Hall of Fame Profile: Alex Gourlay
Alex Gourlay, Co-Chief Operating Officer at Walgreens Boots Alliance, is one of three 2020 selections for the Path to Purchase Institute Hall of Fame. We interviewed him in March at Walgreens headquarters in Deerfield, Illinois
In recognition of his efforts in helping Walgreens respond to industry disruption and become a customer-centric, omnichannel retailer that is ready and able to address the ever-evolving healthcare needs of consumers, Alex Gourlay has been selected as a 2020 inductee into the Path to Purchase Institute’s Hall of Fame.
Walgreens Boots Alliance’s co-chief operating officer since 2016, Gourlay is responsible for the execution and transformation of both the Walgreens and Boots businesses, as well as for overseeing global operations. From 2014 until February 2020, he also served as president of the Walgreens chain, guiding one of the nation’s largest drugstore retailers through a period of massive change. Before joining Walgreens in October 2013, Gourlay was chief executive for the health & beauty division of Alliance Boots, the UK-based pharmacy with which U.S.-based Walgreens began merging one year earlier.
The Institute was first introduced to Gourlay in March 2014 when, as the retailer’s president of customer experience and daily living, he participated in a keynote “fireside chat” at the Shopper Marketing Summit in Chicago.
In March, Bill Schober, Peter Breen and Tim Binder interviewed Gourlay at Walgreens Boots Alliance’s headquarters in Deerfield, Illinois.
Title: Co-Chief Operating Officer
Company: Walgreens Boots Alliance
Education: Pharmacy degree from University of Strathclyde
• Pharmacy student, part-time store associate, Boots the Chemists: 1976-1981
• Pharmacist / Regional Store Manager, Boots the Chemists: 1981-2000
• Head of Stores Human Resources, Boots the Chemists: January 2000-2003
• Healthcare and Property Director, Boots the Chemists: 2003-2006
• Managing Director, Boots UK Ltd / Alliance Group Operating Committee: 2006-2009
• Chief Executive, Health & Beauty division, Alliance Boots, January 2009-October 2013
• President, Customer Experience /Executive VP, Walgreen Co.: October 2013-September 2014
• President-Elect Walgreen Co.: September 2014-December 2014
• President Walgreen Co.: December 2014-February 2020
• Co-Chief Operating Officer Walgreens Boots Alliance Inc.: June 2016-present
• Fellow, Royal Pharmaceutical Society of Great Britain
• Past Chairman, National Association of Chain Drug Stores
• Director, Retail Industry Leaders Association
• Director, World Business Chicago
Judging by your accent, you didn’t grow up in Deerfield. Could you tell us about your background?
Gourlay: I grew up on the north side of Glasgow, Scotland, which is really similar to Chicago because it is a very working-class city. My mum was a housewife, and I had a pretty ordinary, working-class background, going to comprehensive schools and learning how to work hard to make a living. My father was a coal miner, originally, but then he got into further education – which in the UK was around community centers – so he progressed through life and did very well for himself. I learned the value of hard work and always having another ambition from him.
Did you have any jobs as a kid?
Gourlay: My first job was collecting divots from a local golf course after school, and putting the sand and the seed back. But I joined Boots as a 16-year-old on the “chemist counter,” serving people with over-the-counter medicines. I also helped in the warehouse, doing what’s called “porter work,” which is basically cleaning up when people spill things or someone is not so well – I’d be called to go clean it up.
Was there something special about Boots for you?
Gourlay: Boots was always a place I remember going to with my mum and, in particular, whenever there was someone ill in the family. I can recall on these visits how intense the conversation was, and occasionally it was about me: I’d be feeling off color or something. We’d always get solutions, so I had a positive, warm feeling about being in that local Boots store.
You went to University of Strathclyde for a pharmacy degree and qualified in 1981. Was it Boots that made you want to be a pharmacist?
