Monday, November 28, 2016

The History of Walgreen's, Beginning in Dixon, Illinois, Headquartered in Chicagoland.

How did a neighborhood drugstore, founded in 1901 and measuring just 50 feet by 20 feet, become the pharmacy all others are measured by and one of the most respected American corporations?
It all started in a town called Dixon in Illinois. It would be impossible to tell the story of Walgreens drugstores without telling the story of Charles R. Walgreen, Sr. the man who started it all. Walgreen was born near Galesburg, Illinois, before his family relocated to Dixon, Illinois - a town 60 miles north of his birthplace - when his father, a farmer turned businessman, saw the great commercial potential of the Rock River Valley. It was here that Walgreen, at the age of 16, had his first experience working in a drugstore, though it was far from a positive one. 

Working at Horton's Drugstore (for $4 a week) was a job he took only because of an accident that left him unable to take part in sports. While working in a local shoe factory, Walgreen accidentally cut off the top joint of his middle finger, ending his athletic competition. Were it not for the accident, Walgreen might never have become a pharmacist, business owner and phenomenally successful entrepreneur. Ironically, his initial experience working at Horton's was itself a failure. Walgreen left after just a year and a half on the job.

Still, Walgreen realized that his future lay not in Dixon, but in a far larger city - Chicago. Yet Chicago in 1893, the year of Walgreen's arrival, was far from promising for a future drugstore entrepreneur. More than 1,500 drugstores already competed for business (many exceedingly successful) and customers had no lack of choice. Given this stiff competition, Walgreen's ultimate achievements are all the more remarkable.

Determined not to rely on his family's resources to sustain himself, Walgreen resolved to achieve success on his own. In fact, faced with the prospect of being completely broke shortly after his arrival in Chicago, Walgreen defiantly tossed his few remaining pennies into the Chicago River, forcing himself to commit to his profession and a lifetime of perseverance and hard work. A lesson well learned - and never forgotten - by Walgreen

In a series of jobs with Chicago's leading pharmacists - Samuel Rosenfeld, Max Grieben, William G. Valentine and, most importantly, Isaac W. Blood - Walgreen grew increasingly knowledgeable - and increasingly dissatisfied - with what he saw as old-fashioned, complacent methods of running a drugstore. Where was the desire to provide superb customer service. Where were the innovations in merchandising and store displays? Where was the selection of goods that customers really wanted ... and could afford? Where was the sense of trying to understand, please and serve the many needs of drugstore customers? And, most of all, where was the commitment to providing genuine value to the customer? The answer was obvious: Walgreen had to open his own pharmacy.

However, it was not until 1901 that Walgreen was able to put together enough money for the down payment on his pharmacy. He wanted to buy the store in which he was working, owned by Isaac Blood. Walgreen had been not only a trusted employee, but a valuable business advisor as well. Yet even in view of Walgreen's outstanding business counsel on Blood's behalf, Blood was unyielding in the sale to Walgreen, raising his asking price from $4,000 to $6,000. Though it would take years for Walgreen to pay off the loan he signed for the purchase, he went ahead. He was now his own man and well on his way to building one of the most remarkable businesses in America.
Walgreen's drugstore was located in Barrett's Hotel at Cottage Grove and Bowen Avenue on Chicago's South Side. Originally built in anticipation of the 1893 World's Columbian Exposition, this was a thriving neighborhood. The store, however, was struggling. Dim, poorly merchandised and unwelcoming, it presented Walgreen with the first real challenge to his ideas on store layout, selection, service and pricing.

By every account, Walgreen succeeded brilliantly, simply by practicing what he preached and instituting what he felt were clearly needed innovations. New, bright lights were installed to create a cheerful, warm ambiance in the store. Each customer was personally greeted by Walgreen or his colleague, Arthur C. Thorsen. Aisles were widened, creating a spacious, airy, welcoming feeling - a far cry from the cramped interiors of other drugstores. The selection of merchandise was improved and broadened, including pots and pans (unheard of in a drugstore!) at the bargain price of 15¢ a piece! Prices were kept fair and reasonable. The quality of Walgreen's pharmaceutical compounds (he had become a registered pharmacist in 1897) met the very highest standards for purity and freshness. Efficiency was increased. But the most dramatic change Walgreen instituted was a level of service and personal attention unequaled by virtually any other pharmacy in Chicago. And this was exemplified by Walgreen's famous...

