Walgreens embraces own-brand strategies to win customers back

Walgreens, the US pharmacy retail chain, will invest more in marketing and own-brand products to win back the pharmacy customers it lost during the prolonged focus on COVID, according to the company's recent Q4 2022 earnings call. 

 A focus on customer win-back

James Kehoe, Chief Financial Officer at Walgreens Boots Alliance, said that the chain expects an "acceleration" as the year progresses, with 50% of the projected growth to come from labour investments and "fairly sizable" marketing investments. The marketing efforts will focus on customer retention and regaining lost customers. "Frankly, we lost customers during our over-focus on COVID, and now we’ve got to win them back." 

The marketing team, he added, has defined patient outreach programmes, but the priority is to "put the labour back" and then do the outreach.

“We’ve built in, I think, US$45m incremental marketing dollars in pharmacy on this consumer engagement," he continued. "It’s very data-driven. It’s very, very focused. But, ultimately, it’s quite complex because you’ve got to reach the consumer, and they’ve lapsed, and you’ve got to convince them to come back and that our service level in the overall store has gone up.”

Leaning into “own brand” strategies

Walgreens Boots Alliance believes that “own brand” initiatives offer a big opportunity for the company to compete harder and drive profits in health and wellness categories, areas in which the brand is currently less prominent. 

“We have a lot of marketing levers. It’s not just the omnichannel and digital investments that we’ve been making over the last two years. There’s a customer value transformation programme that delivered significant margin enhancement in 2022 and that will continue into 2023,” Kehoe said on the call.

“We see owned brands being an even bigger lever going into ‘23 and ‘24 … We have strong owned brand positions in some of the health and wellness categories. But have we covered them all? No. Should we be covering them? Yes. And are they very profitable? Yes. So we’ve got a lot of plans,” he added. 

Kehoe is also confident that the brand’s proposition will stand it in good stead to navigate the economic downturn, especially a highly inflationary environment. 

“When gas prices are high, people don’t travel as much to a Walmart, they go to a Walgreens … We have an intense focus on building a much, much bigger owned-label business. We don't say we’re insulated, but we’re far more insulated than some of the other peers out there,” the CFO argued. 

[Image: Walgreens]