Fay's Carls buy, a 'perfect fit.' - Fay's Drug Company Inc., Carls Drug Co

LIVERPOOL, N.Y. -- Fay's added marketing clout and cost efficiencies in key upstate New York communities through its purchase of Carls Drug, completed last month.

Described as a "perfect fit" by Fay's Chairman Henry Panasci Jr., the merger will provide an edge in markets where CVS and combo store dynamo Wegmen's apply constant competitive pressure.

Upstate independents, strengthened by wholesaler voluntary programs, and top grocery operator Hannaford Bros., which has targeted New York with a next-generation food/drug format, have provided consumers with other alternatives for prescriptions and drug store merchandise.

Fay's growth in recent years has been in urban areas and in small towns and rural areas through purchases of independents and bantam-sized stores as well as through new store construction.

As Carls is integrated into Fay's, Fays will benefit from economies of size, for example in advertising. One circular can serve a market, where two might have been used before, Panasci told Drug Store News.

Panasci said four of the 48 Carls purchased from Norwich, N.Y. based Victory Markets -- two in Binghamton, one in Ithaca and one in Auburn -- will be closed. With the buy, Fay's adds about $100 million in sales. Fays, Inc. tallied $672.6 million sales in the fiscal year ended January 1991, not counting Carls.

Conversion of the stores to Fay's -- planned for completion by the end of July -- won't require extensive changes at Carls which, with slightly smaller stores, has "mirrored" Fay's merchandise assortment, according to Panasci. Excess Carls product will be sold through a former Fay's store in Buffalo, the ceo added.

The new stores fall within the existing distribution range, a 300-mile radius of Liverpool, a suburb of Syracuse, located in the state's geographical heart.

Fay's has distribution center capacity to handly the Carls volume, having doubled space for drug store merchandise through a warehouse addition and the purchase of warehouse space in recent years. It said recently it has 580,000 square feet capacity, of which 470,000 is being used.

Panasci said that managers will be added at the district manager and pharmacy supervisor levels. He said "most of Carls executives" are moving to Victory markets.

In its purchase of Carls, Fay's gained significant share points in market areas where it is already strong. According to Metro Market Studies, in the Standard Metropolitan Statistical Area (SMSA) for Albany, Fay's surpasses CVS for first place in market share by adding 2.3 percentage points from three Carls stores to its 22 stores' 22.2 percent share. CVS has a 23.5 percent share with 29 stores, according to the Weston, Mass.-based research firm.

In the Binghamton SMSA (the city, plus adjacent counties), Fay's boosted a 15 percent share to about 25 percent; CVS remains substantially ahead, however, with 37.2 percent. In Syracuse, Fay's solidified its lead, by adding ten Carls stores and 8.7 share points to its 33.9 percent share. In Utica Fay's share of rose to 35 percent through the addition of eight Carls to its seven existing stores.

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