CVS Health is staging a makeover that seems intent on creating an entirely new retail category in the U.S.: a national health-and-wellness drugstore chain.
The 9,600-store merchant is on a mission to transform its stores into destinations for healthcare, beauty and food with organic and natural bona fides, and is nurturing a product mix that it hopes will be known more for items like Spectrum flaxseed than Kellogg’s Fruit Loops.
The shift marks a strategic bid to capitalize on the hottest part of its business, CVS executives said during a walk through of a mock concept store in New York City on Wednesday.
Indeed, the market for preventive, health-and-wellness “self-care” products is growing three times faster than over-the-counter “sick care” items, and CVS Pharmacy is tracking similar trends “when looking at how customers are seeking more holistic and proactive solutions for health goals and concerns,” said George Coleman, vice president of healthcare, pricing and business planning for CVS.
That comes as little surprise, as the healthy-living trend has moved from the margins to the mainstream, accelerated by the growing buying power of younger consumers— namely millennials— who tend to favor products with a better-for-you edge.
Now CVS is aiming to dominate health and wellness in the mass-market retail space to differentiate from competitors.
“When looking at the market as a whole, classic, over-the-counter health products, characterized traditionally as acute symptom relief treatments, are more than 90% penetrated in the mass channel,” Coleman said. Meanwhile, only 40% of the specialty wellness-focused health products CVS Pharmacy is now expanding are available at mass retail.
CVS says it can go after a market that its retail brethren aren’t in the same position to pursue.
That’s because the chain starting earning health-and-wellness credibility when it dropped its $2 billion cigarette business in 2014. (Despite chatter at the time that competitors would follow suit, three years later, Walgreens and Wal-Mart, for one, still carry smokes.)
So “we’re pushing hard into health,” said Helene Foulkes, executive vice president, CVS Health and president of CVS Pharmacy.
CVS’s non-pharmacy retail business has been sluggish. In the most recent quarter ended February 9, same store sales decreased 0.7% from the prior year, with front store same store sales down 2.9% amid foot traffic declines. The retailer has yet to recoup the $2 billion in tobacco sales it abdicated in its front-store business.
Aiming For Wellness-Authority Status
As part of its revamp, CVS is staking a claim as a wellness authority with initiatives like the roll out of a vitamin and supplement standards program reminiscent of the Good Housekeeping Seal of approval.
Vitamins and supplements from over 100 vendors will require ingredient testing by public health organization NSF International to ensure that they adhere to health and safety standards. The idea is to “inspire confidence” in the quality of the products on CVS shelves, while keeping “bad actors” off them, Coleman said.
Today, “active nutrition” is a centerpiece of the retailer’s healthcare assortment, as it shifts its customer focus “away from muscle man to yoga mom,” he said.
Now vendors that previously turned their noses up at the chain are appearing on its shelves, such as Nativas Organics, a brand found at local health food stores.
At the same time, the retailer is sprinkling “discovery zones” into its stores that feature themed holistic solutions and educational displays tied to burgeoning areas like connected health and sleep solutions.
‘Beauty With A Purpose’
In a nod to its “beauty with a purpose” mantra, CVS has vowed to remove all parabens, phthalates and formaldehyde from its beauty and personal care house brands, which include CVS Health, Beauty 360 and Promise Organic, a decision informed by what shoppers said they wanted and input from industry experts, said Cia Tucci, vice president of store brands and quality assurance.
And in the beauty aisle, the retailer is leveraging its pharmacists’ expertise with displays that call out pharmacy-vetted solutions to common skincare concerns, from sun protection to acne.
“Incubating new trends,” showcasing hip niche lines like online brand Wunder2, and what’s buzzing on social-networks are directives that will come to life on a “trend wall” rolling out to over 2,100 CVS locations, said Maly Bernstein, divisional merchandise manager of Beauty for CVS.
This month, an exclusive Korean Beauty collection handpicked by K-Beauty expert Alicia Yoon is on display.
And CVS is making a commitment to healthy, “better-for-you” food options, which will account for about 50% of the food assortment in its stores. These include on-the-go items like raw and vegan snacks more common to specialty retailers and 27 new products from its Gold Emblem Abound store brand.
The retailer is telling its healthy-food story via displays with shelf tags that highlight products matching nutritional and dietary preferences, such as heart healthy, gluten free, non-GMO.
All told, CVS’ changes reflect 100 feet of new merchandise in health, beauty and healthier food, which meant reducing the space of down trending categories like magazines, books and greeting cards, said Judy Strauss Sansone, senior vice president of front store business, and chief merchant.
The health-focused format rolls out to 70 stores this year, and is slated to expand to several 100 more CVS locations in 2018.
The idea is to move away from “me-too products” and make CVS “a destination for health and beauty,” Foulkes said.