Whenever a customer in the immediate area telephoned with an order for non-prescription items, Walgreen always repeated - loudly and slowly - the caller's name, address and items ordered. That way, assistant and handyman Caleb Danner could quickly prepare the order. Then Walgreen would prolong the conversation by discussing everything from the weather to current events. Invariably, Caleb would be at the caller's door before she was ready to hang up. She would then excuse herself and return to the phone amazed at the incredible speed with which her order had been delivered.

While Walgreen couldn't do this for customers living farther away, those who did benefit from it were thrilled and delighted to tell their friends about Charles Walgreen and his incredible service.

The Second Walgreens Store Chicago's South Side would remain for many years Walgreen's base of operations and the locale for the first wave of stores he was to eventually open. By transforming one quiet, average drugstore, Charles Walgreen had shaken up the entire drugstore business.
Street Level Soda Fountain - Walgreen Co. State and Randolph Streets, Chicago, Illinois.

The Oak Room, a basement-level cafeteria at the Walgreen Co. State and Randolph Streets, Chicago, Illinois.
And it was, in fact, in the soda fountain - where milkshakes had long been a staple of American drugstores - that Walgreen's next innovations took place.

The year was 1910. Walgreen now had two stores. His challenge: how to find ever-new ways of satisfying a growing customer base while outshining his competitors.
Walgreen Co. State and Randolph Streets, Chicago, Illinois.
Over the preceding 100 years, the soda fountain had become key to virtually every American drugstore. Beginning in the early 19th century, bottled soda water, and later charged soda water, were considered important health aids, making it a natural fixture in drugstores. To dispense the icy-cold, charged water, a tin pipe and spigot were attached. Soon, flavored syrups were added to the fizzy water and still later, ice cream added to that. As sodas grew in popularity, so the "soda fountain" grew in beauty, ornamentation and importance as a revenue source to the drugstore. Manufacturers vied in creating ornate fountains, with onyx counter-tops and fixtures of silver and bronze and lighting by Tiffany.
 Walgreen Co. State and Madison Streets, Chicago, Illinois.
Walgreens was no exception to such a popular trend. Indeed, its soda fountains were among Chicago's most beautiful. Yet the reality was that the items soda fountains served - ice cream and fountain creations - were invariably cold. And cold items sold only in hot weather. That meant each fall drugstore owners everywhere were resigned to mothballing their soda fountains until the warm weather returned. Thus, the drugstores lost an important revenue stream, not to mention valuable store space that could have been used for other, profitable purposes.

Acceptance of the status quo, however, was not one of Charles Walgreen's strong points. His response to this dilemma was typically double-barreled: an idea that benefited his customers as much as his company. "Why not serve hot food during cold weather?" Beginning with simple sandwiches, soups and desserts, Walgreen was able to keep his fountain open during the winter and provide his customers with affordable, nutritious, home-cooked meals. And the food was home cooked, thanks to Myrtle Walgreen, Charles' wife. All menu items - from her chicken, tongue and egg salad sandwiches to bean or cream of tomato soup to the cakes and pies - were prepared by Myrtle Walgreen in their home kitchen. She rose at dawn and finished cooking by 11 a.m., and the food was then delivered fresh to Walgreen's two stores.

As a result of this common-sense innovation, Walgreen once again demonstrated his knack for helping his company while better serving the public. From then on, through the 1980s, food service was an integral part of the Walgreens story. Every Walgreens was outfitted with comfortable, versatile soda fountain facilities serving breakfast, lunch and dinner. Just as Walgreen had reasoned, customers coming to the stores for Interior of a Walgreens storefood usually stayed to purchase other necessary items. And with its friendly waitresses, wholesome food, and fair prices, loyalty to Walgreens increased exponentially.

