FORTIFYING VITAMINS

If supermarket health and beauty care executives take an aggressive approach to promoting and merchandising vitamins, the ever-growing segment could crack into their list of top-five category sellers.Currently, vitamins are the seventh best-selling HBC product at supermarkets, but according to retailers polled by SN, attention paid to the vitamin category at food retail has not matched the sales strength

If supermarket health and beauty care executives take an aggressive approach to promoting and merchandising vitamins, the ever-growing segment could crack into their list of top-five category sellers.

Currently, vitamins are the seventh best-selling HBC product at supermarkets, but according to retailers polled by SN, attention paid to the vitamin category at food retail has not matched the sales strength and potential of the products themselves.

For the 12 months ended June 30, 1994, the vitamins and tonics category racked up sales of

$502.2 million at supermarkets, up 18% from the previous 12 months, according to Towne-Oller & Associates, the New York-based subsidiary of Information Resources Inc., Chicago.

While food retailers agree that the national growth spurt of vitamins has been a mirror of their own successes with the products, they also concur with Towne-Oller statistics that show drug stores to be the undisputed leader in vitamin sales. For the same period, drug store dollar volume in vitamins and tonics was $707.8 million, up 15% from the previous 12 months.

Supermarket executives told SN that at the very least they need to do more to capitalize on the exploding consumer market for vitamins to avoid being left in the dust of other retailing formats. They are already at a historical disadvantage, they said, in the vitamin category. "Drug stores have more variety than supermarkets, and in the past the supermarket industry has not done as good a job as we could in merchandising vitamins," said Jim Key, nonfood direct-store buyer at Community Cash Stores, Spartanburg, S.C. "Drug stores have been able to capitalize on offering variety and having a medical presence of pharmacists. So people get accustomed to buying their vitamins at one place and they don't want to go somewhere else."

One retailer from a large Western chain with sales of more than $3 billion said drug stores hold an edge over supermarkets in the vitamin category for three reasons: consumer habits, weak supermarket selection and lack of supermarket promotion.

The executive added that there's a feeling that "supermarkets won't have as broad a selection of products. While that's changed dramatically over the past few years, drug stores still have the advantage when it comes to selection."

A lack of vitamin promotions by food retailers also stifled their sales, the retailer added.

Most other retailers agreed.

"With supermarkets, although they're becoming more sophisticated today, their mentality is typically food and nonfood, and vitamins are not food," said Marc Sterger, national merchandise manager at McKesson Drug Co., a drug wholesaler based in San Francisco.

The prognosis for supermarkets gaining market share in vitamins is not doom and gloom, however, since many supermarkets have boosted their vitamin sales strongly by taking a fighting stance on prices, promotional activities, depth of selection and shelf sets.

Selection and variety are two keys to unlocking vitamin potential, retailers said. "A reintroduction to vitamins or looking at vitamins in a different light as a category in the supermarket is very timely," said Key of Community Cash. "Supermarkets need to add more stockkeeping units and more variety and offer some of the mainline items people are looking for."

Karen Swanda, HBC manager at Coborn's, St. Cloud, Minn., said supermarkets "need a lot of SKUs in several different brands: a store label, children's vitamins, vitamins for seniors, multivitamins. There have to be over 100 SKUs to stay competitive; otherwise, vitamins will get lost, especially in a grocery store."

David Gammon, HBC buyer at Falley's, a 38-store chain based in Topeka, Kan., agreed: "You need anywhere between 50 and 100 SKUs, depending on the size of your section, but you need that to be equipped to compete."

Key of Community Cash, however, was more conservative in his estimate of the number of products needed for a successful vitamin section.

"We'll probably end up with about 10 to 25 items," he said. "In the past, when a supermarket went with vitamins, they went with everything, but didn't get the turns they needed and they took up a lot of space. You have to maximize products and offer the variety but still try to limit the number of SKUs to what the consumer really needs."

Randy Martin, HBC/general merchandise promotional coordinator at Harvest Foods, Little Rock, Ark., said he strives "to carry usually one line in conventional stores and two or more in pharmacy stores."

Other mechanisms can catapult vitamin sales, too, supermarket executives said.

Gammon said every time his store promotes vitamins, "we see a significant increase in our sales. When we give up a little margin and promote them, it's worth it. We use a promotional price with a special tag on it; that creates a lot of interest.

"There's already a lot of interest in that category," he added. "And if you induce people a little bit to buy it, then they will. Any sort of display or special price or special tag works well."

Sterger of McKesson agreed vitamins offer supermarkets an opportunity to break from tradition and cash-in on their potential vitamin market share.

"They're in a wonderful position to take advantage of the traffic other trade classes will never see, because everybody has to eat," he said. "They can get their store traffic to buy something a little more profitable, like vitamins."

The Western retailer added that there "is a lot more supermarkets can do in terms of promoting vitamins. Less so with multivitamin brands, but in the area of full-line type brands, we can do a better job. And that's where we can address the issue of selection."

"We're increasing the size of our sections. Our standard set is now a 6-foot section, where it used to be 3," he said. "We are trying to strengthen our promotional activity. We've done full lines half-price. We'll be looking to get into special packs on private label like a buy-one-get-one-free. We're also promoting private label very heavily in our regular ads."

Swanda of Coborn's said her store runs a full-page extra ad as an in-store promotion about every eight weeks. Those ads usually last two weeks and work well, she said.

Driving category sales, however, are vitamin "singles," such as vitamins A, C and E, as well as beta carotene and herbal supplements like garlic.

"We're seeing good, strong patterns, particularly with singles, antioxidants and so on," said the Western retailer. "What's interesting is the two biggest trends to emerge in vitamins are the antioxidants and garlic.

"Despite the strength of some new vitamin launches, many retailers are still hesitant to take the plunge on a new product before it proves itself in other stores or generates positive media attention.

"There is growth in new and different types of vitamins like antioxidants. But it is difficult to keep up on the trends. We've seen a lot of new things, but we're hesitant to try them until they've proven themselves," said Martin of Harvest Foods. Sterger of McKesson said literature is often readily available from vitamin manufacturers, and should be taken advantage of.

Vitamin sales are worth promoting and encouraging because the products are so profitable, retailers said.

Most supermarkets get between 25% and 50% margins on vitamin lines, though they earn less on name-brand multivitamins.

Nick Borze, director of nonfood merchandising at Abco Markets, Phoenix, said vitamins "are very profitable. It's the kind of category that all the classes of trade seem to be making a good gross profit on."

All retailers polled said private label was a strong force in vitamins, too. Towne-Oller reported private-label sales accounted for 32.4% of the category's dollar volume for the year ended June 30.

Strong Vital Signs for Food Retailers - Sales of vitamins and tonics have grown faster in food stores than in drug stores over the past three years, averaging 15% at food compared to 12.5% at drug stores.

VITAMIN VOLUME, FOOD VS. DRUG STORES

FOOD STORES DRUG STORES

YEAR SALES % SALES %

ENDED (MILLIONS) CHANGE (MILLIONS) CHANGE

6/94 $502 +17.6 $707 +15.0

6/93 $427 +12.1 $615 +9.6

6/92 $381 -- $561 --