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Feb. 24Once considered the largest liquor retailer in the country, Walgreen Co. went dry in almost all of its drugstores about a decade ago after deciding that liquor departments were too unwieldy to manage.
Now the largest U.S. drugstore chain is reversing course. It plans to introduce beer and wine to as many Walgreens stores as possible, spurring resistance among some local communities.
The about-face comes amidst heightened competition with drugstore rival CVS Caremark Corp., which sells alcohol in more than half of its CVS stores nationwide. Those CVS stores include three of the four locations it recently opened as part of a new expansion in the St. Louis market.
Some Walgreens stores in the Metro East, where the retailer has over 20 stores, have already begun selling alcohol in the last couple of weeks and others are planning to start soon.
In Missouri, Walgreens has applied for 138 liquor licenses including more than 70 in the St. Louis area, where the retailer has about 110 local stores west of the Mississippi River. Those permits will go into effect on March 1.
Before Walgreens can start stocking alcohol, however, local municipalities also must give a green light. Some neighborhoods and cities have not-so-fond memories of loitering panhandlers and minors in the days when Walgreens used to sell alcohol.
Robert Elfinger, a Walgreens spokesman, said the need to keep up with competitors and customer demand are driving the retailer's return to liquor sales.
Unlike the extensive liquor departments that Walgreens used to have, the drugstore giant will now be offering only a limited selection of low- to mid-price wines and domestic, imported and craft beers, he said.
"We won't have fortified wines or spirits or forties things conducive to alcoholism," Elfinger said, referring to wine with added spirits and 40-ounce containers of beer.
The alcohol section will take up about 2 percent of a store's shelf space, he said. And Walgreens expects it to constitute less than 5 percent of overall sales.
But Walgreens' modest return to alcohol hasn't placated everyone. In December, the Clayton Board of Aldermen rejected a liquor license for the Walgreens at Big Bend and Clayton Road. The board expressed concern about the possibility of increased crime and traffic as well as the inability to constrain the liquor selection if Walgreens later chooses to expand the alcohol offerings.
Meanwhile, St. Louis Alderman Bill Waterhouse remembers all too vividly when Walgreens used to sell liquor at the store at McCausland and Manchester avenues.
"You had people outside begging for money, you had people sitting outside drinking drug deals, minors looking for people to buy them beer," Waterhouse recalled. "I lived close to there. It got to the point where I wouldn't let my wife or daughter go down there."
Many of those problems dissipated when alcohol went away, he said.
So Waterhouse recently filed a bill calling for a freeze on new package liquor licenses in his ward in an effort to thwart Walgreen Co.'s plan. But he doesn't think the bill will be passed in time, so he is planning to talk to the store's neighbors in the hopes they won't sign the petition that Walgreens needs for a liquor permit.
Elfinger, the Walgreens spokesman, pooh-poohed any insinuation that bringing alcohol back to stores would drive up crime. "The stores where we continue to sell alcohol are as safe as the stores that do not sell alcohol," he said.
He said Walgreens is now selling alcohol in more than 2,000 of its 7,100 stores since it began the alcohol initiative last summer. Alcohol had been available in only 200 stores before last year's decision.
"Customers and different communities have for the most part been very receptive to this," Elfinger said.
Mayor Ed Hagnauer of Granite City said he doesn't anticipate any problems related to alcohol sales at the two Walgreens in his city. Both stores are in commercial areas.
Hagnauer noted that many convenience stores and groceries also sell alcohol.
"I just look at it as normal for those types of businesses," Hagnauer said.
CHANGING TIMES
In 1990, Walgreens ranked as the nation's largest liquor outlet with combined beverage sales of more than $800 million, according to Drug Store News. Alcohol sales accounted for about 12 percent of the company's revenue.
But in the 1990s, Walgreens began phasing out its liquor departments. At the time, the retailer said liquor demand had gradually decreased and that the "cumbersome" departments regulated by complex state and local laws required too much attention from store managers.
So Walgreens decided to focus instead on more core categories like health care goods. And it added more convenience foods and expanded photo departments.
But these days, technology has made it easier and more efficient to sell alcohol, Elfinger said.
"Every city, county, state, has a different rule about when you can and cannot sell alcohol, at what time you can start, and on certain days," Elfinger said, by example. "We can program our cash registers to lock out sales at specific times when it's not allowed."
The reintroduction of beer and wine, which are relatively high-ticket items, is one way that Walgreens is trying to drive more traffic to its stores, said Jeff Jonas, an New York-based analyst with Gabelli & Co.
"They've done all right there, but they've trailed CVS," he said, adding that CVS has been outperforming Walgreens recently.
Whereas CVS has remained more focused on its staple products, Walgreens had expanded more in recent years into other retail areas such as electronics and holiday decorations, Jonas said.
"They kind of got burned with that in the recession," he said. "So they are cutting back on those and concentrating more on core business."
After growing rapidly in the last two decades, Walgreens is slowing down new store openings to a growth of about 2 percent to 3 percent a year. Now it's focused on revitalizing existing stores.
"They kind of took their eye off the operations in the existing stores," said Steven Shubitz, an analyst with Edward Jones in Des Peres.
Besides adding beer and wine, Walgreens is experimenting with its store format lowering shelves, for example, like CVS has been doing, to make items more accessible to a predominantly female clientele.
The drugstore market has come down to a two-way race between CVS and Walgreens, both of which are in strong financial positions, Shubitz said. Both tend to do well when they are in the same market and even across the street from one another in some cases, he said.
"When it comes right down to it, they basically sell the same products," Shubitz said. "It's all based on convenience. The one that is closer to your home or work is the one you go to."
CVS, which already has nine stores in the Metro East, has targeted St. Louis as one of a handful of new markets for expansion. Four new stores on the west side of the Mississippi River have opened in the last several weeks. A fifth store in Ballwin is set to open later this year.
But it hasn't been smooth sailing for CVS. The company wasn't able to get a liquor license for the new CVS at 7320 Gravois Avenue, CVS spokesman Michael DeAngelis said.
Walgreens' renewed interest in alcohol and the new CVS push locally are bound to have an impact on local liquor retailers.
But Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association, said he's not worried.
Gas stations and convenience stores offer not only a competitive price, but convenient locations, he said.
"Nobody not Walmart, Target or Walgreens can match our convenience in terms of market penetration," Leone said. "We're everywhere.."
Tim Bryant of the Post-Dispatch contributed to this report.
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