By 1913, Walgreens had grown to four stores, all on Chicago's South Side. The fifth Walgreens opened in 1915 and the ninth in 1916. By 1919, there were 20 stores in the rapidly-growing chain.

As impressive as this growth was, even more impressive was the superb management team that Walgreen had begun to assemble since his second store opened. Walgreen would often say - without any show of false modesty - that one of his greatest talents was his ability to recognize, hire and promote people that he considered smarter than he was. Among these early managers and executives were people who would guide Walgreens into national prominence for decades to come: William Scallion, A.L. Starshak, Willis Kuecks, Arthur C. Thorsen, James Tyson, Arthur Lundecker, John F. Grady, Roland G. Schmitt, Harry Goldstine, and later, the invaluable Robert Greenwell Knight, whom Walgreen hired from McKinsey and Company after Knight completed a visionary strategic study of Walgeen's entire operation and future.

In his ability to spot talent, Walgreen was rarely wrong. In fact, his uncanny ability to hire extended even as far as the people who manned his soda fountain, including the man who created Walgreen's next sensation.

By 1920, now 20 stores strong and growing quickly, Walgreens was an established fixture on Chicago's retail scene. Throughout this decade, Walgreens underwent phenomenal growth. By 1929, the total number of Walgreens stores reached 525, including locations in New York City, Florida and other major markets. Many factors contributed to this unprecedented growth: a superb management team, modern merchandising, innovative store design, fair pricing, outstanding customer service and exceedingly high pharmacy quality and service. Yet, one can't overlook something that may have seemed a minor innovation at the time. This was the invention of Walgreens immortal malted milkshake, an instant classic, by Ivar "Pop" Coulson in 1922. Coulson was a lover of fountain creations and the backbone the Walgreens soda fountain since 1914. His chocolate malted milk was a development for the company that was anything but minor.

Coulson had always been eager to improve on whatever he and his fountain clerks had to offer, and he made generous use of Walgreens extra-rich ice cream, manufactured in Walgreen's own plant on East 40th Street in Chicago.

Until then, malted milk drinks were made by mixing milk, chocolate syrup and a spoonful of malt powder in a metal Walgreens employees working at soda fountaincontainer, then pouring the mixture into a glass. On one especially hot summer day in 1922, Pop Coulson set off his revolution. To the basic mixture, he added a generous scoop of vanilla ice cream, then another. Coulson's new malted milkshake came with a glassine bag containing two complimentary vanilla cookies from the company bakery.

Walgreens Customers at the Soda Fountain Response could not have been stronger if Coulson had found a cure for the common cold! His luscious creation was adopted by fountain managers in every Walgreens store. It was written about in newspapers and talked about in every city where there was a Walgreens. But most of all, it was the object of much adoration. It was not at all unusual to see long lines outside Walgreens stores and customers stand three and four deep at the fountain waiting for the new drink. Suddenly, "Meet me at Walgreens for a shake and a sandwich" became bywords as popular as "Meet me under the Marshall Fields clock" at State and Randolph in Chicago.

So, once again, Charles Walgreen's prediction that his soda fountain would be absolutely essential to his stores as a source of revenue, company growth and increased customer satisfaction (which translated into even higher levels of customer loyalty and patronage) came true. In its own way, Coulson's malted was the fuel for Walgreens dramatic growth.

Over the years he worked at various drugstores while studying pharmacy at night. At one point, he had only 5 cents to his name. So he bought a newspaper for 2 cents and threw the other 3 into the Chicago River for good luck. It worked (eventually).

Surviving and Conquering the Great Depression.
By 1930, Walgreens had well over 500 stores and quickly was becoming the nation's most prominent drugstore chain. And while Walgreens was no more immune to the dire effects of a shrinking economy than other American businesses, it persevered. Walgreen continued to come up with new, important ways to serve customers and - just as importantly - employ thousands of people during this period of extreme economic distress. And testament to the continuing quality and stability of Walgreens, its stock (having become a publicly-traded corporation in 1927) continued to increase in price.

