The drugstore sector is about to see a lot less competition now that Walgreens has announced a major acquisition of more than 2,000 Rite Aid locations within the next six months.
The net effect to you? A likelihood that you’ll be paying higher prices as a result of that reduced competition.
That’s going to make comparison shopping more important than ever if you want to save money!
Merger & acquisition fever in the pharmacy world
Walgreens had originally hoped to take over Rite Aid entirely through a buyout. But that deal was nixed by federal regulators because of antitrust concerns.
Instead, Walgreens will now purchase 2,186 Rite Aid locations, three distribution centers and accompanying inventory for $5.175 billion in cash. All locations be converted to operate under the Walgreens banner over time.
Rite Aid’s portfolio consists of some 4,600 locations across the country, according to Reuters. So even though Rite Aid will now dramatically reduce its national footprint, the drugstore will still retain ownership of approximately 2,400 of its existing stores.
Perhaps the biggest loser in this deal is Fred’s. The regional pharmacy chain hoped to buy 1,200 Rite Aid locations as part of a proposed divestiture. The divestiture would have been a condition of Walgreens’ full buyout of Rite Aid. But now Fred’s won’t get to acquire any Rite Aid locations, since plans for a full buyout have been scrapped.
Pharmacy chains are ubiquitous yet costly
The three national drugstore chains — CVS, Rite Aid and Walgreens — have more than 23,000 locations across the country and already charge high prices for a lot of purchases. To allow Walgreens to gobble up Rite Aid entirely would have created a duopoly and further limited competition.
For a sense of just how high the prices at drugstores can be versus traditional supermarkets, we turn to ConsumerWorld.org‘s comparison below.
While prices change from week to week, the average price of a basket of goods they shopped in the metro Boston area were 36% higher at the drugstore chains.
These drugstores have become such a fixture of suburban life that some busy intersections even have all three chains represented!
Most of those locations dedicate about 25% of their square footage to grocery items, creating near mini-supermarkets with soft drinks, bread, milk, eggs, canned soups and more.
But if money matters to you, you need to know that the chain drugstores are not necessarily friendly to your wallet when it comes to food items. They’re all about convenience, instead.
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