CVS Caremark (CVS) is buying a small Miami-based drugstore chain to fulfill big ambitions: more business from the growing Hispanic market and a bigger chunk of the specialty pharmacy segment.
In its largest U.S. retail deal since 2008, when it bought 541 stores from Longs Drug to build up its Northern California footprint, CVS will buy Navarro Discount Pharmacy, the largest Hispanic-owned drugstore chain in the U.S. with 33 retail drugstores, as well as Navarro Health Services, a specialty pharmacy serving patients with complex or chronic diseases.
CVS didn’t disclose financial terms, meaning the amount was likely small.
But for CVS, it is a way to get to more of the fastest growing segment of the U.S. population. According to the U.S. Census Bureau, Hispanics made up 17% of the U.S. population last year with 53 million people, and accounted for more than half the overall U.S. population growth last decade.
“The acquisition of Navarro will strengthen CVS/pharmacy’s position in the Hispanic marketplace, the fastest growing demographic in the U.S., and we are excited to be adding the Navarro Discount Pharmacy brand to the CVS/pharmacy family,” said Helena Foulkes, President, CVS/pharmacy. The Navarro stores, whose annual sales are $340 million and which sell many products and services not found in traditional drugstores such as wireless phones and designer fragrances, will keep their name rather than be rebranded as CVS stores.
The deal is also a way for CVS, which operates 7,600 drugstores, to build up its growing specialty pharmacies business, which cater to individuals who need complex and expensive drug therapies. As of December 31, CVS operated a network of 25 retail specialty pharmacy stores under the CarePlus CVS/pharmacy name. Such stores are on average 2,600 square feet in size and offer prescription drugs as well as a limited selection of front store items such as alternative medications, homeopathic remedies and vitamins. But the company has been actively looking to develop this part of its retail business as it moves beyond the traditional drugstore model.
In recent years, CVS has been focusing its mergers and acquisitions on its services business, above all spending a mammoth $21 billion to buy pharmacy benefits manager Caremark in 2006. A few years ago, there was a spate of acquisitions by CVS and its largest competitor (WAG) Walgreen, each buying regional U.S. chains. That activity has slowed given that wave of earlier deals led to consolidation.