So Long, Longs

Longs was the last regional chain drugstore

Victoria Colliver, Chronicle Staff Writer
Thursday, August 14, 2008
source

The Longs era is over.

The sale of Longs Drugs Stores Corp., the 70-year-old chain based in Walnut Creek, to the East Coast's giant CVS Caremark Corp., spells the end for the last major regional chain drugstore in the country. After the transaction closes at the end of the year, CVS will slowly start converting the stores, and the Longs name will fade into retail history.

We've seen it before: Emporium Capwell. Thrifty Payless. Joseph Magnin and I. Magnin. But that doesn't necessarily salve the frustration of consumers, who bemoan the loss of their neighborhood drug store, or the 22,000 Longs employees who face an uncertain future.

CVS officials say they have no plans to close stores, particularly in Northern and Central California, where the Rhode Island chain has virtually no presence. And, they say CVS intends to retain as many employees as possible and continue Longs' tradition of catering to regional tastes in some locations.

But some Longs customers remain loyal. "Longs is the type of store in summer that's going to carry 50 different types of sun hats and have a garden department. I would go to Longs to buy gifts because they had a lot of neat stuff," said Kent Carthey, 65, of Pleasanton. "I don't think I'd go to CVS for that."

Longs, with its 521 stores in California, Hawaii, Nevada and Arizona making $5 billion in annual sales, has for years been considered a takeover target by a larger player like CVS. CVS posted sales of $85 billion, and the acquisition will make it the largest chain in country, with 6,800 stores in 41 states.

The Longs name will be retained only in Hawaii because of its high name recognition and the geographical separation.

"We love this company, but we believe to continue to provide the service and care our customers expect from Longs and continue to provide great career opportunities for our people and earn our shareholder return, this was the best course of action," Longs' chief executive, Warren Bryant, said Wednesday. "It was necessary to merge with a national player because increasingly we compete with national players."

Chain set back on course
Bryant took the helm of Longs in 2002, when the chain's profits were tumbling, and set it back on course by refocusing its merchandising on health, beauty and pharmaceutical products rather than the expansive array available in many stores. Bryant said some stores still provide customized offerings, such as Portuguese products in Turlock (Stanislaus County).

Bryant, whose future with the company is uncertain, said CVS has assured him it intends to retain as many employees as possible. Longs employs 21,000 store workers, and about 900 people work in the Walnut Creek headquarters. "We really worked hard to join with a company that has (the) same commitment to the community and its employees that Longs has," he said.

Longs pharmacy customers will be able to pick up their prescriptions at CVS stores once the transition takes place, both companies said.

Walgreens commands the greatest pharmacy market share in the Bay Area metropolitan area, which includes Alameda, Contra Costa, Marin, San Mateo and San Francisco counties. According to Metro Market Studies, an Arizona firm that tracks drugstore market share, Walgreens has 38.1 percent of the region's market share, with 121 stores, but Longs comes in second at 28.3 percent and 83 stores. Rite Aid's 46 stores make up 10.6 percent of market, followed by Safeway and other players such as Target, Costco and independent pharmacies.

Independent pharmacies were not overly concerned about being pushed out of business, since CVS is taking over locations previously occupied by a major chain. But officials from groups representing independent pharmacies say their biggest fear centers on drug reimbursements.

CVS last year acquired Caremark, one of the three largest pharmacy benefits managers in the country. The little-known entities, called PBMs, are third-party players that negotiate with drugmakers for prices on behalf of employers, insurers and other purchasers.

Independents worry large PBMs will have so much control over prices and terms they will dictate how much the smaller stores get paid for drugs. "As the market gets more dominated by CVS and Caremark ... the independent pharmacies are really on the outside looking in with no leverage whatsoever," said John Norton, spokesman for National Community Pharmacists Association.

As part of the purchase, CVS will also acquire Longs' PBM, RxAmerica.

CVS will also have to contend with a cultural difference between Longs and its other stores. At CVS' East Coast locations, 70 percent of store revenue comes from pharmacy sales while just 30 percent come from other retail products. At Longs stores, it's a 50-50 split.

CVS owns 3% of stores
CVS spokesman Mike DeAngelis said CVS owns just 3 percent of its stores, while Longs owns nearly half. He said CVS over time might convert the stores to leasing arrangements, but intends to continue operating in those locations.

Such assurances don't assuage customers who like the garden center at the oversize 51st Street Longs in Oakland, or Rossmoor residents who go to the Walnut Creek store because it caters to their needs.

Native Californian Chris Harrison lived for two years in the mid '90s in Washington, D.C., where CVS dominates the drugstore scene. She said she'll miss Longs, and already feels nostalgic about ritual trips to the store with her mother.

"I have long-standing brand loyalty to Longs," said Harrison, 39, of Mill Valley. "It's not that I wouldn't shop at CVS but, given the choice, I'd go to Longs."

Longs Drug Stores
Original name: Longs Self Service Drugs

First location: 4037 Piedmont Ave., Oakland (1938)

Company slogans: "Longs - Where Everybody Saves" (1938); "Take the Longs Way Home" (1970s and '80s); "The Best Drug Store in Town" (1990s); "Live Healthy. Live Happy. Live Longs" (current, since 2001)

Quote from founder Joe Longs: "We go through this life but once. If there's anything we can do, or help we can give, let us do it now, because we may not pass this way again."

Source: Longs Drug Stores Corp.
70 years of Longs
1938: Brothers Joe and Tom Longs open first store on May 12 on Oakland's Piedmont Avenue.

1954: Longs opens its first store in Hawaii, on March 29 in Honolulu.

1971: Longs shares become listed on the New York Stock Exchange, the same year the company reports sales of $169 million from its 54 stores.

1980: Longs enters Nevada.

1982: Sales from its 162 stores exceed the $1 billion mark.

1993: Longs spends $23.9 million to acquire Bill's Drugs, a 20-store chain concentrated in Northern California.

1996: Longs forms Integrated Health Concepts, a pharmacy benefit management company.

1997: Longs and American Drug Stores Inc. (parent company of Albertson's) merge pharmacy benefit managers to create RxAmerica.

1999: Longs pays $150 million to buy 32 Rite Aid stores in California.

2003: Longs initiates first full-scale store remodel.

2007: In February, Longs announces plans to close 30 stores.

2008: Longs purchased by CVS Caremark Corp. for $2.9 billion. Deal announced Aug. 12.

Source: Longs Drug Stores