London turns focus to Eastern expansion push - 2003 Annual Report: Canada - London Drugs

RICHMOND, British Columbia -- The expansion of London Drugs' holdings to include three super-sized formats in Saskatchewan is fueling speculation of a broader sweep farther east, most likely into the lucrative Ontario market.

With two stores in full swing in Saskatchewan since late 2001 and the launch early this year of another location in Regina, the 57-store private company with sales estimated at about $1.5 billion last year seems to be looking beyond a growth strategy limited to filling in its markets in Alberta and British Columbia.

Conceding that the comp any is now "solidly in Saskatchewan," Wynne Powell, London Drugs president and chief operating officer, suggested that the company was looking at new opportunities to expand its presence and share of the drug store market and become more than a regional player. While he wouldn't disclose details, Powell said the company would continue to "actively evaluate any moves farther east."

The company also is adapting its formats from the standard 32,000 square feet to smaller footprint locations to gain entry into new markets closer to its home base. This model, Powell said, is exciting in that it "opens up a whole realm of possibilities for putting stores in smaller areas, as well as more distinct niche markets." The first such test store opened its doors a year ago in Gibsons, B.C. a small coastal community of 2,000 people, and a second location is slated in a yet undisclosed market early next year.

If the test stores prove the viability of the smaller store format, it's likely that more will spring up not only in small centers, but also in downtown locations. Powell said the new prototype was designed to be a scaled-down version of a typical London Drugs outlet. "It's marginalized for size to make the best use of the space, but still offers an extensive array of products and services," he explained.

And like other big hitters in the retail sector, London Drugs continues to seek a higher profile with its pharmacy services. Over the past year, the company fine-tuned a number of programs that Powell said send a clear signal that "we're very intent on trying to take care of the wellness of our customers." One of those programs is a computer-generated medication reminder program for in-home use.

The move to a stronger professional positioning, coupled with an attempt to boost its prescription departments, which account for only about 25 percent of overall sales, is seen as an opportunity for the future, given the great pressure on Canada's health care system. Boding well now is government's acceptance of fees for consultative services. With overall health costs growing at about 12 percent annually, Powell, like others, expects his company to take on an even greater role down the road in helping government control spending.

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