What: CVS Health Corporation and Target Corporation announced that CVS Health is to acquire Target’s pharmacy and clinic businesses for approximately $1.9 billion. Through this agreement, CVS Health will acquire Target’s more than 1,660 pharmacies across 47 states and operate them through a “store-within-a-store” format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services.
Why it matters: After this acquisition, CVS ties, by some measures tops, Walgreens as the U.S. largest pharmacy store counted by stores with close to 8,000 stores. Consolidation has been a trend in this sector with CVS Caremark, Walgreens and Rite Aid clearly leading in store count. By acquiring the Target pharmacies CVS gains more stores to market, particularly through its circular program which is direct mailed, inserted in newspapers and also circulated in digital format.
CVS Health Corporation and Target Corporation announced that they have entered into a definitive agreement for CVS Health to acquire Target’s pharmacy and clinic businesses for approximately $1.9 billion. Through this agreement, CVS Health will acquire Target’s more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. Target’s nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction. The new clinics will be part of CVS/minuteclinic’s plan to operate 1,500 clinics by 2017. In addition, CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy.
CVS Health is committing to offering the approximately 14,000 in-store Target health care professionals comparable positions with CVS Health as part of the transition.
Portada asked Chip Weinstein, CEO of Prime Access, a NYC based agency with strong healthcare and pharma expertixe, to evaluate the deal. “What a great move this is for both Target and CVS. Target is one of the more authentic brands out there. They’ve smartly aligned with CVS and will now have a much stronger in-store offering as they move toward becoming wellness experts. This alliance will also allow them to focus on the other aspects of their business that have made them successful. CVS can now reach customers in an environment that appeals to their overall lifestyle. The integration of the two landscapes will be fascinating to watch.”
CVS’ Increasing Marketing Clout
UniWorld Group buys circulars for CVS and Minneapolis based Haworth Marketing and Media, 49% owned by WPP, is Target’s Media Buying and Planning Agency, including for the Hispanic market. In early May CVS put its media buying business, which for the past 5 years has been run by Mindshare under review. The media review follows last year’s creative search, which triggered a shift from Arnold to BBDO, and once again CVS is using Pile + Co. to manage the process. The company spent nearly US $85 million in media last year, according to Kantar Media.
With BBDO, CVS has sought to reposition itself as a health care provider, with the company last year moving to no longer sell cigarettes.The chain also decided to stop selling tobacco products. Instead, CVS is positioning itself as a leading health and beauty destination. To that end, CVS is launching a beauty elevation program across several thousand stores that enhances and personalizes the in-store experience. CVS is also refreshing 500 stores with a design that eliminates photo departments to introduce healthy food items.
Also, as part of the My CVS Store rebrand, the chain is looking at different “clusters” of demographics, such as Hispanics, to micro-target and tailor store products and messaging to them. These moves are part of a $200 million consolidation process designed to make the chain more efficient and to identify opportunities.
“This strategic relationship with Target supports the highly complementary customer base, brand and culture we share,” said Larry Merlo, CVS Health President and CEO. “When we introduced the new name for our company, CVS Health, we began a new era of growth with a broader health care focus and an appreciation of the rise of health care consumerism with consumer choice and accountability growing. This relationship with Target will provide consumers with expanded options and access to our unique health care services that lead to better health outcomes and lower overall health care costs.”
“At Target, we’ve talked a lot about the evolving preferences of our guests and this partnership demonstrates that we’re committed to putting them at the forefront of everything we do,” said Brian Cornell, Target Chairman and CEO. “By partnering with CVS Health, we will offer our guests industry leading health care services, and at the same time, sharpen our focus on elevating the way we deliver wellness products and experiences to our guests.”
Following completion of the transaction, Target guests will have access to CVS Health’s leading pharmacy care programs and medical clinic services. Pharmacy programs, including Pharmacy Advisor, Specialty Connect and Maintenance Choice, will help consumers achieve better medication adherence through both improved convenience as well as enhanced pharmacy care counseling. CVS Health has also committed to having a low-cost generic drug option available to Target’s cash-paying guests. In addition, with MinuteClinic at Target locations, Target guests will have enhanced access to high-quality affordable medical care. CVS Health customers will gain the option of an expanded, one-stop Target shopping experience, including apparel, home, fresh food and more, when seeking health care services.
Last year CVS Caremark agreed to acquire Miami-based drugstore chain Navarro Discount Pharmacy, which has a strong Hispanic customer base. The deal includes Navarro Health Services, a pharmacy that caters to patients who have complex or chronic diseases.Following the acquisition, Navarro’s 33 stores will continue to operate under the Navarro Discount Pharmacy name.
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