It’s been a long slog for Rite Aid.
Walgreens has been trying to buy all 4,621 Rite Aid stores since 2015. A year ago, the government stepped in and limited Walgreens to buying only 1,932 Rite Aid stores in an effort to keep Walgreens from monopolizing the market. Walgreens is still in the process of converting these Rite Aids into Walgreens-branded stores — they’re about halfway through.
This left Rite Aid with 2,689 stores and declining sales. Many of us wondered what Rite Aid’s future would be. Would they go out of business?
We got our answer yesterday when Albertsons announced they closed a deal to buy all of the remaining Rite Aid drugstores.
What does the buyout mean for you as a Rite Aid shopper?
Right now, Rite Aid stand-alone stores aren’t going away. In fact, Rite Aid stores will start offering more groceries like produce and meat, courtesy of Albertsons.
Since Albertsons will hold about 75% of the company and Rite Aid will hold about 25%, the result is a new company of sorts with minimal changes outside of sprinkling some groceries into Rite Aid and converting pharmacies inside Albertsons into Rite Aid pharmacies. (R.I.P. Sav-On.)
In fact, the CEO of Rite Aid, John Standley, will be the CEO of the new company. The current CEO of Albertsons, Bob Miller, will be the chairman of the board.
Since pharmacy shoppers tend to buy groceries while they’re waiting for prescriptions to be filled, Albertsons is hoping to see a boost in grocery sales overall due to higher foot traffic. Conversely, they’re hoping shoppers will buy more groceries when they hit up their local Rite Aid.
There’s no word on whether Albertsons will expand and continue Rite Aid’s loyalty program, wellness+, or if they’ll replace it with a new loyalty program. The main goal of the merger appears to be staying competitive with Amazon and giving Albertsons the opportunity to be publicly traded.
The buyout is Albertsons’ main line of defense against Amazon’s future in grocery.
When Amazon surprised everyone last summer and bought Whole Foods, it became clear that the e-commerce titan was making a grand entrance into grocery. In fact, as long as Amazon couldn’t get fresh food into American homes, grocery stores were relatively safe from the disruption Amazon has brought to almost every other industry.
Albertsons was already struggling to compete with Walmart’s free grocery pickup, launched in 2016 — despite the fact they’d purchased Safeway in 2014 and acquired meal-kit service, Plated, in 2016.
Additionally, Amazon announced this week that Amazon Credit Card holders can now get 5% back on all Whole Foods purchases in addition to the 5% back they receive on Amazon purchases. This is a play by Amazon to drive traffic to Whole Foods and grow their stake in grocery.
These are all reasons for traditional grocery stores like Albertsons (or supercenters like Walmart and Target) to be really worried.
Walgreens and CVS aren’t worried about what Rite Aid is doing — they’ve got all eyes on Amazon too.
Let’s face it — Rite Aid has been eating Walgreens’ and CVS’ dust for years now. The Albertsons move is a step forward for them and a reason to rest easy if you’re a Rite Aid shopper and you’ve been concerned about Rite Aid’s fate.
But truth be told, the real thing to watch is Walgreens and CVS as they prepare for Amazon’s entrance into healthcare. Last October, Amazon got approval in 12 states to become a wholesale drug distributor. This means the possibility of generic drugs with the ease of all Amazon offers.
What are Walgreens and CVS doing about it?
CVS bought the health insurer Aetna last year, absorbing all of Aetna’s customers and blowing open the possibilities for expanded clinics and pharmacy offerings. If there’s one thing Amazon can’t offer without a brick and mortar presence, it’s actual hands-on healthcare. CVS is crossing fingers and toes.
And right now, Walgreens is in takeover talks with AmerisourceBergen, one of America’s top drug distributors (Walgreens already owns 26% of the company). Walgreens is hoping to cut costs by offering more generic options to customers and thereby showing up as real competition for Amazon.
Long story short, it’s about to get real.
We will keep you posted on news regarding changes to wellness+ and any other updates to Albertsons’ plans for Rite Aid.