WALGREENS TESTS MORE PREPARED FOODS 2004-01-26 (2)

LYNNE MILLER

CHICAGO -- Making another foray into fresh-foods merchandising, Walgreens has rolled out a limited assortment of wrapped sandwiches, salads and baked goods at select stores in this market.

The products, which the company promotes as fresh, healthy and low-fat, are merchandised prominently in freestanding, three-shelf coolers at the front end of the stores, a local industry observer told SN. The coolers are stocked with about 10 to 15 products, including sandwiches, as well as fruit and vegetable salads. Banners above the coolers inform customers the items are "fresh daily." The products are priced from $1.99 to $5.99.

The products "are very consistent with what consumers have been conditioned to see in supermarkets, relative to prepared meals," said David Bishop, a director at Willard Bishop Consulting, Barrington, Ill. "They're similar to what convenience stores are bringing out when they use a third party."

In addition to the prepared-foods lineup launched last month, the pharmacy chain also installed kiosks featuring packaged bakery products -- such as bagels, muffins, cookies and croissants -- at certain stores, according to a published report.

Officials at Walgreens, headquartered in nearby Deerfield, Ill., declined to comment on the test, though it's seen as the latest effort by the drug chain to generate incremental sales with fresh foods. The operator for years has carried an assortment of perishables in refrigerated coolers, ranging at times from prewrapped sandwiches to other grab-and-go items.

The fresh-food items are not likely to steer consumers away from convenience stores, but they may spur existing shoppers to spend more money in the stores, Bishop said. The test also may be a sign the company is studying different merchandising options for perking up sales in the front end, an area that has not generated much new revenue in recent years.

"What it may indicate, longer term, is an interest to expand the store offering into additional perishable products," Bishop said. "It's not that dissimilar from what Dollar General is doing with their test stores in Hendersonville, Tenn. They've introduced refrigerated and frozen products, and found it's helped increase their transaction size substantially."

Walgreens is known for highly competitive prices on milk and other popular grocery items, a Chicago-area retailing consultant said. The fresh foods are likely to appeal to consumers who go to Walgreens on fill-in grocery shopping trips. "They've really given competition to the long lines at the grocery stores," said Diane Garber, a consultant with Insight Communications, Buffalo Grove, Ill.

"They've had great success with their current grab-and-go refrigerated foods. Everybody is eating in their cars, and doing errands. This can become an alternative to a drive-through or fast-food restaurant. When you're on an errand, it's a real time saver."

Walgreens operates 4,300 stores in 44 states and Puerto Rico.