Gourlay: I think so. It was more intuitive than thought through. I also quite enjoyed the thought of a career in retail, and Boots was and is very well-respected as an employer in the UK. For me, it was an obvious choice. It was never really in doubt, to be honest.
Did Boots have any kind of scholarship for you?
Gourlay: Yes. I worked throughout school part time, Saturdays, every holiday – whenever I could. Then, in the summer months, there was placement where pharmacy students could come in for their 8-10 weeks of vacation and learn over-the-counter medicine, which is a big deal in the UK. You begin to understand the practicalities of working in a community pharmacy as a pharmacist.
We’ve learned over the years that, in Walgreens’ culture, the pharmacist runs the entire store, which is different from mainstream retail. Was it the same way in the UK?
Gourlay: If you go back to the 1980s, almost every senior role in Boots would have been a pharmacist, all the way up to my generation. All models evolve, but you are right when you say that Boots and Walgreens have the mindset of a pharmacy company: Pharmacists build trust and relationships, and at the end of the day, we’re always on the patient’s side. The mindset is: Is it right? Is it safe? Is it quality? Can we help the patient understand what they’re taking and feel better about it?
I’ve signed many, many letters for people who have worked even longer [for Boots/Walgreens] than I have. People stay because they like the culture, they like what the company stands for and, most importantly, how it puts the patient before profit.
After college, you joined Boots full time in 1976. How would you describe your climb through the company?
Gourlay: Random. Never deliberate, to be honest – I just enjoyed what I did. I loved running shops, and we moved probably a dozen times. I am grateful to my wife Margaret and our children Nicola and Natalie, who are all fantastic and were so supportive in pulling up stakes and moving homes with me, from Scotland to the North of England, to the Midlands.
It wasn’t like Walgreens where most stores are the same size. Boots had all types of sizes, and generally speaking, you’d get more and more responsibility with each bigger shop: small pharmacies, then middle-sized pharmacies and, eventually, large drugstores or health & beauty stores. In my mid-30s, I ended up running one of the biggest shops in Leeds.
I enjoyed solving problems with other people and never worried much about who got the credit. Eventually you start to get noticed and people want to have you on their teams. That’s how careers happen inside a company.
When did you become part of Boots corporate?
Gourlay: I’d been an area manager for two years when the company restructured. Grocery was becoming very big in the UK, Tesco in particular, and the business was under a bit of pressure. Because I was the youngest area manager and thought to have strong people skills, in 2000 they asked me to become part of Human Resources. I led stores’ HR and personnel, and it was an incredibly important couple of years for my personal development, because that’s where I learned how the business model worked and built stronger people skills.
In HR, I got a chance to understand how the organization came together. Since I knew a lot about store operations and the customer-facing side as well, I was given a lot of big problems to solve. I wasn’t trained in formal HR policies and procedures, so I think I was a little bit freer to become a problem-solver and a change guy. It was a very important couple of years for me.
I also did property, health, and commercial pharmacy because I was good at transforming costs. Then, in 2007, the business was taken private by [investment firm] KKR and [Alliance Boots executive deputy chairman] Stefano Pessina. Stefano asked me to first take on the role of head of Boots’ operations. Then, about a year and a half later, he asked me to become the CEO of the health and beauty division, which was Boots and all the brands and some other operations.
Were there any mentors along the way?
Gourlay: For sure, my current boss Stefano Pessina has been the most important. I was always very curious about what I didn’t know, so I could name another five or six people who were fundamental in my development. I’d argue with them for months and then finally realize: they were right. For me, it was all about the dialogue and so they would challenge me, push me, debate with me – and then I’d see the light.
Why were you picked to come to the U.S. and work with Walgreens?
