The Rexall Story: A History of Genius and Neglect (review)

The Rexall Story is an idiosyncratic work. It is neither the history of a business, in this case the United Drug Company and its Rexall brand, nor a biographical sketch of Louis K. Liggett, its founder and the "genius" of the story. It is, rather, a potpourri of reminiscences, lengthy quotes from company newsletters and promotional material, and other bits of memorabilia, such as an agenda for a 1921 convention, a synopsis of a "modern business comedy" written and acted by company employees, and extensive quotations from Rexall-sponsored radio programs. It is not clear what to make of all this. Mickey Smith emphasizes that United Drug was able to develop a rapport with its franchisees that transcended a strictly business relationship, and much of his material tends to support that argument. Accordingly, the book is likely to revive memories and excite nostalgia among remaining "Rexallites" (as they are called). To those of us who do not fall within that select company, the value of the work is less obvious.

Rexall was actually the brand name of hundreds of products produced by the United Drug Company for its franchisees. Its founder, a former patent-medicine vendor, developed a simple but effective business plan for independent druggists early in the twentieth century: First, he reasoned that prescription drug compounding was on the way out, and that druggists would have to turn to merchandising in order to survive. Second, the key to adequate gross margins was to eliminate the middleman and allow druggists to purchase nationally promoted store brands (viz., Rexall) directly from the manufacturer. And finally, sales would be made only to franchisees, who would have appropriate territorial exclusivity. This formula worked effectively for more than fifty years. There were more than ten thousand Rexall franchisees, and hundreds, if not thousands, of branded products—ranging from aspirin to laxatives and candies, and even tobacco products—bearing either the Rexall name or another United Drug brand. According to Smith, what held the organization together was a steady flow of communication from the home office to franchisees in the form of newsletters, promotional material, training courses, conventions, and visits from "visiting reps."

The strongest part of the book is its discussion of Rexall marketing—understandable, since the author is a retired professor of pharmaceutical marketing. He considers Rexall's One-Cent Sale "the most successful and popular retail event of the twentieth century" (p. 73), and is especially laudatory of the way in which company-sponsored radio programs like the Phil Harris/Alice Fay show tied Rexall into program content.

But it all came a cropper. What went wrong? Smith is loath to assign blame. The target is clear: Justin Dart; his culpability is less so. When he became head of United Drug in the 1940s he reinvigorated the franchise operations—but then he moved to Los Angeles, purchased the Tupperware Corporation, and moved it along with Rexall into Dart Industries. That apparently was the beginning of the slide. Rexall was sold in 1977 to a group of private financiers, and all franchises were canceled in 1980.

There are many issues raised by The Rexall Story that one wishes Smith had discussed. What were the precise terms of the franchise agreements? How did United Drug justify sales to chains like Owl or its own Liggett stores that were in competition with its franchisees? How does an organization with an identity like Rexall preserve its core values in a conglomerate like Dart Industries? There are also tantalizing statements such as "Liggett would be involved in many legal and business battles throughout his career" (p. 7) that remain unexplored.

In the end this reviewer is left with one overriding question that he wishes the author had examined: Why did Walgreen, a company founded about the same time as United Drug that Smith acknowledges "provides an interesting parallel and contrast...