Throughout this period, Walgreens continued to innovate. It had already become convinced of the value of advertising and remained one of the biggest newspaper advertisers in Chicago as well as other parts of the country. In fact, Walgreens ran the largest promotion campaign in its history - costing more than $75,000 - during 1931. Perhaps even more significant was Walgreens entry into broadcast advertising. Also in 1931, Walgreens became the first drugstore chain in the country to advertise on the radio, with legendary Chicago Cubs announcer Bob Elson the "voice" of Walgreens.
Walgreen Drugs, Chicago, Illinois. (circa 1931)
Walgreens expanded its line of high-quality, private label, value-packed items, from sundries and over-the-counter remedies to the hugely popular "Peau Doux" (pronounced "Po Do") golf balls, talc and other products. As a result Walgreens saw consistent sales growth during the Depression years. In fact, so confident was Walgreen of his country and his company, he erected a brand-new building to serve as Walgreens state-of-the art warehouse/distribution center for stores in the greater Chicago area. The building also housed Walgreens ever-growing research and manufacturing laboratory and served as additional manufacturing space for its tremendously popular candy line.

Major philanthropy also became an important corporate mission during this time. In 1937, Charles Walgreen began his association with the University of Chicago with a donation of $550,000 in company stock to establish the Charles R. Walgreen Foundation for the Study of American Institutions.

Yet in 1939, just as the company emerged victorious from this period of great Charles Walgreenchallenge, Charles Walgreen died at the age of 66. Always the planner and visionary, he left his company in superb condition and prepared for the future. In addition to a strong, disciplined management team, he had groomed his son, Charles Walgreen Jr., to lead Walgreens into the next decade and beyond.

From the 1940s to today, the story of Walgreens is the story of a company that has never rested on its laurels, finding ever-new ways to satisfy its customers and stay ahead of the curve in operating its business.

During World War II, Walgreens established a not-for-profit pharmacy in the Pentagon, a service for which it was formally recognized by President Eisenhower. It was an important marketer of War Bonds during the war effort.

Walgreens was among the very first American companies to establish profit sharing and pension plans, to assure security for its employees. The initial funds for the pension - $500,000 in cash - was contributed by the personal estate of Charles R. Walgreen Sr. in a plan called "a landmark in American industrial relations," by The Chicago Daily News.

Following the war, Walgreens was among the first drugstore chains to see the importance of a new wave in retailing - the "self service" concept - and implement it across all its stores.
Walgreens. Lincoln Avenue and Oakton Street, Skokie, Illinois.
With Walgreens insistence on innovation and commitment to customers, growth and prosperity lay ahead. By 1975, more than 1,500 pharmacists in 633 stores filled close to 30 million prescriptions annually, four times the 7.5 million dispensed in 1962 and five million more than in 1972.

By this time, a third Walgreen was at the helm: Charles R. "Cork" Walgreen III. Like his predecessors, he realized continued prosperity could only come through continued progress.

By 1984, Walgreens opened its 1,000th store. As Illinois Governor James Thompson said to mark that occasion, "Walgreens has been a pioneer, not just in pharmaceuticals, but in retail service as well, since 1901. It's not just that Walgreens is an old and famous name in Chicago, and Illinois, and across the nation. There are many old and famous names that aren't with us anymore. "Walgreens is not only with us, it is thriving. I think that's because of their quality and leadership in innovation." People depend upon them because their service and products are consistent, from store to store, year to year, customer to customer.

"In this life of uncertainty, people from my generation like to reach back and cling to the 'good old days.' Sometimes the good old days never really existed except in our imaginations. Walgreens good old days always existed, and the very comforting thing is that they're still here!" 
Walgreens New Stand-Alone Store Style.
Walgreens computer system for filling prescriptions, Intercom Plus, links all stores into a single network and represents how advanced technology serves customers' needs better than any other pharmacy resource. In fact, Walgreens is the largest private user of satellite technology (second only to the United States government). Billing, labeling and prescription histories (for tax planning and reimbursement) are available more quickly and easily than ever before. And now, with the ability to fill prescriptions quickly and economically on their website, the latest piece of Walgreens advanced technology is in place.

Compiled by Neil Gale, Ph.D.

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