Lil’ Drug Store building on success

Chris DeWolf, president and CEO of Lil’ Drug Store Products, shows one of the newer additions to the company’s product lines in the company’s Cedar Rapids distribution facility — Popchips brand potato and corn snacks made with a process that doesn’t require frying. PHOTO DAVE DEWITTE

By Dave DeWitte
dave@corridorbusiness.com

Lil’ Drug Store Products may be hitting middle age, but the consumer products distributor sees a lot of room to run in a retail sector that remains strong and growing.

The 43-year-old company made a flurry of headlines recently with plans for a new $13 million LEED-certified headquarters, and the launch of two healthy snack food product lines in the convenience store channel.

President and CEO Chris DeWolf says it’s all about growth – both in Lil’ Drug Store, and in the convenience store channel it supplies.

The company distributes to more than 125,000 convenience stores, and sold more than 145 million items last year – 10 times more than in 2000. It has become the largest convenience store distributor of over-the-counter drugs and personal care products in the U.S., and is a big supplier of automotive products, sensible snacks and other merchandise.

“There are a lot of examples of our products being more than convenience and impulse purchases,” Mr. DeWolf said.

The company’s expansion meshes well with a trend in the convenience store industry of becoming more of a destination, rather than simply a place to pick up a few items when stopping for gas, he added. Many of the new convenience stores are larger, and carry many of the basic household items needed for daily living.

Last year’s sales data suggests one possible reason for the trend. Sales industry-wide declined 4.3 percent, to about $550 billion, according to the National Association of Convenience Stores. But that decline was entirely due to lower gas prices, which brought fuel sales down 9.2 percent. If sales of items inside the store, such as those Lil’ Drug Store Products supplies, had not increased by 3.2 percent, the decline would have been even larger.

Consumer product companies often seek out Lil’ Drug Store to get their products into the convenience store channel, Mr. DeWolf said. It can be a hard channel to open, he noted, because shelf space is extremely tight, and the industry still has many smaller competitors with 10 stores or less.

“We really consider ourselves an access point for products and trends that want to be in the convenience store channel,” Mr. DeWolf said.

A good example of that capability came this spring with an exclusive convenience store marketing agreement between Lil’ Drug Store and two manufacturers of healthier snack foods. While mainstream grocery and convenience stores both get a comparable percentage of their revenue from meat snacks like beef jerky, sales of healthy dried fruit snacks in convenience stores didn’t come close to the percentage in mainstream groceries.

Lil’ Drug Stores added the Sensible Foods Crunch Dried Fruit line and the Popchips line of healthy grain snacks on the expectation that convenience stores will benefit from the growing popularity of those categories in the same way that mainstream grocers have reaped higher sales.

Mr. DeWolf said he also expects to see growth in services at convenience stores. Lil’ Drug Store has acquired a 20 percent stake in a Minnesota company that supplies tire filling and auto vacuum equipment with the expectation that it can grow its convenience market presence.

With its decades of experience in studying the convenience store market, Lil’ Drug Store has also built a consulting and analytics business. More than 45,000 convenience stores use the company’s services to help determine the optimal mix of product and pricing for profitability.

Lil’ Drug Store is owned by husband-and-wife Chris and Suzy DeWolf, who acquired it from Ms. DeWolf’s parents, Dennis and Donna Oldorf, in 2005. The company operates with a lean local staff of about 50 at 1201 Continental Place NE, a 100,000-square-foot location it has leased since the mid-1990s.

Mr. DeWolf said the company had became serious about building at a new location about one year ago, both to position the company for growth and offer a more attractive workplace for employees. With input from its department heads, it worked with developer-builder Hunter Companies and Aspect Architecture to come up with a facility to suit its needs.

The main location choices were along I-380 at the north and south ends of the Cedar Rapids metro area. Mr. DeWolf said the southern location is close to the FedEx air freight hub at Eastern Iowa Airport, provides easy in and out access for truckload carriers, and will be convenient for visiting customers.

Employee amenities will include a lunchroom facility, fitness area and employee walking trails on the roughly 13-acre campus, Mr. DeWolf said. Still in the final planning stages, he expects the facility to achieve a LEED certification for sustainable construction and design, and reflect the beauty of a natural prairie landscape.

“It’s a great opportunity to invest in our business, in our people and in our community,” Mr. DeWolf said.

He expects the move to the new facility to take place in late summer of 2018.