was able to see the important from the
less important. He was action oriented
to not only visualize something, but
he has the ability to execute.
"He is an expert in interpersonal
relations and brings people together in
a way that allows them to achieve
their very best. Although he was inter-
ested in building a fine chain of stores,
he was more interested in building a
fine name. If the story of the three
crowns had one person in mind, it
would have been Eugene Applebaum,"
Hermelin said.
Applebaum made his money here,
so that could explain his intense devo-
tion to Detroit and the Jewish commu-
nity. But why all this concern about
Wayne State University? More than just
his alma mater, it is now his cause.
Applebaum, who rarely grants
media interviews, still has his office in
the nearly deserted Arbor headquarters
on West Big Beaver in Troy. Much of
the staff, integrating with that of
CVS, has relocated. Even Arbor's exec-
utive vice president and chief operat-
ing officer, Markus "Max" Ernst, who
was with Applebaum from the time he
opened his second store, opted for
retirement. But Applebaum stays on,
his office surrounded and filled with
20th-century contemporary art —
much of it by Michigan artists — that
he has bought and enjoyed.
From here, Applebaum serves on
the board of CVS and oversees their
new store openings in Michigan and
Toledo, Ohio. CVS was smart to uti-
lize his highly regarded expertise in
real estate and site selection. "Every
new store we open now will have
drive-through service," he promises.

Building a chain

Make no mistake about it: the signs
of success are evidence that Arbor was
good for Applebaum even long before
he sold it. He started out in 1963
with the Civic Drug Store, his first
store, on Michigan Avenue and
Greenfield Road in Dearborn. Earlier
he was a pharmacist at Merrill's Drugs
on Greenfield Road near Fenkell in
northwest Detroit.
That now greatly expanded
Dearborn store is still a viable part of
the Arbor chain. In 1974, Applebaum
brought it together with six other
stores he owned to form Arbor. He
took the name from Ann Arbor,
which was a target for the company's
expansion. By 1981, Arbor had grown
to 19 stores. Later that year, it
acquired 11 former Cunningham
Drug Store locations. Arbor continued

Not content to take his
profits and ride off
into the sunset after the
Arbor sale — which made
him the largest shareholder
in CVS
Applebaum is
doing his share to make
this community continue
to grow.

its expansion with the purchase of the
Sentry Drug chain in 1986 and the
acquisition of the M&R Drug chain
in 1994.
Although Arbor was a giant by
regional standards — it was chosen as
Regional Chain of the Year by the
trade journal Drug Store News in 1995
for the second time in six years — it
still paled in comparison with the
industry behemoth, the Woonsocket,
R.I.-based CVS with almost 4,100
outlets. However, Arbor dominates
the local drugstore market with 48
percent of total sales in metro Detroit
and 45 percent in Ann Arbor.
In metro Detroit, CVS is locked
into a fierce, competitive war with
Rite Aid and area newcomer
Walgreen's Drug Stores. Check out an
Oakland County location where you
find one, and the other two will likely

be a stone's throw away.
Applebaum and Arbor escaped the
pitfalls of those who fell by the way-
side in Detroit's drugstore wars, pri-
marily Perry Drug Stores (which was
bought out by Rite Aid), the once-
powerhouse F&M discount chain and
Revco Drug Stores, now part of CVS.
Why did Arbor thrive? Applebaum
said his prescription for success was
"realizing early on in my career that
our business was running a drugstore.
We were a drugstore — that was our
focus — not auto parts, sporting
goods or full-line groceries. No clutter.
No dilution."
Perry's highly touted and expensive
foray into an auto parts sideline hurt
the company's fortunes in the views of
industry analysts. At Arbor, reflecting
Applebaum's determination to concen-
trate upon his core business, pharmacy

accounted for 51 percent of total sales
by 1997.
According to a source close to the
local drugstore industry, the major dif-
ference between the .sale of Arbor to
CVS and that of Perry to Rite Aid was
that Applebaum sold very judiciously
while "Perry sold terribly low."
Perry did well with its public stock
issue in the early 1970s, but eight
years later, before the company was
sold, the shares had dropped from the
upper $30 - low $40 range to $11, the
ultimate selling price.
One of the reasons analysts said
Perry encountered financial problems
was its rapid diversification. At first,
Perry introduced auto parts into its
stores, then built and acquired free-
standing Auto Works stores to further
the merchandise sideline. The compa-
ny also expanded into health care.
Perry concentrated on Oakland
County where the operating expenses
were higher. Arbor, meanwhile, devot-
ed its effcrts to finding lucrative niches
in downriver communities like Ecorse
and Melvindale in Wayne County
"Within a short period of time,
Perry drove up their debt service. But
Arbor, under Applebaum, had a formu-
la that was highly successful. They kept
at it and never stopped. Perry expanded
into eight states. When Arbor tried an
out-of-state operation, they quickly dis-
carded it when they found it didn't
work," the industry source said. He
added: "Arbor has made money every
quarter in their existence."
Arbor reinvested its earnings into
refurbishing stores, bringing in
advanced technology and developing
employee-training programs. During a
five-year span in the early 1990s,
Arbor remodeled 70 percent of its
stores and invested $10 million in
advanced pharmacy systems.
Jack Robinson, Perry's founder, did
not return a call to his Bloomfield
Hills office seeking his comment for
this story.
In 1997, Arbor's last year as an inde-
pendent, the chain pushed net earnings
up a strong 27.4 percent to $34.4 mil-
lion. Sales that year approached the $1
billion mark with same-store revenues
up a solid 10 percent.
According to a spokesman for
Applebaum, the company was
approached by CVS with an offer to
purchase it at 38-plus-times earnings. As
in the case with all such offers, it was
presented to Arbor's board of directors,
which voted to accept it. One key factor
said to have played a role in
Applebaum's enthusiasm for the deal

1/15
1999

Detroit Jewish News

75