Gourlay: Walgreens was looking to develop its model. Their CEO, Greg Wasson, who is a great guy, had seen an opportunity to understand the retail and wholesale sides of Alliance Boots and also generally realize synergy in costs and buying. After the first stage was complete, the Walgreens board bought part of Alliance Boots and they were looking to start the integration. It was also very clear that the second stage was going to happen. They had a vacancy here for the front-end merchandiser after Joe Magnacca took on another role. I was not a perfect fit – my experience in the front end was primarily as president of Boots in the UK. But Greg and Stefano agreed that it would be a good idea to bring me across.
I agreed to come initially for just a couple years to help with the integration. [Current Walgreens President] Richard Ashworth went the other way [over to the UK] and became the head of healthcare at Boots. Richard and I were very lucky because we were both like foreign-exchange students, except that he came back [to the U.S.] and I’ve stayed.
Soon after you came to Walgreens, you spoke at our Summit and discussed Walgreens wanting to “go big” in beauty. Looking back now, six years later, has Walgreens succeeded there?
Gourlay: I would say we’ve gone big in skincare. Walgreens was already pretty strong in cosmetics because that’s such an obvious item that customers pick up in a drugstore. But skincare was one of the bridge categories between pharmacy and health & beauty because in skincare, you often start off with a skin condition, and then can end up with a low-cost or a high-cost beauty product. Many shoppers can move through that whole spectrum as a solution very quickly. So I would say that we’ve done our job well in skincare. We introduced the No7 brand, which really is a skincare brand based on strong technologies – for example, the serums. We’re now at “Beauty Differentiation Three,” which is the third phase of developing all of the beauty strategy.
We’ve had to figure out, which is more difficult, exactly how to make an efficient model in America. Because Boots was definitely positioned in the UK with a very big share in beauty, and most of the manufacturers, including the premium manufacturers, went to Boots for almost everything. So we had to evolve the image, the customer proposition and the service standards at Walgreens over a much longer period of time. I would say we’re probably about one-third of the way through changing the overall image to becoming what I call “health, wellness and beauty specialists.”
How would you rate your progress thus far?
Gourlay: Walgreens is 117 years old. If you think back to [the history display in Walgreens’ HQ lobby], you saw the self-service drugstore of the late 1980s. That model is gone now. CVS is changing; others are selling out, to be honest; we are changing. Our aim is to become a much more personal, community-based, pharmacy-centric, health, wellness and beauty specialist.
But we don’t always have to do things by ourselves. To be really specialized in a modern world, you’ve got to go deep and invite partners into your brand and your supply chain to build a different type of model. That’s what we are trying to do.
So it hasn’t been a straight road – I won’t deny that. And if you speak to the short-term analysts in the street, some haven’t recognized the progress. But I think inside the business, people would say that with 4,000 beauty consultants, with No7 in well over 6,500 drugstores, and with profitability of our front-end model being substantially, remarkably stronger than it was five years ago, I’d say, “Yeah. We’ve done OK.”
When did you become president of Walgreens?
Gourlay: I’d spent about a year running the front end when Greg appointed me to be president in January 2015. I passed that baton on to Richard [Ashworth] in February, so I did five years as president and three years also in a joint role of co-COO.
How did your job change when you added the larger, global role to your duties as president of Walgreens?
Gourlay: The first three years working at Walgreens was really all about kicking off the transformation. We started to build on three massive investments: a new pharmacy system and a front-end system, and then on top of that, digital technology. The focus to become a modern digital- and data-driven Walgreens really started back then.
There was also a ton of work to grow the market share in prescription volume. If you recall, we’d lost a lot of volume in a fallout with Express Scripts. We did a number of different things to recover our pharmacy volume with other partners in the marketplace.
So we recovered our pharmacy volume, and then we started to work on two other areas. One I would call the overall brand of Walgreens, becoming much more of a healthcare-centric brand. It’s early work on that piece as well, but we’ve tried to really position Walgreens as “Trusted Since 1901.” People ask me, “Why did you move away from ‘Happy & Healthy’?” Well, it was an interesting sign-off, but if you look at what we’re doing and where we’re headed, it was almost ahead of its time, to some extent. Let’s remind people that, fundamentally, we’re a healthcare company.
