feet

Coffees: 16 linear feet

Cooking oils: 16 linear feet

Packaged juices: 16 linear feet

All endcaps in the checkout area of the store were stocked with Center Store grocery products:

19-ounce Progresso soups for 98 cents

10.75-ounce Campbell's soups at 4 for $3

7.25-ounce Kraft Macaroni & Cheese at 5 for $3

36-ounce Heinz Ketchup at 2 for $3

20-ounce Coca-Cola bottles (in a cooler) for 85 cents

6-ounce Bumble Bee tuna for 34 cents

20-ounce Dole pineapple chunks for 88 cents