Guaranteed traffic and innovative marketing strategies are keeping supermarkets firmly rooted in health and beauty care. Even so, mass merchants continue to grab share of all HBC categories at the expense of food and drug channels. "Mass has a lot going for it -- price, variety and merchandising," said Don Stuart, partner at Cannondale Associates, a Wilton, Conn.-based consulting firm. "But the food channel will always have foot traffic to draw on."
Stuart sees opportunity for supermarkets in high-growth HBC categories, vitamins being the most noteworthy performer in 1998. That category leaped ahead by 18.2% in the food channel, propelled by demographics and the nation's general focus on health and wellness.
Competing formats are now scrambling to see how they can quickly capitalize on the stay-healthy movement. In the drug channel, Stuart pointed to the Rite Aid-GNC partnership, formed this spring, that will put mini-GNCs in 1,500 Rite Aid locations nationwide within the next three years. By placing nutritional boutiques in-store, Rite Aid -- through GNC, the country's sole national nutritional retailer -- is making the dietary-supplement category a destination for drug-store shoppers.
"There are opportunities for supermarkets to do a lot from a merchandising perspective [in the hot vitamin category]," said Stuart. "The linkage to food is very natural, so there is a great advantage in the channel."
The whole-health strategy being pursued by the food channel is expected to have a significant effect in retaining market share of the big-volume HBC categories. "Capitalizing on a whole-health strategy is one way for supermarkets to strengthen their cross-channel competitive image. Organic foods, natural HBC products and nutritionals and vitamins are synergistic categories that can benefit from a whole-health approach," said Roy White, vice president of the General Merchandise Distributors Council, Colorado Springs, Colo.
White cites Portland, Ore.-based Fred Meyer Inc.'s strategy of merchandising natural products directly behind produce as a key example. "They can really leverage those departments in-store to create an image," he said. Food Emporium, owned by A&P, Montvale, N.J., has also recently flagged natural products in-store and in its advertising rotos, said White.
Industry experts also say that supermarkets aren't -- nor should they be -- playing the price game anymore. "HBC used to be a not-for-profit category with some supermarkets," said one industry expert. "The channel has finally realized that their advantage is convenience, and convenience has a price. Let's face it, weekly trips to the store aren't going to stop."
Chris Hoyt, president of Hoyt & Co., a Stamford, Conn.-based consulting company, puts it more bluntly. "Wal-Mart can sell to consumers for less and make more profit. Supermarkets have to position themselves as a convenience channel and forget about lowering prices because they can't compete that way," he said. "They should shave categories so they are spending the minimum to be in the business."
With new products and line extensions crowding the market, supermarkets will be setting tougher criteria for weeding out underperformers. "There will be more sensitivity to what's true variety vs. what's duplication going forward," said Cannondale's Stuart.
The following provides a snapshot of how the Big 10 dollar volume HBC categories in supermarkets stacked up against the competition in 1998. The statistics are from scan data compiled by Information Resources Inc., Chicago, for the 52 weeks ended Jan. 3, 1999. As has been the case in previous years, mass merchandisers increased sales in all categories, seven of them growing by double digits. Supermarkets posted gains in six categories, while drug did better in seven of the leading HBC segments in the grocery channel.
Also, private-label growth in the food channel is noted, and so is its share of dollars in the top HBC categories within the food channel. Private-label information is for the 52-week period ended Dec. 17, 1998.
ANALGESICS 1998
VOLUME $1.1 Billion
% CHANGE 0
MARKET SHARE 36.1%
PRIVATE-LABEL SHARE OF CATEGORY 20%
% CHANGE + 1.9%
Supermarkets held steady in the pain-relief category, with no gain in dollars. However, unit volume fell 3%. While that's not great news, at least the food channel held onto its leading volume position among the two other competing channels. Total sales across all mass channels rose nearly 3% last year.
Drug stores came in just under supermarkets' volume and also experienced little gain in category sales -- less than 1% to $1 billion, holding a 35.4% share.
The biggest gains in the category were in the mass channel, as expected, with sales increasing 9% to $802.7 million.
The lackluster performance overall may be due to heightened consumer concern over the safety of using pain relief extensively. The Food and Drug Administration issued new labeling requirements last year to enhance consumer education on the safe use of the products. Few new products debuted to add excitement to the category. One key launch, however, was Bristol-Myers Squibb's Excedrin Migraine. It is Bristol's Excedrin Extra Strength formula repackaged as the first non-prescription pain reliever for migraine headaches.
The fastest growth segment within the category, gel-cap formulations, which account for 20% of category dollar volume, got a boost with Whitehall-Robins' Advil Liqui-Gels. The product switched over-the-counter last fall, claiming faster pain relief. Bayer Corp. also introduced Aleve Gelcaps. Category leader Tylenol held the No. 1 spot; Advil held steady in the No. 2 position, and Aleve continues to hold onto the No. 3 top-selling brand position. Private label accounted for 20% of category sales in supermarkets.
