By  on November 2, 2007

NEW YORK — One of the strongest marketers to the Hispanic community just got even more potent.

Miami-based Navarro Discount Pharmacies signed an agreement two weeks ago to acquire 11 stand-alone Sedano's pharmacies. With the absorption of these stores, Navarro fortifies it position as the U.S.' largest Hispanic-owned pharmacy chain. Sedano's is the second largest and continues to operate 28 supermarkets. Navarro is proving that a regional stronghold can compete with even the most viable national drug chains such as CVS and Walgreens.

With the purchase of the stores, Navarro becomes part of the ongoing consolidation of the retail industry, which started with drugstore chains buying others and then natural food chains snapping up competitors. Now, merchants that control demographic groups are also combining for more power. Earlier this year, Navarro received an investment from MBF Healthcare Partners, which is also being earmarked for expansion of three to five stores a year for the next several years, according to the company.

Navarro will now have 32 stores with annual revenues of more than $350 million. The Sedano stores will operate under the well-respected Navarro logo.

"Sedano's Pharmacy has been a strong competitor and will be an outstanding partner," Navarro's chief executive officer Gabriel Navarro stated in a release. "The acquisition of Sedano's Pharmacy significantly expands Navarro's presence in the South Florida market and the locations of the pharmacies are a strong complement to our existing footprint." Although Sedano's had entertained other offers, management said the fit with Navarro was the best for the company and its employees.

Navarro stores average 25,000 square feet — much larger than traditional drugstores. The purchase is important to the beauty business because the chain is a monumental player in beauty, especially fragrances. The fragrance counters in Navarro resemble department stores and are shopped more frequently in many cases than prestige counterparts by Hispanic consumers. Upscale scents are the most popular at Navarro and include Bulgari priced at $29.99 for a 1.7- oz. eau de parfum spray and Fendi EDT 3.4 oz. for $21.99. Navarro management promises to open even splashier stores with a bigger focus on beauty, according to executives.

The chain is a strong testing ground for manufacturers looking to launch products targeted at Hispanic customers. For example, several hair care companies gained a foothold in Navarro before rolling out to the rest of the country.Because of its strong positioning in beauty, sales of those items exceed 10 percent of average store volume, sources estimated. Navarro is also known for exceptional customer service, including trained beauty advisors in the cosmetics and fragrance department.

Beyond beauty, Navarro has kept up with industry trends including walk-in miniclinics. The chain's connection to Miami's population has helped it earn a 17 percent market share, ahead of national powers such as Walgreens and CVS. Navarro is run by the Navarro family which founded it in Cuba in 1940 and reestablished the company in 1961 in Miami. The chain, which recently opened a new distribution center, hopes to expand into Palm Beach, Tampa and Orlando. With expansion into new markets, Navarro also hopes to attract not only Latino consumers, but a crossover shopping base, as well. Earlier this year, Jose Navarro, former president of the chain who now sits on the board, said he wants to build stores in "any suitable places we can fine in Miami-Dade or South Broward counties."

The Navarro family is also getting more visible in the industry. Jose Navarro is very active on the National Association of Chain Drug Stores' Board of Directors and he testified this week before the House subcommittee on small business concerning the Center for Medicare and Medicaid Services competitive acquisition program for certain Durable Medical Equipment Prosthetics, Orthotics and Supplies and its impact on small business. At a time when the industry is shrinking, Navarro is an example that regional players can still rule a market.

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