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tion through a practice called dumping, until the smaller companies could
no longer bear such losses and went under, ridding Rockefeller™s corpora-
tions of more competitors and freeing them to crank their rates even
higher than before without fear of a price war.
Walgreen was not at all squeamish about watching dusty, disorganized,
poorly run drugstores close their doors; but he opposed dumping as un-
necessarily predatory, believing that drugstores should succeed on their
merits, not through monopolistic means. California legislators passed a
statute called the Fair Trade Acts in 1931”which permitted manufac-
turers to set minimum prices that neither independent stores nor chains
could undercut”and other states soon followed. Walgreens supported
the measures, even though without it the chains might have taken ad-
vantage of an unregulated environment to wipe out independents,
Robber Baron“style.
Walgreen had little affection for a new wave of fly-by-night retailers
called “pine-boards,” so named because these slap-dash stores stacked their
goods on unpainted pine-board shelves, which harkened back to the worst
elements of the nineteenth-century traveling medicine shows. Like any
trend, this one had some appeal, including low prices, aggressive market-
ing, and the facade of pharmacies, though few actually had prescription de-




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partments. The last issue particularly grated on Walgreen because his
stores had always offered its customers fully stocked pharmacies, staffed
with certified professionals, from the day he opened his first store; and the
company went out of its way to maintain these departments long before
there was much economic incentive to do so.
Walgreens eagerly joined the National Association of Chain Drug-
stores, formed late in 1933, to fight the pine-board trend and even sup-
ported FDR™s National Recovery Act (NRA) of 1933 because it was
established, among other things, to monitor the practices of these pine-
board stores. A few years later, the Supreme Court eventually ruled that
the NRA was unconstitutional; but by that time, the ball was in motion,
with numerous states and professional associations working together to en-
force codes of conduct among drugstores”another step in the ongoing
professionalization of the industry.14
Walgreen came up with a way to cut through the legal red tape and un-
savory patina of unregulated snake-oil shops to help thousands of inde-
pendent pharmacists directly when he conceived of the Walgreens
Agency system in February 1929, just months before the stock market col-
lapsed. The thought occurred to him when he considered the thousands of
towns across the country that had fewer than the 20,000 people Walgreens
required to start a new store. Walgreen knew his company created its pop-
ulation formula for sound reasons, but he also knew that the small stores
in those small markets were still selling lots of merchandise”totals that
added up fast.
To tap into this neglected sector of the industry, Walgreen decided to
offer selected independent outlets in small towns great prices on over
a thousand Walgreens products (from Epsom salts to stationery); store
supplies, like napkins and signs; advice on store operations and mer-
chandising, especially for financial planning and window displays; and
the credibility and cachet that came with the Walgreens name, including
a borrowed boost from national ad campaigns. In return, Walgreens
received a relatively small but steady stream of additional income,
enhanced name recognition in new territories, and”one of those




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104 america™s corner s tore

unexpected by-products”a fantastic farm system for identifying talented
young pharmacists and managers.
To head the new program, Walgreens made a savvy selection in
Raymond E. Walker, who, as a former small-town banker from North
Dakota, seemed perfectly suited to the position”and was. Walgreens
started the Agency program in June 1929 with small stores in Cali-
fornia, Washington, and Oregon and two traveling company repre-
sentatives to help them; but the program quickly took off, fueled partly by
the small druggist™s desperate need for additional help during the
Depression.
By 1934, the nascent program had grown to 17 Walgreens representa-
tives in 33 states overseeing the performance of over 600 Agency stores,
which generated $1 million of Walgreens™ $54 million in revenue that year.
Management devoted special editions of the Pepper Pod to the Agency
stores “to provide and maintain a closer coordination of thought and ac-
tion,” “to build a bond of sincere loyalty and friendship throughout the
ever-growing organization,” and “to rear from your daily work a structure
which shall be known for all that is best in business.” To those ends, the
occasional editions included a page headed “Ideas That Work” with tips
from around the country”what we would call “benchmarking” today”
and testimonials, including a letter from Russell P. Iltis of International
Falls, Minnesota.
In 1933, a year after Iltis switched his affiliation from another chain to
Walgreens, his small store™s sales and profits doubled. He wrote:

