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Drugstore Chain to Drop 'Osco' From Its Sav-on Name

February 09, 1989|MARTHA GROVES | Times Staff Writer

Now you see Osco, now you don't.

Giving up on a 2 1/2-year effort to establish the Osco banner in the West, the Osco Sav-on chain plans to revert to just the Sav-on name for its 159 Southern California drugstores.

"We'll start changing the signs about mid-February, . . . with probably a mid-April completion," Dominic Cavallo, an executive with the chain's parent company, said Wednesday.

Through a subsidiary, American Stores operates a total of 652 Osco stores in 27 states, the nation's largest chain of super-drugstores.

Since late 1986, the company's Southern California drug chain has been operating under the combined handle of Osco Sav-on, with the expectation that the Sav-on name ultimately would be dropped.

But the company decided to go back to the old name once it became evident that it was not getting "either the sales or profitability that had been anticipated" from operating under the Osco name, said John B. Kosecoff, an analyst with the New York investment house of First Manhattan Co.

Observers said Osco Sav-on's business started slipping away in 1987, as merchandising responsibility for the chain shifted to Osco's buying offices in Chicago and regional tastes were no longer adequately addressed.

(One problem with using the name Osco in heavily Latino Southern California might not have occurred to folks back in the Midwest, one supplier of health and beauty aids noted. The Spanish word asco, pronounced like Osco, means sickening.)

"Sav-on has had a long-standing cachet in California," Kosecoff noted. "Its name is familiar. It has represented quality, local merchandising and good value for consumers."

Anaheim-based Sav-On Drugs Inc. was the Southland's leading drug chain when it was bought by Jewel Cos., a large food and drugstore company, in 1980. American Stores acquired Jewel in 1984, and the Sav-on operation soon started losing market share.

According to figures from Metro Market Studies, a research firm in Weston, Mass., the stores that now make up the Sav-on chain had nearly a 30% share of the Los Angeles-Orange County market in 1982; Thrifty had 22.1%. Recent numbers show that Osco Sav-on's share has slipped to 23.4%, whereas Thrifty has held firm with about 22.1%. (However, vendors and product brokers say Thrifty has recently picked up market share at the expense of Osco Sav-on.)

Analysts say Osco's results recently have shown a strong rebound and are expected to continue to improve under the leadership of Richard L. Scott, a highly regarded former executive of Longs Drugs who is now chairman of the American Stores drugstore subsidiary. "Hopefully, he will get it back on track," said Terence J. McEvoy, a vice president at Swergold, Chefitz Inc., a New York investment house.

Kosecoff said he expects Osco's earnings to remain relatively flat for the next two years as the company changes signs and reduces prices to lure shoppers back. "They'll be concentrating on rebuilding the consumer franchise," he said. "Consumers have been confused."

Separately, American Stores is embroiled in a legal effort to win approval to proceed with its plan to put its Alpha Beta supermarkets under the banner of Lucky Stores, which American bought last year for $2.5 billion. California Atty. Gen. John Van de Kamp has challenged the merger on antitrust grounds. The case is now in the U.S. 9th Circuit Court of Appeals.

The company has other changes in the works as well. It is in the process of moving back to its former headquarters in Salt Lake City after a short-lived stay in Irvine.

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