It also became clear that we had to have more value, so we started investing in our pharmacy business in terms of pricing. And that’s been very successful in generating volume. We just kicked off a very strong program to change how our people feel about being in charge of the stores. We call this program “Frontier,” and it’s all about problem-solving in front of the customer without having to wait for direction from the operational head office. That was a big program of change. We tried to free people up to spend more time with customers, such as the beauty advisors, and in many other things we do.
Then we looked at the assortment. People said, “Your stores are confusing, and overloaded with products; curate your products better.” So we did a lot of work in beauty and healthcare, developing much more information on the shelves by working with many of our suppliers. We also converted all our photographic labs and really kicked on that business. We started looking at seasonal to become much more of a gifting destination.
That was the first three years of the effort, but then we stood back and said, “It’s not enough.” This marketplace is rapidly changing and we can accelerate our work, so we kicked off “Project Greens” about two years ago. We asked Kroger to help us with food because, while food is important to us, we just didn’t have the brand nor the depth of experience ourselves to do this quickly enough. Project Greens was also about us getting into the “last mile,” and we did that in particular with our FedEx partnership. We also worked on many healthcare partnerships which are all in the early stages of development, such as primary care, optical and labs.
Sounds like there was a lot to consider.
Gourlay: The last two years, after I took on the co-COO role, I really stepped back a bit from Walgreens to look after Project Greens and the development of digital and supporting the new hires in marketing, IT, innovation and communications. We’ve really focused on going for that customer view and giving better curation, product assortments and experience.
I’ve worked with Richard really closely for four years, and in the last year, Richard has more and more been running the day-to-day and I’ve been trying to develop the new model. It’s a big job when you’re transforming a business that’s already as successful as Walgreens is and so important to the American community.
It’s amazing how people come to Walgreens right now, in this COVID-19 situation, because they trust us. Walgreens is the pharmacy America trusts – above any other name, in my view. We see that all the time and we are determined to modernize Walgreens and make a great customer/patient experience. We are very confident and have a ton of work ahead of us, but the investments pay off in the moments like these, serving people who are really worried.
One member of the team said to me yesterday, “Customers are very concerned about COVID-19.” Our teams are keeping them calm, advising them on what to do and explaining how they should take care of their families. It’s great to see, and it’s why Walgreens, as a pharmacy-led healthcare company, is so vital to the communities we serve, and the reason why Walgreens will never disappear from the American landscape. Never.
How is the partnership with Kroger progressing?
Gourlay: We both saw the same problem at the same time. We speak to everyone – “Alliance” is our last name, our middle name and our first name – so we really believe in partnerships. Our strategies aligned because Kroger is also trying to create a digital environment and become “the grocer America trusts.” So we worked on what we could do together. We’ve done two market tests in northern Kentucky over the past 12 months, and they continue to do well; now we’re in Knoxville [Tennessee]; and we are also starting up a joint buying group.
Designing something for the future of your company takes a while. We’re making good progress, and we’re very comfortable with each other. If it works for the customer, the shareholders and for both sides, then we will continue to do it.
With your Microsoft partnership, the phrase that jumps out is “transforming the future of healthcare.” What does that mean and where does it take you?
Gourlay: We bring the frontline of healthcare to American communities with pharmacists working with primary care physicians, healthcare providers, professionals of all types. We also have an app that’s been downloaded almost 60 million times and a loyalty program that’s used by 100 million Americans. But while we’re deep into communities and we’ve got deep human expertise, we don’t have the modern technical expertise that you need to bring all that alive as a digital company.
The phrase that I really like is: “Walgreens and partners: human kindness, with digital magic.” That’s what we are trying to do. It’s a massive task to drive consumer accessibility and value in the healthcare marketplace. A lot of Americans have no idea how much it is going to cost when they get ill.
