The SupeRx Files

In the latter years of the 1950’s, Kroger entertained the possibility of operating its own chain of drugstores. Having successfully expanded the company in the postwar era, America’s third largest grocery chain began to consider other avenues to employ their successful merchandising practices, preferably in a way that would complement their existing supermarkets while providing a means to enter new regions. A slow, deliberate process ensued as Kroger sought the ideal entry into the drugstore field.

In late 1960 the right opportunity came, and on November 16, The New York Times announced Kroger’s purchase of Plainfield, New Jersey-based Sav-On Drugs, Inc. (No relation to the west coast Sav-On drug chain.) At the time Sav-On had five stores in New Jersey – Plainfield, Carteret, North Plainfield, Watchung and Springfield and two on Staten Island, New York. All of these stores were well outside of Kroger’s existing market area.

Arguably the major factor in Kroger’s decision was the reputation of Sav-On’s president and founder, James P. Herring. Herring, a 25-year veteran of the drugstore industry at the time, had spent most of his career with the Walgreen Co., where he was a key leader in Walgreen’s successful conversion to self-service in the early 1950’s. In 1954, Herring left Walgreen to start his own company. As head of Kroger’s newly formed “SupeRx” division, Herring’s merchandising and management savvy would more than justify their confidence.

Although only one SupeRx, a Milford, Ohio unit, had been opened by August 1961, plans were unveiled to open 19 more in the following six months. Most of these were slated to be located next door to Kroger stores. In 1962, Kroger entered the drugstore business in Michigan, with the purchase of a single Owl Drug Co. store in Battle Creek. There was a strategic reason for their purchase of the Owl unit, even though four brand new SupeRx’s (Ypsilanti, Mt. Clemens, Saginaw and Plymouth) were stocked up and ready to go. Michigan law at the time mandated that drugstores operating in the state have at least 25% ownership by registered pharmacists, a move designed to protect independent operators against the onslaught of chains. Since Owl had been granted a prior exception to this law, Kroger assumed it would be accorded to them as well. Not so. In September of 1962, the Michigan Board of Pharmacy formally rejected Kroger’s application to operate the SupeRx stores. Not until December 1963, more than a year later, did the impasse end, when the Michigan Supreme Court ruled in Kroger’s favor and the license was granted.

Despite the Michigan debacle, Kroger continued to open SupeRx stores in other markets, and in November 1962, the company acquired the 18-store Gasen’s Drug Stores, Inc., a St. Louis chain. Both Gasen’s and Sav-On would continue to operate under their original names for a few years, while new stores went under the SupeRx banner. At the close of 1962, Kroger had 66 drug stores, and a year later there were nearly double that amount, 119. In addition to the (now 10) Sav-On units in the northeast, there were the 18 Gasen’s units in greater St. Louis and 91 SupeRx stores in the midwest, west and south. Kroger was becoming a national player in the chain drug business.

Throughout the balance of the 1960’s and into the early 1970’s, Kroger’s SupeRx division, as it was formally named in 1969, was an unqualified success. There were 180 stores at the end of 1965, 307 by the end of 1967, 381 in 1969 and 476 at the end of 1972. In 1970, the state-of-the-art SupeRx photo-finishing plant was opened in Cincinnati, bringing this profitable activity in-house in Kroger’s home market. One of the most prominent signs of SupeRx’s success was the ascendancy of division president (and Sav-On founder) James P. Herring to the post of Kroger’s president and chief executive officer in 1970.

When Kroger’s much-heralded Superstore program was launched in the 1970’s, SupeRx stores were a standard part of the package, opening alongside most of the gleaming new superstores, an activity that continued throughout the decade. To coincide with the Superstore openings, heavy emphasis was placed on SupeRx’s decidedly non-pharmaceutical offerings – touting SupeRx as “the place where people go to buy a TV set, a guitar, a grass skirt, a hair dryer or a hank of yarn”, as the company put it in 1972. I hope SupeRx’s buyers didn’t go too heavy into the grass skirts – at least not for the Ohio stores, that is.

With the stress on general merchandise, however, the SupeRx image had begun to blur by the mid 70’s, to the point where the stores “began looking like mini discount stores”, as later stated in Kroger’s 1983 “100th anniversary” pictorial history book. SupeRx’s identity as a pharmacy had receded in the public’s mind, and sales and profits began to slide. A strong effort to re-establish SupeRx’s “drug store” bona fides and sharpen up the marketing focus was undertaken, achieving moderate success.

By the end of the 1970’s SupeRx was back in a buying mode. In 1979, 14 central Florida stores were picked up from Cleveland-based Gray Drug Stores, Inc., bringing SupeRx’s Florida tally to 86 stores out of a companywide total of nearly 500 units. In early 1985, the company made what would be its largest acquisition, winning an intense bidding war with Rite Aid for the prize of Hook Drugs Inc., an Indianapolis concern with 320 drug stores. (SupeRx had 620 units at the time.) Hook had strongly expressed a preference for Kroger’s less intrusive management style over the potentially sweeping changes they anticipated under Rite Aid’s wing. The fact was, by this time, the SupeRx operation was badly in need of an infusion of fresh talent – a stock analyst quoted in the Wall Street Journal sharply put it that the company had “never really put together a focus that the customer has responded to”, and that the key would be to “assimilate the well-run, very profitable Hook operation into a not so well run, marginally profitable SupeRx operation”. Yow.

Indeed, a year and a half later, Kroger made the decision to spin off its SupeRx group. A new company, Hook-SupeRx, was formed to assume 700 of its nearly 900 drugstores, with the balance – mostly stores in Florida (which eventually went to Rite Aid), Alabama and Arizona, put up for sale separately.

Hook-SupeRx would become a public company in 1992, operating stores under the Hook, SupeRx and Brooks banners. (Note: Thanks to Dan for pointing out some additional banners I omitted - SuperXtra Drug World - later just called "Drug World" and Warehouse Drug, formats developed to compete with Phar-Mor and Drug Emporium, two fellow Ohio-based "discount drug warehouse store" chains that experienced rapid growth in the 80's and early 90's and are now both gone. In 1994, Hook-SupeRx operated 19 of these stores, according to an annual report quote provided by an anonymous commenter on this post.) The company struggled, due in large part to the lack of a computerized prescription-trackingsystem that would allow customers to have their orders filled at any of the chain’s stores. Two years later the company was acquired by Twinsburg, Ohio based Revco D.S. Inc., pushing Revco into the number two spot in the nation’s drug store hierarchy, squeaking past Rite Aid but well short of number one Walgreen. The Brooks stores (mostly located in New England) were sold to Jean Coutu, a Canadian firm, which would later merge with Eckerd. Coutu sold the Brooks and Eckerd stores to Rite Aid in 2007.

In 1996, Revco attempted to sell out to Rite Aid, under pressure from its co-chairman and largest investor Sam Zell (of recent Chicago Tribune fame). Because of the heavy degree of overlap between the companies’ market areas, the Federal Trade Commission sued to halt the deal. A year later, Woonsocket, Rhode Island-based CVS Corporation was successful in their attempt to buy Revco, and all stores were converted to the CVS banner.

As far as Kroger is concerned, although the free-standing drug store format has long since gone the way of the dinosaur there, in-store pharmacies (which in many of Kroger's markets would, ironically, use the name "Sav-On") would become, and still are a major part of their business.

The photo above is from 1967, the three below from the following year.