SANITARY NAPKINS/TAMPONS
1998
VOLUME $801.3 Million
% CHANGE - 0.4%
MARKET SHARE 42.7%
PRIVATE-LABEL SHARE OF CATEGORY 8.4%
% CHANGE + 4.1%
Supermarket sales were flat in the $1.9 billion sanitary napkin/tampon category in 1998. While total category sales rose 5.4%, the food channel recorded a 0.4% slip to $801.3 million. However, grocery stores continued to capture the biggest market share, followed by mass merchants, 34.6%, and drug stores, 22.7%. The other channels reported dollar increases; mass merchants saw dollar sales rise 13% to $650.6 million and drug stores rang up $425.4 million in sales at the registers, an increase of 5.7%.
Sluggish sales are even more disappointing considering the increased number of products retailers are carrying to offer consumers a complete selection.
Few new products have entered the market; Tampax Naturals, a 100% cotton tampon, is the only notable new entry. Sales of super-absorbent, winged napkins continue to dominate that segment of the business. Alway's led the category with a 26.4% share, Kotex followed with an 18.8% share and Tampax checked in with a 17.1% share.
TOOTHPASTE 1998
VOLUME $752.4 Million
% CHANGE + 2.4%
MARKET SHARE 46.0%
PRIVATE-LABEL SHARE OF CATEGORY 1%
% CHANGE - 18.3%
Supermarkets continued to be the consumer channel of preference when it comes to purchasing toothpaste. The $1.6 billion category was up 5.6% overall, but mass merchants outpaced everyone, increasing their sales by 14% to $577.1 million and lifting their share to 35.3%. Drug stores experienced a 1.4% decline in category sales to $306 million and trailed the other channels with a 18.7% share.
Toothpastes that do it all for consumers, such as Colgate-Palmolive's premium-priced Total and Procter & Gamble's Crest MultiCare, continue to drive the category. Soon after its introduction, Total became -- and remains -- the best-selling paste on the market. A second variant of Total was introduced under Total Fresh Stripe earlier this year. It has the benefits of the original formula, plus a strong mint flavor in the stripe gel form for breath protection.
Whiteners have continued to perform well and their high-price points of up to $7 for a 6-ounce tube raised margins and generated dollars for the category.
Consumers appear to be buying what branded products offer over the private label, which represents a small -- and declining -- portion of sales.
VITAMINS 1998
VOLUME $734.0 Million
% CHANGE + 18.2%
MARKET SHARE 23.5%
PRIVATE-LABEL SHARE OF CATEGORY 28.2%
% CHANGE + 10.1%
The $3.1 billion vitamin category was the strongest performer in HBC with category sales across all three channels jumping 24% in 1998. While supermarkets' 23.5% share trailed drug stores' 43.1%, and mass merchants' 33.4%, the channel had a strong increase. Only mass merchants, with sales at $1.1 billion, had a higher percent gain at 42%. The drug-store channel's 15.8% gain, a respectable percentage in any other category, appeared paltry in comparison.
Consumers couldn't get enough of vitamins, minerals and herbal supplements. Retailers scrambled to bring their own profitable private-label versions of the most popular products to the shelves; in supermarkets private label accounted for 28.2% of sales, a 10% increase.
The category will no doubt be the center of much activity and attention for some time as media coverage of natural remedies, such as garlic, ginseng, ginkgo and echinacea, continues to generate consumer trials. New entries by big-name pharmaceutical players, such as Warner-Lambert's Quanterra, Bayer Corp.'s Consumer Care Division's One-A-Day Specialized Blends and herbals, and American Home Products Corp.'s Centrum line of herbals, are sure to attract new users to the category.
COUGH/COLD 1998
VOLUME $675.1 Million
% CHANGE - 3.9%
MARKET SHARE 34.9%
PRIVATE-LABEL SHARE OF CATEGORY 17.6%
% CHANGE - O.3%
The $1.9 billion cough/cold category suffered a 3.1% dip across all three channels this year. Everyone, except mass merchants, took a hit. Mass increased sales 4.5% to $472 million. Drug stores pulled in a disappointing $786.2 million, down 6.4%.
Private-label sales also were off slightly. The category, including liquids, tablets and cough drops, represents 17.6% of cough and cold sales in supermarkets. This was off by 0.3% over the previous year.
An absence of any blockbuster introductions didn't help performance. Natural remedies, such as echinacea and zinc, continue to have a big effect on the category. Quigley's Cold-Eeze zinc lozenges, for example, have occupied the No. 2 spot in the cough-drop segment. The brand has been so successful that Warner-Lambert introduced its own Halls Zinc Defense brand this year. Whitehall-Robins moved its Robitussin into the herbal arena with the introduction of Robitussin Herbal with Natural Honey and Lemon Tea cough drops. It also added a honey formula to the cough syrup line. McNeil Consumer Products also placed emphasis on its Tylenol Flu and Sinus NightTime remedies.
