Big chains a headache for small drugstores
Independent shops that haven't been swallowed up are facing ruthless competition.
The pharmacy business in Southern California is cutthroat. Just ask John Tilley, the owner of four small drugstores in Downey.
Over the years, the Los Angeles-born pharmacist has seen drugstore chains such as Sav-on, Thrifty and Drug Emporium fade away. In their place are ever-larger nationwide giants such as Walgreen Co., CVS Caremark Corp. and Rite Aid Corp.
This summer, for instance, CVS agreed to buy Longs Drug Stores Corp., one of the last major regional drugstore chains. Now Walgreen has jumped in with a rival bid.
"It never, ever stops being a shark tank," said Andrew Wolf, an analyst who follows drugstores for BB&T Capital Markets. "The smaller players have gotten squeezed, their profits have gotten squeezed and at some time they decide to throw in the towel."
To keep up with the fast-changing industry, Tilley has stocked hundreds of new drugs and added a wider selection of products to the shelves at his stores, Pacific Pharmacy, Downey Plaza Pharmacy and two Zweber Apothecary shops. More recently, he's had to compete with mail-order prescription services, which have gained a strong foothold.
In the meantime, rivals try to woo away his pharmacists. The large chains court him and seek to buy him out. One even threatened to plunk one of its superstores across the street from his busiest location.
"We get offers, I would say probably not every week, but at least once or twice a month," said Tilley, 54. "Usually it's just a little feeler-type letter: 'Why don't you sell to us now while you still can make some money?' "
Many customers said they felt frustrated by the swift pace of consolidation.
Maria Sykes-Free, a Los Angeles retiree, said she longed for the days when she would get her prescriptions filled at a "small, quaint" neighborhood pharmacy.
"Pretty soon, there will just be one drugstore, one department store, one bank. People can't have their own individual businesses, is what it seems to me," said Sykes-Free, who was buying cosmetics at a Walgreens in the Miracle Mile district recently. "Everything is being gobbled up."
Longs, based in Walnut Creek, Calif., became the latest prize. With 526 stores, mostly in California but also in Hawaii, Nevada and Arizona, Longs developed a significant presence in key markets that its bigger rivals envied.
The chain announced in August that it had agreed to sell itself to CVS for about $2.7 billion. But a month later, Walgreen jumped in with an eleventh-hour, $2.8-billion offer.
