Osco Drug and Sav-on Drugs

In 1915, S.M. Skaggs, a Baptist minister, opened a grocery store in American Falls, Idaho, with lower prices on goods.[1] In 1917, O.P Skaggs started a chain of self-service stores, and later sold the franchise in the western states to Christian Call. In 1926, the Skaggs brothers merged the chain with Sam Seelig stores, which had become Safeway in 1925.[1] L.J. Skaggs retired from Safeway in 1932, and in 1934, he opened the first self-service drugstore in the US in Tacoma, Washington.

Loronzo L. (L.L.) Skaggs owned a controlling stock in a company called Quality Food in Minnesota and subsequently left the Safeway business. L.L. opened a chain of self-service drugstores in the Midwest similar to his brother L.J.'s stores in the west. The first store opened in 1937 in Rochester, Minnesota, and was named "Pay-Less" (different from the drug chain Payless founded later in the century), and was managed by George Hilden. The store remained in operation until 1987, when it closed due to redevelopment in downtown Rochester.

In 1937, while in the process of opening a second store in Mason City, Iowa, it was learned that another company had already registered the name "Payless" in the state. L.L changed "Payless" to "Self-Service Drug, Inc." and formed a new corporation.

In 1942, the corporation "Self-Service Drug, Inc." was dissolved and succeeded by "Owners Service Company", a partnership of L.L Skaggs, H.B. Finch, Paul Stratton and George Hilden. From this company 'Osco' was coined. That year Osco moved its headquarters from Waterloo, Iowa, to the Merchandise Mart in Chicago, Illinois.

Osco Drug logo until 1980

In 1961, The Jewel Companies, Inc. acquired the 31 Osco Drug stores in six Midwest states. In 1962, Osco's headquarters was moved from Chicago's Merchandise Mart to Melrose Park, Illinois, and the first side-by-side "Jewel-Osco" store opened. The early Jewel-Osco combination (combo) stores were two individual stores, separated by an interior wall (and in some locations, a half-wall), allowing a customer to go back and forth between each store without having to go outside.

After the merger, all of Jewel's subsidiaries soon had an Osco Drug. Some Eisner Food Stores locations were re-branded "Eisner-Osco". When Jewel acquired Star Market in 1964, the first Osco Drug in New England was opened, and some were next to Star Market locations and were branded as "Star-Osco". By 1968, Osco grew to 168 stores in sixteen states. During most of the 1960s, Osco operated as two divisions – 'City Osco', comprising the Chicago, Illinois, and Chicago suburb stores and 'Country Osco' (all the other Oscos). These two divisions were combined in 1968 and formed Osco Drug, Inc. Also in 1968, Osco's headquarters relocated from Melrose Park, Illinois to Franklin Park, Illinois. Later that year, the Jewel Imports procurement group was established to import a broad range of general merchandise from around the world to sell in Osco stores.

When The Jewel Companies Inc. acquired Buttrey Food Stores in 1966, many of the stores were converted to a combination store format and bannered as "Buttrey-Osco" with common checkout stands but separate store management, all under one roof. By the early 1980s, Buttrey eventually operated 60 stores in Montana, North and South Dakota, western Minnesota, Wyoming, eastern Washington, eastern Oregon, Utah, and Idaho. Stores were spread thinly over a 2,000-mile (3,200 km) wide territory.

Outside of the Chicago metropolitan area, Osco operated stand-alone pharmacies (or free standing stores). In the early years, many of the Jewel and Osco combination stores maintained different operating hours from one another and on certain days such as holidays, one side of the combo store would be open, while the other would be closed. By the early 1980s, new and remodeled combo stores had the 'wall' removed and the store became one, and to this day, Osco retains control over drug, general merchandise, pharmacy and liquor departments in the Jewel Osco combo stores.

In the late 1960s, Osco was seeking to purchase or build a photofinishing plant to service its stores. At the time, the company was using outside vendors, and the film developing quality and service was inconsistent. In 1970, working with Kodak, Osco built a photofinishing lab in Elgin, Illinois. The facility, Crest Photo Lab opened in 1971, and serviced Osco's Chicago, Central and Eastern region stores. The Elgin photo lab expanded several times over the years. As both Osco and its photofinishing market share grew, three more photo plants were added: Alves Photo Service Braintree, Massachusetts, in 1980, Rich Photo Lab Salt Lake City, Utah, in 1984 and Drewry Photocolor Burbank, California, in 1987 (renamed Crest Photo in 1988). The photo labs were sold to Kodak's Qualex photo processing division in 1996, prompted by the emergence of in-store one-hour photo labs and digital photography technology.

In 1974, Osco's headquarters were relocated from Franklin Park, Illinois, to a new facility at 1818 Swift Drive in Oak Brook, Illinois.

