. 1
( 39 .)



>>

TLFeBOOK
america™s
corner
store




TLFeBOOK
TLFeBOOK
america™s
corner
store
Walgreens™ Prescription
for Success


John U. Bacon




John Wiley & Sons, Inc.



TLFeBOOK
Copyright © 2004 by John U. Bacon. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise,
except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without
either the prior written permission of the Publisher, or authorization through payment of the
appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers,
MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com. Requests to the
Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons,
Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best
efforts in preparing this book, they make no representations or warranties with respect to the
accuracy or completeness of the contents of this book and specifically disclaim any implied
warranties of merchantability or fitness for a particular purpose. No warranty may be created or
extended by sales representatives or written sales materials. The advice and strategies contained
herein may not be suitable for your situation. You should consult with a professional where
appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other
commercial damages, including but not limited to special, incidental, consequential, or other
damages.

For general information on our other products and services, or technical support, please contact our
Customer Care Department within the United States at 800-762-2974, outside the United States at
317-572-3993 or fax 317-572-4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print
may not be available in electronic books.

For more information about Wiley products, visit our web site at www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
ISBN 0-471-42617-2
Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1




TLFeBOOK
contents




Preface ix

Acknowledgments xiii

1 From Humble Beginnings 1
The Apple and the Tree 1
Sweet Home Chicago 7
The State of the Profession 14
Walgreen Does Chicago 22
To Live and Almost Die in Cuba 25
Walgreen Returns 27
The Most Important Merger 30
Diving In”Together 37

v




TLFeBOOK
vi contents

2 The Start of Something
Special: 1910“1929 43
On His Own 43
The Secrets of the Second Store 44
I Scream, You Scream 47
The Hot Lunch Program 48
Cultivating Leaders 50
Growing Like Topsy 52
The Pepper Pod 55
Steppin™ Out 59
Chicago in the Roaring Twenties 61
On the Lighter Side 65
Fundamental Values 69
Putting Out Fires 71
The Walgreen Creed 74
The Knight Report 75
“Absolute Dominance” 82
If They Can Make It Here 83
Read All about It 86
Chain Fight 88
The Good Life 92


3 Nothing to Fear: 1929“1945 95
Facing Fear Itself 95
Better Days Are Coming 96
Helping the Mom-and-Pop Shops 101
Walgreens™ Own: From Coffee to Corn Remover 105
Getting the Word Out 109
Damn the Depression, Full Speed Ahead! 111
Finding Time for Fun 117
The Son Also Rises 119
The Accidental Benefactor 122
Charles™s Demise 126




TLFeBOOK
contents vii

Defusing a Palace Coup 129
There™s a War On 134
Where Everyone Meets 137

4 The Postwar Era: 1945“1970 139
The Power Era 139
Mergers and Acquisitions 141
All Power to the Pharmacist 144
Partners in Health 145
Battling the Bargain Stores 149
The Self-Service Revolution 151
The Shopping Center Is Born 159
The Four-Way Test 161
Chuck™s Legacy 163


5 Reinventing the Corporation:
1970“1990 167
State of the Company 168
Looking for a Few Good Men 171
Walgreen™s Wingman 174
The Turn-Around Team 177
Killing Off Their Little Darlings 182
The Systems behind the Smiles 187
Walgreens Goes High-Tech 189
Vindication 191


6 Poised to Pounce: 1990“Future 193
“This Is Dan Jorndt, How May I Help You?” 193
Plain and Proud of It: The Anti-Enron 197
Getting the Right People Ready 207
A Good Corner Is a Good Corner 211
Passing the Torch 215
Hello, My Name Is Dave 217




TLFeBOOK
viii contents

Constant Competition 220
Walgreens™ Advantages 223
The Future Is Now 224

Appendix A
Walgreens Financial Facts 227

Appendix B
Historic Highlights 229

Notes 233

Index 249




TLFeBOOK
preface




L ate one night, Sean Smith, an eight-year-old boy living in Wilmette,
Illinois, called his mom to his room to tell her he had a sore throat.
“I think I need a prescription,” he informed her, then opened wide.
“I don™t know, honey,” she said, gazing into his open mouth. “It depends
on what kind of sore throat you have.”
“What kind needs a prescription?” he asked.
“Well, strep throat is one kind that needs a prescription.”
“Then that™s the kind I have,” he concluded, with complete confidence
in his self-diagnosis.
“How do you know?” his mom asked.
“Whatever kind needs a prescription,” he said, “is the kind I have.”



ix




TLFeBOOK
x pref ace

It happens every time. Whenever Sean Smith gets sick, he informs his
mom that he needs a prescription. No, Sean is not a junior lobbyist for the
pharmaceutical industry. But he knows that when he needs a prescription,
he gets to go to Walgreens. His mom acquiesces because she knows she can
fill his prescription, pick up some chicken soup, and grab a knit hat, all in
just a few minutes. And Sean, of course, knows Walgreens has one of the
best selections of toys around, which is enough to make young Master
Smith one of Walgreens™ most loyal customers”despite the fact that the
Smiths live three miles from Walgreens, but just across the street from an
Osco-Jewel Pharmacy.

A lot of history went into that little transaction”more than a century™s
worth. It™s easy to take such convenience and selection for granted now.
But before Walgreens came along, pharmacies didn™t have wide aisles,
bright lighting, or economical store brands; they didn™t provide self-
service, allowing customers to roam the store freely without waiting for a
clerk; and they certainly didn™t have Intercom, a computer network con-
necting the pharmaceutical databases of all 4,000-plus Walgreens stores,
making Walgreens the world™s second-largest satellite user behind only the
U.S. government itself.
Other stores, of course, pioneered customer-friendly innovations, too.
However, unlike so many of Walgreens™ long-time retailing peers”Kmart,
Montgomery Ward, and A&P, for example”Walgreens is not only surviv-
ing, it is thriving.
Walgreens was born when Charles R. Walgreen Sr. used all his savings
plus a loan from his father to buy his first store on the South Side of
Chicago in 1901. Today Walgreens™ 150,000 employees in 44 states run
more than 4,000 stores”and will run more than 6,000 stores by 2010 (all
in the United States). Walgreens sells more merchandise”$33 billion
worth in 2002”than CVS.
Walgreens™ 600,000-some shareholders have been rewarded many times
over for their investment”over 125 times, in fact, over the past three




TLFeBOOK
pref ace xi

decades, a performance that trails only that of Southwest Airlines and
Wal-Mart.
Charles Sr., however, would be heartened to learn that the company he
started over a century ago has succeeded by sticking to the basic values he
established in his first store: Put the pharmacy first, even when it™s not
making the most profit; hire people on character and promote internally

. 1
( 39 .)



>>