Navarro drugstore chain ready for a face-off

Navarro doesn’t want to lose Juana’s business. But new Chief Executive Steve Kaczynski believes future growth for the largest Hispanic-owned drugstore chain in the United States lies in it’s ability to attract a wider range of consumers and carve out its niche among the national competitors.

MIAMI  _ Navarro Discount Pharmacies wants to be known as more than just the store where abuelita shops.

For nearly 40 years, the grandmotherly Juana has been the prototypical customer at the Miami-based chain with Cuban roots. Juana is at least 60 years old, most often Cuban, lives on a fixed income not too far from a Navarro pharmacy and speaks Spanish.

Navarro doesn’t want to lose Juana’s business. But new Chief Executive Steve Kaczynski believes future growth for the largest Hispanic-owned drugstore chain in the United States lies in it’s ability to attract a wider range of consumers and carve out its niche among the national competitors.

By catering to the entire Hispanic population, he sees an opportunity to take advantage of the changing U.S. demographics. The goal: expansion within Florida and ultimately the U.S.

Kaczynski calls his new target Carmen. She’s a working mother with an average age of 38.7 years. She could be Cuban, South American or Central American. While Carmen speaks mainly Spanish, she also understands English. She may or may not be a U.S. citizen and has a household income of less than $44,000.

Since his arrival in December to head Navarro, Kaczynski has designed these customer profiles modeled after the characters from the old television show Que Pasa USA.

Life-size cutouts of their pictures sit in his office and he’s started making the changes necessary to attract more Carmens to Navarro’s 28 stores in Miami-Dade County.

“We need to find out what Carmen’s DNA is and cater to her needs, without upsetting Juana,” said Kaczynski, who has spent his career in the supermarket industry.

To reach out to mothers with young children, Navarro launched its first Pediatric window in the pharmacy department where moms can get service in 15 minutes or less.

Kaczynski also has added more quick-meal preparation items and larger family-sized packages to keep abreast of shifting demographics. Navarro is also marketing services such as a Baby Club and free prescription delivery.

“What I’m trying to teach people here is that we need to be flexible to look at all ethnicities within the Hispanic community,” Kaczynski said.

And Kaczynski isn’t stopping there. He’s already picked out his next target: Cristy. Modeled after Navarro’s vice president of marketing, Cristy is a college-educated Hispanic, who was born in the U.S., prefers English and has an family income over $75,000.

Hispanic marketing experts believe the effort to grow Navarro’s customer base _ both beyond Miami-Dade County and among younger Hispanics _ is a strategy that makes sense.

“If they want to be successful they have to appeal across the Hispanic market beyond the Cuban housewife and target the younger bicultural Hispanic,” said Raul Lopez, president of Phoenix Multicultural, a Miami-based Hispanic research firm. “The bicultural Hispanic is going to want to shop in a retailer that knows they live in two cultures and gets it.”

Kaczynski has a solid base to work from. The chain rang up over $320 million in sales last year and attracts 1.1 million customers a month.

Customer volume is why Navarro’s stores already generate more sales per square foot of non-prescription items than competitors.

The average Navarro store does 35 percent of its business from prescriptions and 65 percent from everything else. That’s the opposite breakdown of national competitors Walgreens and CVS.

Driving that business is a merchandise assortment that already resembles a mini Wal-Mart, featuring everything from food to clothes and wine.

You’ll find grocery staples such as Cuban coffee and fruit nectars or cleaning supplies such as Fabuloso. Small appliances from pressure cookers to rice cookers are big sellers. There are also racks of floral house dresses, domino tables and tools. Plus, there’s a designer fragrance counter and a full-service cell phone store.

Regular customers such as Maria Lafont watch for the weekly fliers highlighting the specials.

“The prices here are the best,” said Lafont, 54, a Miami resident, who shops the chain once or twice a week. “They have more variety and more assortment, especially on the Hispanic products.”

But Navarro’s challenge is trying to provide the right mix of products for a store in Doral where there are Venezuelan and Colombian shoppers, compared to a Cuban shopper in Hialeah. That means customizing the food and beauty products that remind each group of their home.

In the process of adjusting the merchandise mix, Kaczynski also plans to weed out underperforming items and narrow the breadth of choices for items such as picture frames and toys. In its place will come expansion of other categories like nutritional supplements, where he also plans to add a bilingual staff member who will offer consultations.

“In the past they had a one-size-fits-all plan and they just contracted based on the space,” Kaczynski said. “We don’t want to take away anything customers are used to getting at Navarro. But we want to add categories that bring in additional customers.”

While Kaczynski isn’t Hispanic and speaks very limited Spanish, he doesn’t see that as an obstacle.

“The process of running a business is the same, whether you’re Hispanic, black or Jewish. It’s good merchandise and marketing,” said Kaczynski, who has a Colombian son-in-law and is learning Spanish from his granddaughter. “What rallies the troops is when they see results.”

The changes come on the heels of what has been a tumultuous few years for Navarro as it grappled with the downturn in the economy and several major transitions in its business.

MBF Healthcare Partners purchased a majority stake from the Navarro family in January 2007. A year later, the Navarro family stepped down from top leadership for the first time in company history. Since January 2008, the company hasn’t had the same chief executive at the helm for an entire year.

That instability at the top came as the company also was trying to absorb the 11 Sedano’s Pharmacies it purchased in October 2007.

By the end of 2008, same-store sales were down 3 percent and MBF knew there was a need for a change. The board and then-Chief Executive Lee Ambruster parted ways over a difference in pricing philosophies.

“We wanted to maintain the discount philosophy and he had started raising prices,” said Marcio Cabrera, managing director of MBF and Navarro board member. “We felt that was the wrong approach. At the end of the day, the business was going in the wrong direction. We had to do something.”

MBF executives and Navarro family members spent most of 2009 trying to retrench and get the business back on track. The company cut prices on 6,000 items and closed three stores, including its only two in Broward County.

“The important thing is that we’re back on track and positioned for growth,” said Gabriel Navarro, former chief executive and current board member, who is the grandson of company founder Jose Sr. “I still believe we serve the Hispanic consumers in South Florida better than any other retailer.”

Plans call for opening two new stores this year, likely in Homestead and North Miami-Dade area, plus a store expansion and five remodels. By 2011, the goal is to expand to Broward or Palm Beach with a cluster of three or four stores. Longer-term plans call for expanding Navarro throughout the state and ultimately the country.

Kaczynski said he’ll know he’s on the right track when he doesn’t see Hispanic consumers shopping at his competitors.

“It turns my stomach if I see a Hispanic customer going into Walgreens or CVS,” he said. “We have to win them over.”

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