Sav-on Drugs logo

In November 1980, The Jewel Companies Inc. purchased Sav-on Drugs, Inc. which was headquartered in Anaheim, California, and had 150 stores in California, Nevada and Texas.[2] The Sav-on chain became Osco's 'Western Region'.

In 1984, American Stores Company, which consisted of Alpha Beta, Acme Markets, and Skaggs, acquired The Jewel Companies Inc.[3]

In 1989, a new subsidiary, American Drug Stores, Inc., was formed and consisted of American Stores drugstore holdings of Osco Drug, Sav-on Drugs, the Osco side of the Jewel-Osco food-drug combination stores and RxAmerica. RxAmerica began earlier in 1989 as a mail service prescription fulfillment center with a facility in Salt Lake City, Utah.

American Stores had a strategy to build a nationwide network of pharmacies, streamline operations and advertising to gain national recognition for the brand, especially for the high-margin private label products. The name Osco Drug was chosen as the national chain banner because of the large number of stores which already had that name and existed in various parts of the US. The name change was completed for the Skaggs drugstores in 1985 and then for the Sav-on stores in 1986. The name "Osco" did not resonate well with Sav-on's Southern California customer base. American Stores eventually made the decision to change the name of the former Sav-on stores back to Sav-on Drugs. Rumors circulated at the time claiming that the reason for the name change back to ‘Sav-on’ was due to "Osco" having the same pronunciation as the Spanish word "asco" (oss-ko), which means "nausea" or "disgust", a considerable factor within Southern California's heavily Hispanic market. This explanation for the name change was refuted by American Stores.[4]

The name change on all stores was completed in 1989, and the Sav-on Drugs brand was re-launched in Southern California and Nevada.

At the same time that the company was making major divestments in the early 1990s, American Stores also looked for opportunities to make strategic minor acquisitions that would enhance its position in the main markets where it needed to strengthen market share.

• The company's California drugstore operations were enhanced through the early 1992 $60 million purchase of 85 CVS Stores (63 CVS Pharmacy drugstores and the rights to operate 22 CVS health and beauty aid stores) from the Melville Corporation. These stores converted to the Sav-on Drugs and Sav-on Express banners. Later that year, 30 Thrifty and Rx Plus drugstores in Arizona and Nevada were acquired.
• The following year Reliable Drug (a 55 unit chain) in Indiana, Illinois, Iowa, Kansas, and Missouri was bought. These stores were soon re-bannered as Osco Drug stores.
• In February 1995, American Stores spent about $37 million for 17 Clark Drug stores in southern California, which were then converted to the Sav-on Drugs name.

In 1992, American Stores shifted its strategy from that of a holding company to a centralized operating company. As a result of the decision, common functions among American Stores' operating divisions (procurement, distribution logistics, payroll, human resources, etc.) were removed from the operating divisions, consolidated and run centrally. From 1992 through 1998, American Stores consolidated operations and moved responsibilities of their division offices to their headquarters in Salt Lake City, Utah. Although 'American Stores' food divisions retained an operating presence in their geographical locations and other centralized marketing, merchandising and other staff functions were relocated between 1992 and 1998 from Oak Brook, Illinois, to Salt Lake City to occupy the then-new American Stores Tower. Pharmacy operations were relocated to Scottsdale Arizona with certain pharmacy systems-related resources continuing to operate from the Chicago area after being relocated to 3030 Cullerton Drive in Franklin Park, Illinois.

After American Drug Stores' move to Salt Lake City, Utah, was complete in 1998, Osco's Oak Brook, Illinois, 1818 Swift Drive headquarters was sold to the Follett Corporation.

In 1994, American Stores converted 25 Jewel Food Stores in Chicago, Illinois, to Osco Drug free-standing stores. These older and smaller Jewel stand-alone stores were closed so that American Stores could focus on the combination formats only for Jewel and to expand Osco's presence in Chicago as a response to Walgreens increasing market dominance. The Osco stores replacing the Jewel stores contained expanded food and produce presentations and were coined 'Osco Foodmarts'.

To extend its core drugstore business, in November 1995 American Drug Stores launched a new format called Health 'n' Home, which was a 28,000-square-foot (2,600 m²), 18,000-item home health care superstore. The first Health 'n' Home opened in Phoenix, Arizona, and by late 1997 there were 20 Health 'n' Home stores in four states.

In 1998, American Stores RxAmerica division and Longs Drug Stores Integrated Health Concepts (IHC) division agreed to merge their Pharmacy Benefits Management (PBM) ventures. Under terms of the joint venture, RxAmerica and its former corporate partner, Geneva Pharmaceuticals, parted ways, and RxAmerica combined with Longs' IHC division in a 50/50 partnership. The alliance created a national PBM of nearly 1,400 Longs and American Stores pharmacy outlets and a nationwide network of 40,000 pharmacies serving some 3 million patients under contract. Longs and Albertsons remained equal partners up though 2001, when Albertsons sold their 50% interest to Longs.