"Don't say drug store, say Drug Fair." This slogan, used by the Washington drug chain since the 1950s, is being abandoned as part of Drug Fair's effort to build a new image with consumers.

The company is remodeling old stores, adding new ones, expanding its traditional market area, putting new departments into its drug stores and opening new stores that don't sell drugs at all. Drug Fair shareholders were told at their annual meeting yesterday.

Symbolizing the actions is a new jingle that tells shoppers, "it's time you discovered how we're changing at Drug Fair."

The changes in the 40-year-old drug chain were discussed by President Milton L. Elsberg, who with the late Robert Gerber opened their first community drug store in 1938 in Arlington.

Elsberg, his wife Rita, who is on the board of directors' and their son Stuart senior vice president, and other members of the family now own 23.7 percent of the publicly traded company. Rose Gerber, the widow of the other founder, and her sons Myron, the chairman of the board, and Sylvan, executive vice president, control 23 percent of the stock.

Elsberg, 65, said he had no retirement plans. Management's nominees to the company's board were re-elected without opposition.

The operating changes apparently are aimed at reversing the tread in the chain's profits, which slipped from $696,000 (40 cents per share) to $226,000 (13 cents per share for the three months ended Sept. 30.

Sales were up 9.2 percent for the quarter, to $61.9 million and Elsberg told shareholders the company's recent efforts are reflected in an 11.5 percent sales gain for the four weeks ended Oct. 28. He said the company is changing its fiscal year, which had ended June 30 to the Jan. 31 year used by most retailers.

When the 1978 fiscal year began, Ellsberg said Drug Fair executives took stock of the company and "found there was some room for improvement. In many instances our attention to the day-to-day basics of our business had begun to slip."

The response was a program called "operation excellence," headed by Myron Gerber, aimed at improving housekeeping, operations, maintenance, merchandise assortments and in-stock levels.

Acknowledging, "there are still employes and stores that don't meet the high standards," Elsberg said the program is working and enabling the chain to change its marketing strategy.

Calling its customers "the most quality-conscious, service-oriented, value-minded, best-educated and most sophisticated consumers in the United States," Elsberg said, "in our opinion, none of the retail drug chains in this area have catered to their needs and desires. The major emphasis has been on price."

He said Drug Fair prices will "be competitive with anyone" but indicated the emphasis will shift away from the aggressive price competition that has made the Washington area the most competitive chain drug markets in the nation.

The chain will expand outside its traditional Washington market, Elsberg said, but will stay within a 200-mile radius of its Alexandria offices.

New stores are opening in Pennsylvania and more are planned in Virginia and West Virginia markets that are not now served, with a goal of 14 units a year for the next two years. The old pace had been five stores a year.

The company plans to remodel 150 stores in the next five years.

Although neighborhood shopping centers will be the main locations, the chain has its first mall unit in the Lakeforest Mall at Gaithersburg and is seeking additional mall units.

He said 40 additional Drug Fair stores will get 2,500 square foot Fashion Fair clothing departments, like those added to 19 stores in the past year.

Leases have also been signed for two more Wrangler Wranches, to bring that operation to 13 units.

Elsberg said the casual clothing stores are already proving profitable, although that is not yet the case with Drug Fair's other diversification effort, the Scoops ice cream parlors and Soup'r Scoops eateries.