Drug Store News: Solid foundation for growth made from an old family recipe

The closer Brooks executives get to the Eckerd stores the company acquired, the more they come to like their chances. Every discussion about the future comes back to the "o-word."

To be sure, the opportunity is there for Brooks to bring the focus back to the core drug store business and greatly enhance the profitability of the Eckerd stores. But if it is going to have any chance at all to unlock that opportunity, the key will be people and culture: re-energizing and re-empowering the former Eckerd people and getting them to buy in to the Coutu/Brooks culture.

Brooks got some great real estate in the deal--the stores they bought are in great shape, with 65 percent built in the last few years. Brooks has finally broken out of New England, moving into several highly profitable markets from the Northeast down to Georgia and from the Atlantic Coast out to Pittsburgh. Brooks picked up a lot of important Eckerd assets in the deal, not the ]east of which are the former Eckerd people in the stores and in the field operations teams that come along in the package.

"There are some great people here--the talent pool is strong," Brooks-Eckerd president and chief executive officer Michel Coutu told Drug Store News. "For us the challenge is going to be refocusing everybody in the right direction. That is our responsibility--to come in and set the right vision and the right direction."

And while there is often some resistance when new management comes in with an agenda built around change, the response from Eckerd people has been extremely positive. After several months of waiting for the other shoe to drop, wondering when the stores might be sold and what would happen with their jobs, the Brooks message and vision have been very well received.

"Our job is to re-energize these stores," chief operating officer Bill Welsh explained. "They want to be re-energized. I'm telling you right now that if you go out to a store after we visit them, you'll see it. These guys are pumped. They are ready to go. They want to win."

There is a gap of almost $200 in sales per square feet between the Brooks stores and the Eckerd stores. The average Eckerd store is about 2,000 square feet bigger than the average Brooks store, but Brooks stores out-perform Eckerd stores in sales by about $300,000 per location.

You have to like Coutu's chances. The company has demonstrated a solid ability to take over marginal stores and turn them into superstars. Five Maxi Drugs, 22 Douglas Drugs, 220 Brooks stores and 80 Oscos later, the company's fortune has been built on successful acquisitions--all of those operations have been improved dramatically under Coutu's leadership.

Call it an old family recipe. Michel Coutu understands the drug store business--he grew up in it. The Coutus' pharmacy isn't just a family business, it's a family tradition. And it is a tradition built on visible, hands-on management-you live in the stores. In the first week of August, Coutu visited 45 Eckerd stores. By the end of the year, he probably will have visited several hundred more.

It's a habit that is practiced by Coutu's entire senior management team. It's part of an overriding philosophy that is a big component of its management style. "Think big; act small," senior rice president of marketing David Morocco explained. You get in the field and you roll up your sleeves, and you put your hands on it--you don't just throw money at it. After all, driving expenses up is a major concern.

One example: Eckerd owned a private jet--an unnecessary expense Brooks eventually will eliminate.

"It's a great ride--really," Morocco explained. "I drove to Providence, get there about 7:25 a.m., and by 7:30 a.m., I'm in the air. Four hours later I'm here [in Tampa]. But I'm willing to give that up. I'll give up as much as I can because I think that once you get comfortable with that kind of thing, it's not very good for the business. You need to be efficient in travel. You have to be able to just jump in the car and go out and see the stores."

While Coutu is a publicly traded company, the Coutu family owns about half of the stock. That the owners are gambling with their own money instills confidence in Brooks' employees--they have no incentive to use smoke and mirrors to persuade some securities analyst about what they're doing. At Brooks, you're in business to make money every day. People respond to that.

"Yes, we're a public company, but most of the stock is owned by the family," Morocco said. "This is what they know; this is what they do best. They don't own other businesses. They touch product; they touch stores; they touch people."

Coutu doesn't just touch people--he reaches them. There is a lot about the Coutu philosophy that people respond to. It is a culture built on entrepreneurship and empowerment. It is about conditioning people to take ownership of the stores and the operation.

"This is your store," Coutu advised the Eckerd people. "Be a customer of your own stores. Take a shopping cart, and grab a circular and shop your store like a customer. Can you find what you are looking for--is everything you saw in the circular on the shelf? Is the offering exciting?"

But it isn't about getting in peoples' faces. It's about picking the right message that motivates them, that makes them want to strap on the pads and get in the game. It's about making people want to win.

Brooks uses its data warehouse capabilities to benchmark every category in the store and every store in the chain. And it uses that information to make store managers believe, rather than rap them across the nose with their shortfalls.

"We walk up to the store manager and we say, 'So, what do you think sells in your store?'" Welsh explained. "And then we say, 'Well, suppose I tell you that your store sells more greeting cards than any other store in the company.' And then we show them the evidence. They start thinking a little bit different. They start thinking, 'Hey, I sell the most greeting cards of any store in the company.' I guarantee you the next time they walk past that greeting cards aisle, they are going to look at it a little bit more critically, think about it a little more thoughtfully and economically."

Another challenge for Brooks will be getting good people from Eckerd headquarters to join Brooks. The issue isn't the company, its values or even the financial package. Getting Floridians to give up the land of no seasons and no income tax for Warwick, R.I., isn't easy. It hasn't been and doesn't figure to get any easier going forward. And that will put a premium on talented front-office people, particularly, in areas such as merchandising. Brooks is clearly going to need some more people to make this thing fly.

One area in which the company has been successful in terms of retaining key Eckerd people has been in operations. By mid-August some reorganization had already been completed in the field operations team. The new organization will consist of four operating regions. From the Brooks side of the operation, Don Kinney, will continue to oversee New England. The group from Eckerd includes: Allen Patrick, the former Genovese executive, who will have responsibility for the New York metro area; Tim Burger, who retains responsibility for the Northeast, which will include, Pa., and the mid-Atlantic; and Enzo Cerra, who will continue to run things in the South.