Supermarkets using a whole-health strategy may have an opportunity to positively affect this HBC segment by cross merchandising with other synergistic categories.
SHAMPOO 1998
VOLUME $654.2 Million
% CHANGE + 4.5%
MARKET SHARE 39.1%
PRIVATE-LABEL SHARE OF CATEGORY 3%
% CHANGE + 12%
The middle market continued to fall out of the $1.6 billion shampoo category, while the value and the premium segments of the business performed well. Across all three channels, the category was up 7%. Mass merchants led with a 41.3% market share and sales of $691.1, an increase of 12%. Drug store sales of shampoo gained 1.9% to $327.6 million.
Value-priced lines, such as Suave and St. Ives, continued to generate sales, while higher-end niche lines answered consumers' specific hair care needs. Proving that it's a brand to be reckoned with, Helene Curtis' ThermaSilk, which has already grabbed a 2.8% market share, introduced several new stockkeeping units. The company also has launched Color Shield in its Salon Selectives line for the growing numbers who color their hair. It is formulated to help keep color from fading. P&G's Pantene continues to be the top-selling brand in all trade classes with a 14.3% share. Promising new introductions included Johnson & Johnson's Neutrogena Clean line, a beauty-oriented line that is a departure from the brand's therapeutic positioning.
DEODORANT 1998
VOLUME $624.5 million
% CHANGE + 1.5%
MARKET SHARE 39.2%
PRIVATE-LABEL SHARE OF CATEGORY 3%
% CHANGE - 25%
Deodorant sales at mass merchants posted a healthy gain of 11.8% for the year. Notably, mass edged out supermarkets for market share dominance, claiming a 39.9% share of sales in 1998. Meanwhile, private-label sales plummeted.
The value-sized segment is showing the best growth in the category, with a 12% increase in unit sales. The segment now represents 33% of the market. As part of its marketing push, Gillette rolled out new value-sized gel antiperspirants/deodorants earlier this year with an additional ounce of product, representing a 15% discount per ounce.
Movement also was posted in clear gels and clear sticks, which continue to grow. Carter Products added to the sports niche with Arrid XX Total Sport Solid and Ultimate Sport Ultra Clear Spray.
RAZORS 1998
VOLUME $521.8 Million
% CHANGE + 9.4%
MARKET SHARE 36.1%
PRIVATE-LABEL SHARE OF CATEGORY 0.01%
% CHANGE - 4.3%
As a result of premium-priced introductions, dollar sales outpaced unit sales more than 100% in the $1.4 billion razor category. While unit sales increased a modest 6%, dollar sales were up 15.8% across all three channels. All three channels posted healthy sales gains. Mass merchants blew the category out with an increase of 24% to $565 million, and drug stores grew category dollars 13.2% to $358.2 million.
Gillette's Mach3 took the premium segment to a new level and helped grow the category. Ad dollars behind Gillette's new launch -- and other new launches and re-stages -- contributed to increased sales this year. Bic also launched BicPlus and Warner Lambert Shaving Products Group relaunched its Schick ST disposable razor.
ANTACIDS 1998
VOLUME $443.2 Million
% CHANGE - 1.5%
MARKET SHARE 33.3%
PRIVATE-LABEL SHARE OF CATEGORY 6.6%
% CHANGE + 18%
The $1.3 billion antacid category was flat, up 1.1% overall. But this slight increase outshone unit sales, which were down 3.2% across all three channels.
Food, drug and mass split the category nearly in thirds, with dollar-volume shares at 33.3%, 34.5% and 32.3%, respectively. Only mass merchants had a dollar sales gain of 7.2% to $430 million.
The excitement that the prescription-to-OTC-switched H2 blockers brought to the category has been a hard act to follow, and new introductions have been few and haven't had much of an effect on the category overall. Two that have focused on new delivery systems are: Johnson & Johnson Merck's Pepsid RPD, a tablet that dissolves on the tongue without water, and a Pepsid AC chewable tablet.
Supermarkets relied on their own private-label brands to generate dollars for the category; private-label antacids represent 6.6% of dollar sales, an increase of 18% over last year.
TOOTHBRUSHES/DENTAL ACCESSORIES 1998
VOLUME $392.1 Million
% CHANGE + 11.4%
MARKET SHARE 31.9%
PRIVATE-LABEL SHARE OF CATEGORY 4.3%
% CHANGE + 2%
Like the toothpaste segment, the toothbrush and dental-accessory segments of the oral care category were fueled by sales of high-end, high-performance products. Aging boomers, who are taking pains to care for their teeth, contributed to the $1.2 billion category's 13.7% growth. The food channel's 11.4% growth was respectable, but was outpaced by the mass channels 23.5% growth that reached $448 million.
Consumers continued to trade up to brushes offering distinct advantages, such as Mentadent's ProCare brush with a grooved, flexible handle. Oral-B's rollout this year of the technologically advanced CrossAction brush at a $5 price point should again push dollars over the top.
