Walgreens Opens Its First Store In District

Drugstore Chain Enters CVS Territory

Walgreens opened its first store in the District last week, marking the start of a major push into territory that has long been dominated by rival drugstore chain CVS.

Nationally, the two companies are locked in a battle for customers and their wallets. But in the Washington region, CVS clearly holds the upper hand. It has more than three times as many stores as Walgreens in Maryland and Virginia. It had 51 stores in the District to Walgreens' none.

Not anymore. Walgreens opened its store on 22nd and M streets NW, across the street from the Ritz-Carlton, luxury gym Sports Club/LA and -- yes -- a CVS.

Walgreens hopes to open three stores next year in the District, part of roughly a dozen planned for the Washington region over the next three years.

"This is what we consider the last big market that we're not in," said Don Wilburn, district manager for Walgreens. "This pretty much makes us complete."

Executives at the grand opening said the store was tailored to fit the needs of the community. In an apparent attempt to cater to tourists at nearby hotels, shelves near the store's cash registers displayed keychains, postcards and shot glasses emblazoned with images of the city. Wilburn said the store also carries many seasonal items and darker-colored handbags to appeal to an older, more conservative clientele.

The store also offers several distinct services, including DHL shipping kiosks. But executives said the main focus of the store is its pharmacy, which accounts for nearly 70 percent of sales companywide.

"Pharmacy has always been our primary focus," said Kermit R. Crawford, senior vice president of pharmacy services. The division "has been the heart and soul of this company from the very beginning."

The chain was founded in 1901 in Chicago when Charles R. Walgreen Sr., a pharmacist, bought the store where he worked. The company says it was the first major chain to put medicine in child-resistant containers and offer prescription labels in multiple languages. Its philosophy has been to grow through store openings rather than acquisitions, though in recent years it bought several smaller drugstore chains and health-services businesses.

That strategy is markedly different from CVS's. The company, based in Rhode Island, began as a health and beauty chain in 1963, adding pharmacy departments four years later. Much of its growth has been through acquisitions, including the purchase of Peoples Drug in 1990. Last year, CVS merged with pharmacy-benefit manager Caremark Rx, which operates drug programs for businesses, in a deal that analysts said would give the company clout to bargain with drugmakers for lower prices.

"The success of chain drug retailers has largely been tied to a company's convenient store locations and breadth of products and services," Lauren Teevan, an analyst with Fitch Ratings, wrote in a report on the industry. "As a result, the retailers' growing desires to expand their store bases to gain greater scale and purchasing power . . . have come to the forefront in recent years."

Walgreens said it began seriously looking at the region several years ago. Its philosophy of growth made it careful about jumping into the market too quickly.

"We're very conservative and patient and put lots and lots of research and analysis into finding locations that we think are perfect locations," company spokeswoman Tiffani Bruce said.

CVS spokesman Michael J. DeAngelis said his company is not worried about Walgreens' entry into the Washington market. He noted that CVS has the most 24-hour pharmacies in the area, including four in the District.

"We compete with Walgreens in many markets," DeAngelis said. "It is not unusual for CVS to enter a competitor's market or a competitor to enter our markets. This doesn't change our focus of taking care of our customers. It's business as usual."

Walgreens beat CVS in retail pharmacy sales last fiscal year, bringing in more than $50 billion, compared with CVS's $45 billion. But CVS has a few more stores, with 6,245, according to its latest quarterly report. Walgreens ranks second with 6,237 stores as of Feb. 29, including its District location.

The approximately 11,000-square-foot store is in the former site of the landmark Blackie's House of Beef, which closed on New Year's Eve 2006. Walgreens is also planning to move into another local institution next year, Yenching Palace on Connecticut Avenue, where legend has it that the final negotiations to end the Cuban Missle Crisis were held.