Bergen Brunswig Looks North With $1-Billion ShopKo Deal

Bergen Brunswig Corp., expanding its reach across the Northern states, said Thursday that it has signed an exclusive contract to supply ShopKo Stores Inc. with pharmaceutical products for the next five years.

The deal with the Green Bay, Wis., company is expected to eventually generate $1 billion in sales for Bergen, with an average of $200 million in annual revenue.

The agreement gives Bergen a major stake along the Northern tier as it distributes goods to ShopKo’s 118 stores in the upper Midwest, Mountain and Pacific Northwest regions.

Under the contract, ShopKo also will use Bergen’s computer-based product and information management system, which will expand ShopKo’s ability to centralize its pharmaceutical purchasing.

Bergen’s automated distribution system and other assets are “very high quality, state of the art,” said Kevin E. Silverman, an industry analyst with Kemper Securities in Chicago. “The company seems to have a new urgency to do better.”

Bergen, which has been going through a corporate restructuring, also has been working to lower its overhead to compete with other major drug distributors such as McKesson Corp. in San Francisco, said William Jelin, an analyst with Hamilton Investments in Chicago.

The contract with ShopKo isn’t a big one considering Bergen’s overall sales--$6.8 billion for its fiscal year ended Sept. 30--Jelin said. Silverman figures the $200 million in annual sales will amount to 2.6% of the company’s expected revenue this year of $7.7 billion.

“Anyone would love to have this contract,” Silverman said. “In terms of percent addition to revenue, it may seem small, but that’s a reflection of how big Bergen is.”

Officials of the companies could not be reached for comment.