Lots of people right now are walking into Walgreens, CVS and other pharmacies and asking the pharmacist, “How do I protect myself and my family from this virus? What is it that I need to do to take control of my health?”
Also, everyone recognizes that, with 20% of American [gross domestic product] being spent on healthcare, which is double what’s spent in many other countries, and a healthcare system that’s not any more successful than other systems, there’s a massive opportunity for consumers, patients and caregivers to have a transformed healthcare marketplace.
That’s the job we are on. We believe we’ve got the right partners, and that we’re able to provide the right support, but we have a long way to go to make it happen. We accept that. The good news is that many of our key competitors – Walmart and CVS in particular – are on the same journey, for the same reasons. And we wish them luck because if they are successful, we all – Walgreens, consumers, patients – will be successful as well. American consumers should have much better options five years from now in how they choose to use healthcare. That’s what we are trying to do.
The drone delivery test is not widespread, but everyone wants to know about it. What are you learning?
Gourlay: It’s going well. It’s a long-term play. It’s with Wing, an Alphabet company, and they are flying commercial drones today in Christiansburg, Virginia, where the delivery area covers thousands of homes. They are delivering more than one hundred SKUs. They are the only company that I’m aware of that is actually flying drones today on a commercial basis. We’re very keen to expand that service to other regions, slowly, under their guidance, and to expand into other healthcare products and prescriptions. It’s the start of a long journey. Like everything else in innovation, what will be normal in 10 years seems crazy sitting here today. But I can assure you that the statistics are good, people are receiving wellness products such as OTC medicines, tissues, toothpaste and even their [potato] chips by drone today, and it’s all working well and safely. I can’t say much more on this phase. There won’t be a scale service for a while, but it’s a step-by-step process.
Will it wind up being mostly chips or mostly prescriptions that get delivered?
Gourlay: I don’t know. It’s clearly going to be young people using it at first because it’s great fun and more convenient, as they are so used to everything being at their fingertips today. The behavior will catch on very quickly, I think. And when you have conditions like the coronavirus situation, if we had a full-line drone service right now, I’m sure people would be using it.
In terms of innovation, are you testing a lot of things that might never scale?
Gourlay: Ideas are free. But if you are not careful, they can complicate the operator’s life – and if you put yourself in the place of our operators, they might not always be happy about that. But I’m more of a problem solver, so I like ideas, and we encourage them from anywhere. You have to have a very clear process before you can say, “Ok, this is the one we are going to pilot.”
The great news for Walgreens is that we can scale quickly because we are already on 9,000-plus corners and have 100 million people using our loyalty card and 60 million people using our app. We are one of a half-dozen platforms that can scale quickly. Over the next five to 10 years, you are going to see a ton of stuff at Walgreens. You won’t see all of the gnashing of teeth and scratching of heads [behind the scenes], but you will see a ton of innovation because we have to innovate. The customer demands it, and the Walgreens brand deserves it.
Can we look at a few other partnerships? First off: Cooler Screens, which recently expanded.
Gourlay: Cooler Screens started off as an interesting idea, and I have to say the world of digitalization and data and mass personalization is a really powerful concept. We had some local innovators who were willing to test it with us. I think this kind of technology could also scale quite quickly across grocers. Customer adoption has been pretty good, and we are working our way through important matters of compliance to ensure a positive experience for consumers.
Gourlay: FedEx has been successful. Being able to drop off or pick up products in your local Walgreens has gone really well. We ramped up just beyond the rate we expected.
I see some of the competitors marketing directly to pick up in their car park. We think that’s ideal for us: car park pickup, drive-thru 2.0 and internal pickup – fantastic. The last mile is a big part of the strategy that’s working really well, but we’ve got more work to join up the partnerships and the data and make it even more convenient and an overall better experience for customers.
