American Stores
American Drug Stores

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Division: American Drug Stores -
Osco Drug and Sav-on drugs
Store Count:



Osco
Sav-on
Total		 Stand-alone Drug Stores


442
310
752		 Drug Side of Combo
Jointly Operated
154
 40
194 		Pharmacy in Food Stores


48
110
158		 Total



644
 460
1,104
Retail Square
Footage:
Osco:    8.4 million
Sav-on:    5.2 million
Includes the drug side of 194 jointly operated combination stores. Does not include any footage for pharmacies operated in food stores.
Market Areas: California, Nevada, Arizona, New Mexico, Chicago, Milwaukee, Des Moines, Omaha, Indianapolis, Kansas City, New England
Marketing Orientation:
Promotional
Customer
Loyalty Cards:		 Osco Sav-on Rewards Card
Jewel-Osco Preferred Card
Lucky Sav-on Rewards Card

Strategy:

American Drug Stores is the fifth largest U.S. drug store chain based on 1997 sales. Operating under the Osco Drug and Sav-on drugs names, the division operates stand-alone drug stores, the drug side of combination stores and all pharmacies in the Company's food stores. The stores are typically larger than other industry drug store chains and the pharmacy volumes per store are among the highest in the industry. Through both its combination and free-standing formats, the division is leveraging its association with other Company divisions. American Drug Stores emphasizes customer convenience. It builds free-standing corner lot stores with quick, easy access that usually include a drive-up window for the pharmacy. It is also focusing on improving its total health-care offering to its customers. The division plans to leverage the knowledge and expertise of its pharmacists in meeting customer needs beyond simply filling prescriptions. For example, diabetes consultation is a growing area of pharmacist utilization. The division's front-end general merchandise business is also increasingly growing in its home health care focus with the expansion of the Health 'n' Home centers.



Health 'n' Home
The Company at year-end 1997 operated 24 Health 'n' Home centers within Osco and Sav-on drug stores in addition to six durable medical equipment distribution outlets. These centers offer home delivery of items such as oxygen concentrators, wheelchairs, hospital beds and infusion therapy equipment. In February 1998, the Company purchased Ultimate Home Care Company, a home medical equipment company located in the southwest. The acquisition of Ultimate added five distribution outlets to the Health 'n' Home network. The acquisition reinforces the Company's existing operations in the region as well as provides a strong base of operations throughout the California market. Expansion of operations positions the Company to better serve its managed care customers.

RxAmerica
An additional strength of the Company's pharmacy operations network is RxAmerica, a pharmacy benefits management company and prescription mail-order operation. RxAmerica, a joint venture with Longs Drug Stores, contracts with insurance companies and health plans to administer pharmacy benefits and to offer their participants a strong retail pharmacy network. The joint venture provides an effective means of competing for important third-party prescription business.

Pharmacy
American Stores operates one of the largest drug store chains in the country including a total of 1,101 pharmacies. All of the Company's pharmacies, whether in a food store or drug store, are operated by the Company's drug store management. The Company's pharmacy strategy includes focus on third-party pharmacy sales and generic substitution. Third-party (insurance, health plans, etc.) contracts generate higher prescription volumes and generics generally provide higher margins.





The Company is implementing various stages of a pharmacy technology upgrade called "Pharmacy 2001." Pharmacy 2001 is re-engineering the pharmacy work flow. The Company is better able to handle larger volumes of customers by streamlining the work flow, generating efficiencies, lowering costs and improving accuracy.

Elements of Pharmacy 2001 include "high tech" improvements such as a touch tone phone interactive voice response system, or IVR, whereby customers can place refill orders through a voice menu tree. This improves pharmacy productivity and is convenient for customers. The Company currently has IVR in approximately 770 of its drug stores.

Another element is Scan Verify, a quality control system that verifies dispensing accuracy using the latest in scanning technology. The system matches the bar code on the stock bottle with a bar code produced on the prescription label. Scan Verify is not only a sound professional and operations system, it has also proven to be an excellent marketing tool for quality control conscious third-party insurance payors.

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