BROKERS TOLD TO PURSUE GROWTH IN DRUG CHAINS

CAPTIVA ISLAND, Fla. -- Food brokers selling health and beauty care products were advised to look outside their main customer base -- food chains -- for future growth opportunities.In a keynote address to about 100 manufacturers and nonfood brokers, industry consultant Bob Ernsberger said significant financial turnarounds at some drug store chains could translate into additional business for brokers.

CAPTIVA ISLAND, Fla. -- Food brokers selling health and beauty care products were advised to look outside their main customer base -- food chains -- for future growth opportunities.

In a keynote address to about 100 manufacturers and nonfood brokers, industry consultant Bob Ernsberger said significant financial turnarounds at some drug store chains could translate into additional business for brokers. Ernsberger, a consultant who works as director of trade development at Whitehall-Robins Healthcare and Lederle Laboratories, both divisions of American Home Products Corp., New York, spoke here earlier this month during the GM/HBC Conference, sponsored by the National Food Brokers Association, Washington.

Specifically, he named Walgreens, Deerfield, Ill., and Jack Eckerd Corp., Largo, Fla., as chains that are reversing drug sales slumps of the last few years through the use of advanced technology, and in designing stores that meet the consumer's need for convenience.

"There is a huge opportunity emerging in chain drug. I've found a lot of brokers tend to come from old paradigms and tend to stick with the food accounts. I'd be living with the Eckerds, Walgreens, Revcos and Rite Aids of world if I were on your side of the fence," Ernsberger told the brokers.

In his presentation, he outlined trends in the retail marketplace that will have a major impact on HBC and the way brokers are doing business. These included the power some wholesalers are gaining at retail through technology;

the evolving shop-at-home services offered through the interactive superhighway; consumers struggling with finding the time to shop, and the projected growth in new products that have gone from prescription to over-the-counter that are projected to increase all HBC sales by 25% within the next four years.

While total drug store dollar and unit sales continued a slow slide last year, dropping about 2% to just under $15 billion, both Walgreens and Eckerd posted robust 14% sales gains, Ernsberger mentioned.

Technological advances, such as a satellite communication system linked by computers in all Walgreens' stores, are driving the drug chain's growth. "Walgreens store managers get a readout every day on every single stockkeeping unit in the store. As a result, they've done an incredible job on micromarketing," Ernsberger said. He added that Wal-Mart Stores and Publix Super Markets also are practicing micromarketing in their stores.

Walgreens also has positioned itself as a strong convenience format. In the next few years, convenience will overtake price as the most important element in a shopper's decision on where to shop, Ernsberger said.

The most successful format in HBC has been the food-and-drug combo stores, according to Ernsberger. He estimates there are 12,000 of these stores that generate 65% of the $14 billion HBC business at food stores. Of all formats, the 55,000- to 65,000-square-foot food-and-drug combo format generated 30% of the $40 billion HBC business in 1994, said Ernsberger. This format will survive and flourish because it offers true convenience, despite the threat of competition from the supercenters, said Ernsberger.

Ernsberger said that with technology driving a fast-paced and changing retail environment, the future for brokers in HBC and general merchandise is bright. "There is a big responsibility to get high-tech and to get on computer direct link with retailers you service, and coordinate this with manufacturers as we get into just-in-time, automatic replenishment and quick response," he said.