Any druggist who may be invited to avail himself of the many oppor-
tunities of an affiliation with the Walgreen Company should by all
means consider himself honored. And if he will then follow the pro-
gram as it is laid out for him and cooperate 100 percent, capitalizing
on the almost inexhaustible amount of expert service and the expe-
rience of so rare and successful an organization, we are certain that
his success and experience at the end of a year™s time will by all means
be parallel to or succeed ours.15




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Granted, it sounds a bit Eddie Haskel“esque, were it not for Mr. Iltis™s
sincerity. He also had the numbers to back him up and plenty of small
store affiliates who agreed with him. When Agency head Raymond E.
Walker stepped down in 1950, his baby had over a thousand affiliates in
all 48 states.16
The Agency system accomplished everything it had been designed to
do, and then some. It spread the Walgreens name coast-to-coast; it saved
small stores nationwide; it brought in some additional revenue for the
company; and, under the category of unintended consequences, it also
produced dozens of future stars who would become leaders in the decades
to come”though not all of them in the drugstore industry.
Walgreens™ Agency affiliates included a humble outlet in Huron, South
Dakota, owned by Hubert Horatio Humphrey Sr. His son Hubert worked
there as a clerk during high school and later as a pharmacist before em-
barking on his political career, which led to the U.S. Senate and to the
White House as Lyndon Johnson™s vice president. “That store was the
meeting place for the whole town,” Hubert Humphrey recalled in the
1960s, when his brother Ralph was the manager. “During the Depression,
Dad canceled all his customers™ debts because he said they didn™t have any
money anyway. People would trade chickens and eggs and meat for drugs,
and we used the food at our luncheonette”25 cents for a full meal.”17
The program would reach its peak in the late 1960s with some 1,900
Agency stores, about eight times more than Walgreens owned itself at the
time. “This division was an important part of establishing the Walgreens
name across the country,” said John Rubino, who headed up the system in
the 1970s. “Mr. Walgreen™s 1929 idea served our company well.”18



walgreens™ own: from cof fee
to corn remover

Despite the Depression, Walgreens had the nerve to stretch not only hor-
izontally, across the land through its Agency system, but also vertically,




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106 america™s corner s tore

extending its connection to the customer from the factory to the counter.
The company™s line of private-label products, introduced two decades ear-
lier, grew to include over a thousand items, from Columbian coffee to cod
liver oil, hosiery to playing cards, cigars to sodium bicarbonate, and hair
brushes to bay rum.
Walgreens was so encouraged by the consistent sales growth and profits
of its store brands that, a month before Black Tuesday, the company started
building a massive 224,000-square-foot state-of-the-art building on
Chicago™s southwest side to house the company™s laboratory, factory, ware-
house, and distribution center and finished it five months later.
The tablet room was equipped to make 6 million pills a month, which
were then sent on to the bottle-filling and labeling machines, which could
process four bottles a second. At a time when many pharmacists were still
concocting their own prescriptions with mortar and pestle, this facility was
way ahead of its time. The factory could crank out 750 jars of cold cream
an hour, 3,000 pounds of talc and facial powders a day, and a million
pounds of chocolates a year.19
During the Depression, Walgreens took on the additional duty of mak-
ing Russell Stover candies, too. Russell Stover had shown an early knack
for selling sweets in the 1910s when he and a partner created the country™s
first chocolate-covered ice cream bar, which we call an Eskimo Pie today.
Stover managed to squander that fortune, however; so in 1923 he and his
wife, Clara, decided to create a line of chocolates in their modest Denver
home under the name, Mrs. Stover™s Bungalow Candies.20
The treats were a hit; but once again, the Stovers™ finances were run
aground, this time by the Depression. Walgreens decided to absorb the
company”on the strength of the product and the good name”until the
1940s, when the renamed Russell Stover Candies was ready to stand on its
own. Today it is the nation™s largest producer of boxed chocolates and re-
mains a loyal Walgreens supplier.21 Thanks partly to the factory™s double
duty, Walgreens™ chocolate production rose from 1 million pounds in 1933
to 2.25 million pounds the next year.
The factory produced enough goods of all kinds to justify the spacious




