Dive Brief:

• Wakefern Food will be closing underperforming pharmacies in 62 ShopRite supermarkets during the next month and transferring customer prescription files to CVS locations in the vicinity of the affected stores, a spokesperson for the East Coast retailer-owned cooperative confirmed late Monday. The company plans to continue running pharmacies at 147 ShopRite locations.
• Pharmacy support staff affected by the impending closures, which were first reported by The Philadelphia Inquirer, will be offered other positions in ShopRite stores, while pharmacists and technicians will have the chance to interview with CVS, according to Wakefern.
• Wakefern is scaling back its pharmacy operations even as it moves ahead with efforts to administer COVID-19 vaccinations. The company said neither its inoculation program nor the pharmacies distributing the shots will be impacted by the closures.

Dive Insight:

The decision by Wakefern to dismantle a substantial portion of its ShopRite pharmacy fleet follows the cooperative’s conclusion that it could not keep up with its much larger rivals in the challenging retail drugstore business.

“The pharmacy industry is highly competitive and we were unable to sustain sufficient sales despite our marketing efforts, which led to the difficult decision to close these store pharmacies,” Wakefern said in a statement. “ShopRite remains committed to delivering a wide assortment of healthy, affordable foods and wholesome meal solutions with the exceptional ShopRite value and service our customers expect.”

Neil Saunders, managing director of GlobalData Retail, said Wakefern’s decision to reduce its exposure in the retail pharmacy business is not surprising given its relatively small size.

“To make pharmacies work financially you really need scale.” Saunders wrote in an email. “This has become more of an issue over recent years as reimbursements from insurers have fallen and the bigger drugstore chains have become more aggressive in capturing customers. While a chain like ShopRite is far from small, it lacks the clout to make a real impact in the pharmacy space.”

Wakefern’s member companies collectively run more than 350 supermarkets under the ShopRite banner and several other names. ShopRite stores operated by the cooperative are located in Connecticut, Delaware, Maryland, New Jersey, New York and Pennsylvania.

Wakefern’s move to hand off a portion of its pharmacy operations to CVS follows Schnuck Markets’ decision in early 2020 to sell 99 pharmacies and prescription files from 11 other locations to the drug store chain. In 2015, Target sold the 1,672 in-store pharmacies it had been operating to CVS.

A key difference between those deals and what Wakefern has opted to do is that while CVS took over operations of the Target pharmacies and most of those run by Schnucks, the 62 ShopRite pharmacies will be leaving stores altogether.

“Pharmacies in grocers are still a driver of foot traffic. As such, ShopRite will need to double down on finding ways of drawing people into its stores,”  Saunders said. “If it can put the space vacated by the pharmacies to good and creative use then it should be able to do this.”