December 2015 CBM 5

RIGHT ONTARGETWith over 7,800 stores in 44 US states, CVSpharmacies serve five million customers eachday. Annemarie Kruse finds out how it hasbeen investing in its own label beauty brands

CVS

CVS RETAIL PROFILE

CVS Health is one of the largest health andbeauty retailers in the US. The CVS groupoperates four divisions: CVS Pharmacy, which isthe second largest pharmacy chain after after theWalgreens (Walgreens Boots Alliance) chain in theUS; CVS MinuteClinic, which comprises some 900walk-in medical clinics that are usually locatedwithin CVS Pharmacy stores; CVS Specialty, adepartment that deals with patient treatments forrare and complex diseases; and CVS Caremark, aPharmacy Benefit Manager (PBM). PBMs are thirdparty companies that act as an intermediarybetween a health insurance company and theinsured individual, mostly processing and managingdrug prescription claims.

The first CVS store the acronym CVS standsfor Consumer Value Stores was founded in 1963in Massachusetts. Six years later the CVS chainwas sold to Melville Corporation. Over the nextdecades CVS expanded, acquiring smallerpharmacy and drugstore chains across the US. In1994 CVS introduced a PBM service, followed bythe introduction of ProCare in 1997 and the firstwalk-in clinic in 2000.

In 2007, CVS Corporation and Caremark RXmerged to become CVS Caremark. And in 2014CVS Caremark was renamed CVS Health inorder to highlight its pharmaceutical and medicalbackground. The CVS group has performed wellover the last years: for fiscal year 2014, CVSHealth announced group net revenue ofUS$139,367m, up 9.9%. The pharmacy retailsection accounted for turnover of $67,798m, anincrease of 3.3% compared to 2013.

CVS retail division currently operates over 7,800stores in 44 US states, the District of Columbia,Puerto Rica and Brazil. Besides the CVS Pharmacyand CVS stores, the companys retail division alsoincludes the drugstore chains Longs Drugs,Navarro Discount Pharmacy and Brazilian companyDrogaria Onofre, in addition to the online storescvs.com, navarro.com and onofre.com.br.

Fact file: CVS

Founded 1963

Address One CVS Drive, Woonsocket,Rhode Island 02895, USA

Contact telephone +1 800 746 7287

Website cvshealth.com

According to the company some five millioncustomers visit CVS pharmacies each day. Thestores sell prescription drugs, OTC medicationand supplements, beauty and personal careproducts, convenience foods, confectionery anddrinks. The majority of CVS stores are acombination of drugstore and pharmacy andthese outlets also offer basic health care serviceslike flu vaccinations. The prescription drugbusiness accounts for the majority of turnover inthe retail division.

Beauty in focusBesides the usual cosmetic and personal careretail brands, the companys proprietary beautybrands include Essence of Beauty, a bath andbody care range, the Skin+Pharmacy facial skincare range for younger and problem skin and the

CVS Phamacysturnover grew by 3.3%in 2014 to $67.8m

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6 CBM December 2015

RETAIL PROFILE CVS

nail polish brand Pop-arazzi. Just the Basics is abudget range of personal care, baby care andhousehold essentials.

Over the last decade CVS has been looking fornew ways to grow its beauty business. In 2008 thegroup launched a new store format, Beauty 360.The Beauty 360 outlets were designed to cater toa more upmarket and sophisticated clientele,offering a selection of high end and niche beautyand fragrance brands. Stores were staffed withtrained professionals offering beauty advice and arange of beauty servicesincluding mini-manicures,express facials and handmassages.

Initially CVS had highhopes for the newperfumery chain andannounced that it wouldopen 50 stores by 2009.However, competition fromestablished perfumeries suchas Ulta and Sephora as wellas the economic recessionproved to be too much and in2012 the chains 25 storeswere closed down.

However, CVS Pharmacy continues toposition itself as a leading beauty destination, withhigh quality and fashion-forward brands, whilealso offering products at affordable prices. Itcontinues to retail many designer and celebrityfragrances from brand names including WhiteDiamonds, Versace and Burberry, and still sells arange of beauty and make-up tools and accessoriesunder the Beauty 360 label.

The group also continues to invest in its beautybrands. In 2011, the company launched Nuance, abeauty range developed together with actressSalma Hayek. The product portfolio of NuanceSalma Hayek currently offers some 100 skus,including facial skin care, bath and body care, haircare, styling and colour cosmetics.

And in July 2014 CVS introduced MakeupAcademy, a 145-sku range of make-up artistinspired colour cosmetics and make-up tools.Makeup Academy features some 100 lip products

in an extensive range of shadesand textures, as well as a wideselection of false lashes andmake-up brushes andapplicators.

In bath and body care,CVS launched a natural-focused exclusive range ofEssence of Beauty productsin September 2014. TheNaturally Indulgent Bath &Body Collection, which isfree from parabens,sulphates, phthalates,petrolatum and artificial

dyes, includes two scentedlines formulated with plant extracts and essential

oils: Lavender with Rosemary Oil and Eucalyptuswith Mint Oil.

Retail relevanceCVS is considered one of the more soliddrugstore and pharmacy retailers in the US. Its direct competitors are market leaderWalgreens and Rite Aid, the third-biggest chainon the market. However, Walgreens parentcompany is now busy integrating the newinternational division into its core businessfollowing the major corporate merger with UKhealth and beauty retail group Alliance Boots inDecember 2014.

CVS Health, on the other hand, is squarelyfocusing on its home market in the existingbusiness as well as its current acquisition strategy.In 2014, the company acquired Miami-baseddrugstore chain Navarro, the largest Hispanic-owned drugstore chain in the US and one of themost important health and beauty retailers in thecountrys Hispanic community.

With the Navarro purchase, CVS is ensuringthat its retail business is reflecting currentdemographic trends in its home market. TheHispanic community is a very importantdemographic for any US retailer; CVS alreadyhas several product ranges and retail brands thatcater to Hispanic consumers, including a partialselection of the Nuance Salma Hayek portfolioas well as ethnic beauty brand Milani Cosmetics.

CVS is also pushing forward its expansion intothe mainstream pharmacy market. In July 2015,the group announced that it had acquiredTargets pharmacy and clinic business for$1.9bn. The 1,660 Target pharmacies in 47 USstates will be rebranded under the CVSPharmacy name, while Targets 80 clinics willjoin the MinuteClinic roster.

CVS finds success in ownlabel nail care Nuance, an exclusive CVS brand which wasdeveloped together with Latina actress SalmaHayek, has been one of the most successfulCVS own label brands so far. On the colourcosmetics side Nuance offers a comprehensivenail care line-up of 19 skus. The range includesa base coat, a top coatand 17 colour polishes inmuted, natural colours.Another of CVSsexclusive nail brands isPop-arazzi, a teen-oriented line-up of over70 nail polishes,including effect lacquers,sparkling top coats andfour treatment polishes.Other nail polish brandsavailable at CVS storesinclude Maybelline, Wet nWild, Sally Hansen,Essie, Earthly Delights,Revlon, Kiss, LOralParis, Max Factor, OPI,SensatioNail, Milani andCoverGirl.

With theNavarro purchase,CVS is ensuringthat its retailbusiness isreflecting currentdemographictrends in its homemarket

CVS continues toexpand rapidly, havingacquired Hispanic-owned drugstore chainNavarro in 2014 andTargets pharmacy andclinic business this year

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