Competing in a Booming Industry

By WEEK Producer
By Denise Jackson

March 2, 2011 Updated Mar 2, 2011 at 11:13 PM CDT

Being branded as a specialty store often means selling products not found everywhere.
But the recession of 2007 forced many specialty stores as well as larger retailers to downsize, restructure or reinvent themselves in order to compete.
In a special report Denise Jackson takes a look at how local pharmacies are surviving against competition.

Regardless of what's happening economically one thing is certain people don't stop getting sick.
One would think the increasing demand for medicine and prescription drugs might guarantee job security at drug stores.
But as we've seen in recent years that's not always the case.

Smith Drugs owner Kathryn Connor knows about selling medicine. Her grandfather Wilbur "Webb" Smith opened the first of three drug stores in Peoria in 1938 on Knoxville Avenue and McClure.

"My grandfather originally opened stores for Charlie Walgreen and after so many years with Charlie Walgreen he decided to open up his own business," Connor said.

Connor says her grandfather's practice of helping every customer, providing credit and deliveries aided their success, a philosophy she follows now.

The big idea now is to age at home instead of going to a nursing facility so we work with families and we do certain types of packaging.

Connors family was not the only one thriving in the drug store industry. Pekin Prescription Lab opened in 1949. When John Neumann bought the business in 1974 he says times were good for pharmacy owners.

"There use to be seven pharmacies in Pekin, five were independents now there is just one," Neumann said..

While local pharmacies established a good share of the customer base, bigger chains started popping up everywhere...try to capturing a larger share of the pharmaceutical market.

Last year Peoria's largest employer Caterpillar changed it's prescription drug network policy in an effort to cut costs. That meant Caterpillar employees and retirees doing business with local pharmacies had to switch to Walgreens or Walmart.

That decision made many independent pharmacy owners sick and worried about their future.
Connor says so far it hasn't hurt Smith Drugs last remaining store.
John Neumann says business fell about 25 percent over the past year due to Caterpillar's change.

"If they really and truly wanted to look at saving money they would have come and included us all and said this is a problem we have, we need to figure out a way we can address it," he said.

With some drug stores getting a large percentage of Caterpillar business, casualties were inevitable under the company's network changes. Drug Store Owner Dave Newell closed all three of his stores including this one in Morton and after a long run, Tingleff's on Harmon Highway in Peoria shut it's doors.

In a statement Caterpillar spokesman Jim Dugan says the company is requesting proposals from pharmacies interested in joining its prescription network in 2012 after its current contracts expire.

Whether or not that means Cat could resume business with local drug stores is uncertain. Neumann wants to see that happen again.

"Give the patient the choice. You have patients that live next door to Krogers that do their shopping there. Maybe it's a person who can't travel.

In the meantime Neumann and other drug store owners like Kathryn Connor hope by diversifying, customizing orders and soliciting for more customers like nursing homes they will solidify their niche in the local market.

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