By HILDY MEDINA

Staff Reporter

Now that Rite Aid Corp. has finished digesting the more than 1,000 Thrifty and PayLess stores it acquired in 10 Western states, the company is focusing its most intense marketing efforts in L.A.

The first phase of a $225 million ad blitz will begin in Los Angeles, where about $8 million will be spent on weekly television and print ads. Rite Aid also plans to open around three dozen stores in the state this year the beginning of an aggressive expansion effort.

"We see a lot of opportunity here," said Martin Grass, chief executive of Rite Aid. "By 1999 or 2000, I wouldn't be surprised if we were opening 100 new stores in California each year."

When Camp Hill, Pa.-based Rite Aid purchased both Thrifty and its sister company, PayLess, in 1996, L.A. instantly became its biggest market. But the coming months are a crucial time, say analysts, as the company rolls out a marketing effort to introduce West Coast consumers to the new brand name.

Rite Aid faces a neck-and-neck battle with Sav-on for market share; each have about a 25 percent share of the area's drug store market.

"It's down to how well they execute the conversion and how well the advertising comes across," said Mark Husson, an analyst with J.P. Morgan Securities in New York.

While Thrifty conjures up fuzzy memories of buying ice cream for 15 cents, Rite Aid hopes to be seen as a state-of-the-art, no-frills drug store.

"We want to get the pharmacy message across," said Grass. "Thrifty and Payless were not as strong in pharmacy as we believed they should be."

Some Thrifty and Payless stores are being renovated to include drive-thru windows for picking up prescriptions (the converted Rite Aid store on La Brea Avenue and Rodeo Road in South Los Angeles features one).

Rite Aid will also include such new technology-based services as allowing customers to order prescription refills through the Internet.

Rite Aid also plans to renovate a majority of its outmoded Southern California stores, shifting floor plans around and changing the merchandise mix to focus more on drugs and less on discount merchandise a staple at Thrifty/Payless stores.

The company will spend about $500,000 per store on renovations. "You're going to see a much better looking store," said Grass.

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