Walgreens Boots Alliance said Friday that Roz Brewer had stepped down as the company’s chief executive as it leans deeper into its strategy to become a health care company instead of a drug store, according to a CNBC article.
“Our Board and leadership team will intensify our focus on creating value for our customers and our shareholders while we advance the search for a successor with deep healthcare experience to lead in today’s dynamic environment,” said Stefano Pessina, Walgreens’ executive chairman.
Brewer and Walgreens were in a rough patch leading up to Friday’s announcement. Walgreens shares are down more than 32% this year as of Thursday’s close, as the company has struggled with a drop in demand for Covid testing and vaccines. It’s also seen front end retail sales for items like toothpaste and shampoo consistently fall as consumers go to competitors like Walmart and Amazon for those everyday necessities, which can be ordered online and delivered within a couple of days.
Walgreens has pursued a transition that will position the company more as a health care company than a pharmacy chain. It recently acquired Summit Health and primary-care provider VillageMD, which has opened hundreds of total clinics, including some that are adjacent to Walgreens stores.
Stated another way, Walgreens has made the decision that they no longer want to be a retailer and instead, they want to become a leader in health. The change in strategy opens all kinds of possibilities for Walgreens. In my professional opinion, this is what Walgreens should do to achieve their corporate goals:
- Sell the retail operations of their stores to Amazon, Lidl, Starbucks, PepsiCo, ByteDance, or Target. I believe Amazon is the best choice. Walgreens can continue running their pharmacies and health clinics, all retail will be operated by Amazon or another company. Note: Kroger is merging with Albertsons. Acquiring Walgreens stores isn’t an option.
- Walgreens fills around 60% of its prescriptions through automation. The company has plans to open 22 automated micro-fulfillment centers. Walgreens should outsource their supply chain and logistics operations. Another advantage of Amazon acquiring Walgreens retail store operations is that Amazon can also manage all of Walgreens supply chain needs.
- Walgreens board of directors must ask this question: Has the time come to seek a buyer for Walgreens? (I believe it has.) If so, Walgreens should contact Amazon CEO Andy Jassy as Amazon is the ideal company to acquire Walgreens.
It isn’t just Walgreens that should consider the strategy I outlined. CVS should also assess getting out of the retail business.
There are few opportunities in retail as exciting as acquiring Walgreens retail operations and logistics infrastructure. Walgreens has never been good at retail, supply chain management, or logistics. There is a significant amount of cost-savings and efficiency gains that can be achieved at the company.
