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"The Rexall Tradition"

Stephen Barrett, M.D.

Rexall Showcase International (RSI), launched in 1990, is a direct marketing ("multilevel") company that sells weight management products, homeopathic medicines, personal care products, nutritional supplements, and water filtration systems. It is a subsidiary of Rexall Sundown, Inc., of Boca Raton, Florida, whose stock became listed in 1992 on the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System.

RSI was originally described to prospective distributors as "the newest member of the Rexall Family of Companies, one of the best known, most successful corporate families in America." [1] The initial distributor kits indicated that RSI intended to capitalize on the Rexall name, "the trust that goes with the name, and the warm fuzzy childhood memories associated with Rexall drugstores." According to an RSI brochure, a survey of more than 30,000 households found that 75% recognized the Rexall name and that trust in the name was "exceptionally high." [2]

Rexall's Roots

In the video "Why Rexall Expands to Network Marketing" (1990), Rexall Division's Chief Executive Officer Armend Szmulewitz provided a brief history of Rexall's development:

In 1903, a gentleman named Louis Liggett decided to do something with the independent pharmacist. Those pharmacists were providing medical care to the individual people. Not the medical care we're used to today; it was done on an individualized basis. Lou said, "If I can pool that strength . . . I can come up with a method of taking individual pharmacists and individual markets and bringing them together into a national organization." It began what came to be known as "the Rexall concept." In the beginning it was called United Drug.

According to Szmulewitz, Liggett developed products that pharmacists "could proudly prescribe on an over-the-counter basis to their patients. That's really the beginning of what we call today OTC, but in those days they were called patent medicines. . . . In 1903 . . . . the pharmacist was the doctor in the town. . . . He worked in concert with the [medical] doctor." Liggett called his line Rexall Products [short for 'Rx to all.']. As the Rexall name gained recognition, Szmulewitz continued, "the items became stronger than the store" and the stores became Rexall stores. In the mid-1980s, the Rexall name and distribution rights were purchased by RSI's parent company.

"With that name came a great tradition," Szmulewitz asserted. "We asked, 'How do we get back to what Rexall was, bringing it back to the person, to the independent pharmacist?' We can't do that. But the person-to-person concept will work-bringing the Rexall store to somebody's house." Noting that people typically take only a second to decide whether to buy a product on the shelf, Szmulewitz said that RSI's story needs to be told in a different format: "Very similar to how the independent pharmacist told it many times. The consumer came in, 'Doc I got something wrong, what do you think? They [pharmacists] spend the time. 'Tell me what's wrong.' 'This is what you need. This is what I think will help.'" Szmulewitz continued: "If we can explain it to someone, if we can train them on how to sell it, train them how to use it, train on what the benefits are, and have those people explain it to other people, we've now brought back what always worked in the Rexall concept: One person talking to another."

What Really Happened

An article in the March 1, 1982 issue of Business Week magazine provides a somewhat less glowing perspective. It states that the Rexall name had once appeared on about 300 company-owned stores and 12,000 franchised outlets (about 20% of the country's drugstores). During the 1970s, however, Rexall was unable to withstand competition from rivals that built modern outlets in high-density shopping areas. In 1977, the chain was sold for $16 million to a group of private investors, which divested itself of the stores, pared its manufacturing capacity, and became primarily a distributor of vitamins, health foods, and plastic products such as toothbrushes. Former franchisees were permitted to keep using the Rexall name, but a former company official said this might not promote Rexall products because some of the stores were "eyesores" that conveyed a negative public image [3].

In 1985, operating control of the Rexall name and distribution rights were acquired by Sundown Vitamins, Inc., a company founded in 1976 by Carl DeSantis. DeSantis, who had worked in advertising and management for Super X Drug Stores and Walgreen Drug Stores, became board chairman, chief executive officer, president, and principal stockholder.

When RSI formed, although many pharmacies still carried Rexall products, few still used the Rexall name. In 1992, I inspected 20 Yellow Page directories selected randomly at the Allentown public library and found only three "Rexall" pharmacies out of about 1,000 listed. Moreover, the law limits what pharmacists can do when people ask them to recommend products.

In April 1993, Sundown Vitamins changed its name to Rexall Sundown, Inc., shortly before raising $32.9 million by selling 2.5 million shares of its stock to the public. For fiscal year 1998 (September 1, 1997 through August 31, 1998), Rexall Sundown reported total sales of $530.7 million, with $158.9 million attributable to Rexall Showcase [4].

References

1. Rexall Showcase International. Dedicated to your health & wellness. Flyer, Oct 14, 1991.
2. Rexall Showcase International. Rexall. . . . today!: Building for the future on a 90-year heritage of trust. Undated brochure acquired in 1992.
3. The Rexall Rx: Dropping out of retailing to be a distributor. Business Week, March 1, 1982, p 85.
4. Rexall Sundown, Inc. 1998 10K report to the Securities and Exchange Commission.

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This article was posted on July 19, 1999.