The modest R.I. beginnings of a national giant
Many in Rhode Island aren’t aware of the size of hometown company CVS Health.
It now ranks seventh on the Fortune 500 list of biggest firms in America — its $177 billion in revenue larger than General Motors, Ford, AT&T and Amazon.
Even more astonishing, if it completes its purchase of Aetna, which has $63 billion in revenue, CVS will likely surpass Berkshire Hathaway, Exxon and Apple to become the nation’s second-largest company, behind Walmart.
It’s a great American story that began May 9, 1963, when two Rhode Island brothers opened a single “Consumer Value Stores” selling health and beauty products in Lowell, Massachusetts.
Today, CVS runs 9,600 stores.
I wondered how that first one got started, so I called Stanley Goldstein, one of the founders.
Now 83, he was 28 when he and his brother Sid launched CVS along with a partner named Ralph Hoagland.
The company’s headquarters are in Woonsocket in part because that’s where Stanley and his brothers grew up, on the first floor of a three-decker on working-class Burnside Avenue.
Their dad, Israel Goldstein, ran a business selling bags and other paper goods to grocery stores.
As a small sideline, along with older sons Larry and Sid, he also supplied items such as toothpaste, shampoo, shaving cream and Band-Aids marketed on small shelves by the cash registers.
But things got tough in the 1950s when grocery wholesalers began selling their own paper goods, so the Goldsteins came up with a novel idea:
Expand their health and beauty items to the grocery’s aisle area.
They started a company called Mark Steven, named after the family's first grandchild, which stocked what would now be called grocery drugstore aisles. Back then, their selection was a third as big or less.
After graduating from the University of Pennsylvania in 1955 and then serving two years in the Army, Stanley joined the firm as the Connecticut salesman. The company supplied a few hundred grocery stores, but the margins were low so they weren’t getting rich.
Stanley decided to become a stockbroker in Providence, but a year or so later, in 1962, his eldest brother Larry died in a small-plane crash coming back from a business trip. Not long after, Sid, 33, called Stanley, 28, and said there was something he wanted to talk about.
The two sat down in Sid’s Woonsocket den on Woodland Road. Sid was a straight talker, so he cut right to it.
“Larry’s gone,” he said. And their dad had recently died, too. “I’d really like you to come back.”
The timing was right — the stock market was down, so Stanley’s business was lousy. Plus, he admired both Sid and the firm’s other senior executive — Princeton grad Hoagland, whom they’d hired from Procter & Gamble.
The three executives had just the right mix.
“Ralph was the wild man who’d push the envelope,” recalled Stanley. “Sid was quite conservative. And I was in the middle.”
Just then they faced a new challenge. Grocery wholesalers had started competing in health and beauty products themselves. The writing was on the wall.
The three began to consider a complete change.
“We looked at nursing homes,” said Stanley, “roller-skating parks — all sorts of crazy stuff.”
Then Sid called Stanley and Ralph into his office saying he’d read about a small Pennsylvania chain called White Cross that sold discounted health and beauty products in freestanding stores.
Up until then, the only places that carried those were grocery aisles and small selections in pharmacies that were mostly about medications.
The three were intrigued — but could it be successful?
Ralph Hoagland went down to McKeesport, Pennsylvania to research it. He’d stand outside the White Cross stores counting how many people walked by and what percentage went in. He looked through the windows and wrote down the price of each purchase that popped up visibly on the cash registers so they could analyze average sales.
Back in Woonsocket, the three agreed the numbers looked promising.
They decided to open a discount store of their own and picked a low-income area of Lowell, feeling bargain prices might work well there.
That first store is featured in most CVS histories, but Stanley said they actually opened two, the second a week later in Haverhill. That way, succeed or fail, they’d have a better sample.
They did two things differently than the Pennsylvania model.
First, they made their stores and selections bigger.
And second: “We made each department better than its competitors,” said Stanley. “If you’re going to carry candy, make sure everyone says, ‘Wow, that’s where you want to buy your candy.’”
Sid decided to call them “Consumer Value Stores” to emphasize the discounts. But Stanley today chuckles and says the signage soon made them change their minds:
“All those letters cost a lot of money, so we shortened it to CVS.”
They were nervous about whether the stores would work. About three weeks after opening, Stanley sat down in a Lowell doughnut shop with the raw numbers.
He took out an envelope and began to add up sales, payroll, utilities, rent — everything. He looked at the bottom-line and this is what he thought:
“This could be a hell of a business.”
Fifty-four years later, that business is on the brink of becoming the nation’s second-biggest company.
I asked Stanley, who retired as CEO in 1999 and from the board in 2007, if there’s a philosophy behind the CVS success.
“It’s as simple as listening to your customers,” he said. “Don’t think, ‘Let’s make a profit this way or that way.’ You satisfy your customers, you’ll do fine.”
Not long ago, Stanley Goldstein, who lives in Providence, drove by the old house in Woonsocket to remember his three-decker beginnings.
He says he remains amazed that the family’s grocery-aisle venture went from there to where it is today.
mpatinki@providencejournal.com
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