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Navarro Discount Pharmacies, a prominent force in the Miami pharmacy market, made headlines in 2000 as it spread its wings and, for the first time, went beyond the Miami boundary. Navarro continued its evolution and made its first acquisition in 2001 and now, in 2002, the chain is preparing for additional growth with the opening of a handful of new, even larger stores.

Finding itself faced with an unsurpassable opportunity to enter two ideal markets, Miami Beach and Sunny Isles, the family-owned retailer took a leap and snapped up four free-standing locations from Fedco Drugs, which had a presence in Miami Beach for more than 20 years before closing down last year.

"We realize we have to try to grow aggressively in this market in order to better compete and this of course was an easy way to do that, as opposed to opening one store here and one store there," explained Navarro vice president of operations Gabriel Navarro, whose grandfather, Jose Navarro Sr., opened the first Navarro store in Cuba in 1940. "We actually began looking at [Fedco] with the idea of purchasing the chain, but the more we got into it we decided to focus on a few key stores."

The stores, with combined revenues of about $26 million, average 10,000 square feet--slightly smaller compared with Navarro's other locations that average 18,000 square feet. Financial terms of the October deal were not disclosed.

"Finding any real estate these days in Miami Beach is very difficult," Navarro said. "It worked out fantastic that these stores had nice locations in modern buildings, so it made the entrance into the market that much easier through acquisition."

While Navarro said the company is open to the idea of acquiring additional pharmacies, the company is not in talks with any potential candidates at this time.

Intense competition from Walgreens, Eckerd and CVS not only convinces the regional chain to expand through acquisition, but also to open its first drive-through pharmacy location.

"We are going to try it this year for the first time. We've always been somewhat reluctant because we rely so much on the front end," said Navarro, who noted that in 2001, front-end sales increased a solid 6 percent. "We are developing a store now from the ground up, so we figured what a better time to try it."

The company currently operates 16 stores of which seven are freestanding, and plans to open four more locations over the next 18 months. All of their locations contain a one-hour photo lab. The new stores will be approximately 25,000 square feet, enabling Navarro to better compete with the pharmacy retail giants.

Packaging jackpot

With the acquisition of the Fedco units, Navarro also purchased a vitamin packaging facility from the company. The 15,000-square-foot center in the Miami area enables Navarro to package its own vitamins and over-the-counter products under Navarro's private-label brand, as well as provide private-label products to other retailers in the United States and Latin America.

"Private label is becoming more difficult for smaller chains and regional chains such as us," explained Navarro, who notes that they are presently packaging some 400 SKUs. "Many of these manufacturers are requiring quantities which are very difficult for somebody our size to reach on many items."

Navarro would not disclose how many retailers it supplies with private-label vitamins and OTC products through the facility, but he did say it is a branch of the Navarro business that will be expanded upon, specifically in the Latin American markets. Navarro prides itself in catering to the Latin market and carries a wide selection of imported goods.

"We carry a lot of imported goods, a lot of goods from Spain and South America. They are names that people who moved here from Latin America or South America are used to and they come here and find it. I think it creates a sort of loyalty," said Navarro. More than 80 percent of the chain's customers are Hispanic and 95 percent of its 1,000 employees are bilingual, according to Navarro.

Also in 2001, the retailer wrapped up the remodeling of its pharmacy departments.

The company automated nine stores with the ScriptPro SP 200 system, and plans to install the system in additional stores only when necessary. With the new system, the drug chain has slashed its prescription wait time from about two hours to 20 minutes chainwide.

"That alone has justified the cost of it," he said. "We found that by [cutting] that wait time down to 20 minutes we are not losing pharmacy business to competitors."

Last year also marked a healthy year for sales at Navarro, which posted sales of $147 million for 2001, an 18 percent increase compared with the year-ago period. Pharmacy sales rose 15 percent, while same-store sales increased 9 percent.

Looking to take on the look and feel of a department store, Navarro last year started remodeling its designer fragrance departments with a higher-end wooden fixture with hard-to-miss names of various designer brands, such as Chanel, Gucci and Lancome, emblazoned across the top.

The 52-foot-long space, packed with hundreds of designer brands at discounted prices, has been a hit. By the end of June, Navarro expects to have all of the stores updated with the new format.

"It has the selection you find in department stores and the prices are much more competitive. It differentiates us," said Navarro.

While it is obvious that this homegrown pharmacy has grasped technology and innovative strategies in an effort to stay competitive, underneath still remains a family-owned business that prides itself in the basics--customer service.

"Much of it comes down to realizing the importance of our personnel and treating them as such. This, in turn, translates to better treatment of the customers that they serve," explained Navarro.