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adjoining warehouse manned by 400 employees, ready to load 10 freight
cars and 14 trucks at any one time.
Walgreens sold some of the toiletries”like shaving cream and talcum
powder”under the name Peau-Doux (pronounced “Po-Doo”), French for
“soft skin.” On the morning of one of Walgreen Sr.™s birthdays, he was
using the company™s trademark shaving cream when his two young chil-
dren surprised him with his present: a toy Boston bulldog, with character-
istically soft skin. Walgreen named him Peau-Doux and soon added his
likeness to the familiar trademark.
“It was amazing the number of products that could be developed with
our own name and to our own specifications,” Chuck said. “The number-
one thing with all of them was quality. They had to be as good as or better
than anything on the market, or else we wouldn™t put our name on
them. That was my Dad™s view: that since we™re not going to be advertising
our products heavily, they have to be the utmost in quality to get repeat
business.”22
However, the company soon found that even the popular Peau-Doux
name and logo had their limitations. When Walgreens started marketing
its own golf balls, Chuck Walgreen quickly realized “soft skin” was “a
rather foolish name to give a golf ball,” especially since the duffers they
were trying to sell to would often cut “smiley faces” and “half-moons” into
their golf balls with their errant irons. A softer golf ball skin is not what
they needed. As the company™s sundries buyer in the early 1930s, Chuck
was responsible for developing a number of company product lines, and
he had a quick-and-easy answer to the golf-ball problem: “We just
changed [the name] to Po-Do.”23 In the modern era of expensive focus
groups, test markets, and “blue ribbon panels,” it is rather refreshing to
read of a manager who had a simple idea and acted on it. Walgreen™s so-
lution allowed the golf ball to keep the essence of the good name, without
turning off any duffer who might know enough French to understand
what it meant.
Of all the products Walgreens has sold under its own name over the
years, the Po-Do golf balls, it seems, earned a spot in the nation™s heart




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more than any other. Wall Street Journal sports columnist Frederick Klein
wrote in 2000:
As a boy in Chicago, I used to dive for golf balls in the pond at the
city-owned Waveland Avenue golf course. The course being popu-
lated mostly by duffers, I always got what I came for. The prizes were
$1 balls; even a scuffed dollar ball would sometimes fetch a quarter.
When I found a new ball, it usually was a Po-Do, the ball of choice
for municipal golfers of the time. That was a mixed blessing, because
while I almost always could sell a good Po-Do, it would rarely bring
more than 10 cents. (Walgreens sold them three-for-$1 new.)
I also played golf at that time”nine holes for 25 cents”so I
wound up keeping a lot of the Po-Dos I found. Sure, I was conscious
of their plebeian status, and hitting one squarely didn™t yield the
same distance or satisfying click the dollar balls produced, but they
went pretty much where you hit them.
And the Po-Do was more than just a cheap ball. In 1941, the pro
Johnny Bulla endorsed it and went on to win that year™s Los Angeles
Open, a major PGA tour stop. Sales soared, and it became the na-
tion™s No. 1-selling ball.
Bulla . . . was quite a golfer, a runner-up in the Masters, U.S. Open,
and British Open. [He™d endorsed the Po-Do, but he never used one
in a tournament, preferring instead Walgreen™s Golden Crown, a
more expensive ball.] Walgreens and I were careful never to claim
otherwise. [Bulla did take a dozen Po-Dos out to a practice range and
drive them in front of witnesses, averaging 302 yards a drive”facts
featured in the Po-Do ads.] The wind was behind me that day and the
ground was pretty hard, but the yardage total was square.
Bulla would like to see the Po-Do come back. He thinks a good
35-cent ball would be good for golf, and for America. And”hey!”
maybe there™d be an endorsement contract in it for him.24

Walgreens discontinued the Po-Do golf ball in 1965 but brought it back
briefly in the mid-1990s. The timing couldn™t have been worse for the re-




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turn of a low-cost, low-brow golf ball. The U.S. economy and golf™s popu-
larity were both booming”the exact opposite of the conditions that

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