They must be salivating at Giant Food Inc. And for good reason. Peoples Drug Stores Inc., Giant's biggest competitor among drugstore chains in the Washington area, is about to undergo drastic changes in management and operations that could make Giant, now the region's biggest supermarket chain, its biggest drugstore chain as well.

As reported by The Washington Post last week, Peoples's new owner, Melville Corp. of Harrison, N.Y., plans to make the Alexandria-based drugstore chain a subsidiary of Melville's CVS drugstore division, a chain that operates mostly in the Northeast. To achieve the consolidation, Melville has initiated plans to do away with Peoples's headquarters organization, getting rid of at least 350 employees, including Peoples's president and veteran of Washington's chain drugstore wars, David Eisenberg.

Giant's pharmacy division, of course, is second only to Peoples in sales in the Washington market. Peoples recorded about $600 million in sales in the Washington area last year -- more than half the company's volume -- while Giant's share of the market for drugstore chains was close, at more than $500 million.

A single mistake by Melville could open the door for Giant to seize the competition by the throat and achieve a level of dominance with its food-pharmacy combination stores that it enjoys in the supermarket business. The chain drugstore business in the Washington market is a two-horse race and the slightest stumble by Melville will make Peoples just another also-ran.

Indeed, the days of the traditional drugstore chain may be numbered. The small independent neighborhood pharmacy should still be able to find its niche, but chain drugstore business is losing ground in major markets to competitors that effectively make use of the one-stop shopping concept. The convenience factor that allows a customer to shop for groceries or buy food from the delicatessen while waiting for a prescription to be filled is a strong draw.

Even though most chain drugstores sell a wide variety of merchandise other than health and beauty aids, they're competing against bigger and stronger department stores and general merchandise stores where the one-stop shopping concept is old hat by now.

"My gut feeling is {Melville and CVS} are going to open up the door further for Giant," declared an industry official, who declined to be identified because of his association with Peoples and Giant executives.

Melville may already have made its biggest mistake by forcing Eisenberg and other key members of Peoples's management team to take a hike along with 350 other employees. Eisenberg, a respected veteran of nearly 40 years with Peoples, knows the Washington market and the competition as well as or better than anyone in the business. The same obviously can't be said for the CVS managers who will take up the reins at Peoples. It may be two or three years before they really get to know this market. Eisenberg, it seems, would have been a valuable asset in helping Melville complete the transition and in maintaining Peoples's edge in the market.

"I can understand that the efficiencies of integrating the companies are important {to Melville} in today's economy," Eisenberg said, without a trace of bitterness. "A return on their investment is necessary for them. ... Hopefully they will do their homework well and continue the work Peoples has done in grooming its customers. I think CVS will do well as long as they don't stray from that credo."

To be sure, efficiency and economies of scale are important to Melville, which bought Peoples only a few months ago from Imasco Ltd. of Canada for $330 million. It remains to be seen, however, whether Melville's strategy for its Washington-area subsidiary is the right one.

Besides being very shrewd, aggressive and smart, Giant's management has built a formidable drugstore chain by taking advantage of a buy-and-plunder-or-blunder strategy that's been employed by various owners of area drugstore chains over the past 10 or 12 years. Melville, for example, is the third owner of the Peoples chain since the late 1970s. Both of Peoples's principal competitors for nearly 30 years, beginning in the 1950s -- Dart Drug Stores and Drug Fair -- also changed hands at least three times during the 1980s before Drug Fair was acquired by Rite Aid Corp. of Harrisburg, Pa., and Dart (renamed Fantle's) was forced recently to liquidate.

In the wake of all this, Giant and Safeway Stores Inc., the No. 2 supermarket chain in the Washington area, have jumped into the fray with their colossal food-pharmacy superstores and have nailed down a hefty chunk of the local drugstore market. General merchandise and discount store retailers, including K mart Corp., have also joined the competition for pharmacy customers by adding drugstore departments.

Peoples, nonetheless, controls about 44 percent of the Washington market, which for years had been recognized as one of the more competitive in the country. It still is the third-largest drugstore market, behind Los Angeles and Chicago, according to industry figures.

Its far-flung $2 billion, 800-store chain notwithstanding, CVS will have to prove itself in the big leagues once it completes the consolidation with Peoples. Described by industry sources as a chain more like Rite Aid than Peoples, "CVS is trying to understand that Washington is different from a Boston," for example, Eisenberg said.

It's going to take a lot more to keep Giant Food and the others from stealing Peoples's chickens, however. Remodeling 20 percent of Peoples's 500 stores and streamlining the merchandise mix may not be enough to prevent that from happening.

By not closing any Peoples's stores immediately and by retaining most of the 12,000-member work force -- 5,000 in the D.C. area -- CVS at least assures itself of a strong base of operations at the outset. It will also have Peoples's sophisticated distribution center in Fredericksburg, Va., and a state-of-the-art electronic scanning system that's crucial to inventory control.

Like his competitors at Giant, Eisenberg is a strong proponent of technology in support of retail operations. Peoples, as a result, is much further along than most drugstore chains in the use of electronic scanning equipment.

"We had a hell of a team here and we were turning this company around," Eisenberg said during a recent interview. "I'll go out and find another job, but it's breaking up the team, the family that we built here, that hurts.

"I hope they remain sensitive to consumer needs," he said of CVS. "If they don't, they'll just hand Giant {market share} on a silver platter."

As former New York Yankee all-star Yogi Berra once said, it could be "de'ja` vu all over again" in a still-unsettled chain drugstore market.