Gourlay: Birchbox was really about two things: Could we sell subscription models in a pharmacy and would people pay to have beauty products regularly delivered? And secondly, how could we improve our digital, physical experience for beauty customers so they get access to more brands and independent brands, in particular, because Birchbox had tons of hot, new brands that can sometimes come and go very quickly. Can Walgreens become more famous for beauty innovation?
So that’s still in test and trial. Customers love the idea of it, but it is not a particularly efficient model in our drugstores, so we’ve got more work to do to create it on the digital side, I think. Birchbox was really born out of a physical manifestation, so there’s more work to do there.
Gourlay: Jenny Craig just started, and it seems to be going well. It’s an obvious linking of fitness and health – as is Kroger. Jenny Craig is all about the experience again, being able to speak to a human being about prepared meals and how to take care of your health in a very different way. They are a great company and they are very appealing to our customer base. It only started in January, but we are very excited to see the positive reaction from our customers.
Does the future of the modern drugstore still leave room for more physical stores?
Gourlay: We are developing a format that we call “small drugstores,” similar to what you see in Europe: a pharmacy, OTC medicines, drive-through and pickup. We’ve got about 50 of them in the market and we’re really pleased with how they are progressing. It gives us the ability to get to new locations with a more organic model.
The marketplace is quite distressed at the moment with the reimbursement pressure. You saw this week that CVS bought [supermarket retailer] Schnucks’ pharmacy business, taking advantage of grocery chains wanting to change their model. So I think you’ll see the drugstore format changing. We see three models:
• The traditional convenience model, which you may call the health-and-beauty-specialist convenience model, which is pharmacy-centric.
• The small pharmacy with pickup and drive-thru, OTC and pharmacy, but at much lower costs so you can get to tighter spaces and provide good service – including digital services.
• And last but not least, a healthcare model with a primary care base pharmacy alongside doctors, physically and digitally. We’ve got three different tests in three different markets: with Humana’s Partners in Primary Care, with Southwest Medical Healthcare in Las Vegas, and with VillageMD in Houston.
Many of our readers are national-brand marketing people. What is your take on the power of national brands going forward?
Gourlay: Huge. From what I’ve seen over the last four to five years, the world has changed. The [big CPG] companies have been really smart to focus on their big brands and the things that really matter to consumers. They are hugely important to the marketplace. Hugely important.
In the U.S., I think, there are three platforms. There’s a Walmart platform; that’s 35% of the market. If you are a brand owner, you can’t afford not to be in Walmart, can you? And Walmart knows that. A second platform or marketplace is Amazon, and if you are a big brand who’s thinking of not being on Amazon, that’s a strange decision to make as well.
The third marketplace, I believe, is one I would call the “mass specialists.” These are people who are really good at what they do. We’re very good at pharmacy, OTC and healthcare, and getting better at skincare, wellness and beauty. Kroger is very good at food. So when you put a Kroger and a Walgreens together, digitally and physically, you start to create maybe a third marketplace.
Most uninformed CPGs would say, [such an alliance] means you want better cost of goods. And they are right; of course you want better cost of goods. But we also want to make sure that we offer access to more customers for the brands that we work with to ensure that we are creating a win-win.
So if I believe the drugstore channel is a thing of the past, then what’s the thing of the future? Well, it’s a mass specialist platform where the CPGs can work together with different models on a platform and reach more customers that don’t always want to go to an Amazon or a Walmart, but who do want to have the comfort of great value from a mass specialist.
Of course, I’m a bit biased when I say that. And maybe a bit hopeful. But I honestly believe it is an opportunity for both CPG companies and people who are truly good at what they do in their space. You can be good at many things, but you can’t be good at everything. People like specialists, they like to know they’re getting the best value, and they want to know in their most difficult moments that they are getting the best for themselves and their families.
So, to all of the manufacturers and CPG companies out there: All we desire are the very best products, the best innovation and the best marketing. We are always available to give you more customers.