Premium toothpastes are reshaping the entire $1.5 billion oral-care category by filling consumer needs for specialty and therapeutic attributes at higher retails.
Although premium pastes represent a small percentage of the total category, supermarkets are finding more profit in items that they don't have to football in price like commodity brands.
For small-sized grocery chains, premium brands are enabling them to compete more effectively against their larger competitors, said David Himel, category manager, health and beauty care at Baton Rouge, La.-based Associated Grocers. The prices result in better profits; the relatively low number of units sold mean mass merchandisers usually pay minimal attention to the category, he said.
"We might have to sell one tube of premium toothpaste to make the same profit we're making on 10 tubes of Crest," said Randall King, HBC buyer at Burlington, N.C.-based Byrd Food Stores. "And since they're not the fastest-moving items in the category, the mass merchandisers do not use them as a loss-leader," he said. "We're more at price parity with those than we tend to be with the competitively priced brands and the category killers," he added.
Industry definitions of premium pastes tend to vary. Some say brands earn premium status through a combination of price and features. Major manufacturers say features targeting oral problems, such as whitening, gum care, sensitivity and/or tartar control, are enough to make a product premium.
In fact, aggressive product introductions and marketing campaigns by Colgate and Crest are dramatically broadening the scope and definition of the premium category. The two premium brands King said he is most excited about for the coming year are Colgate's Baking Soda and Peroxide Whitening Toothpaste and Procter & Gamble's Crest MultiCare pastes.
Despite the extra features, Colgate plans to hold the line-price of Baking Soda & Peroxide Whitening, which begins shipping today, to the same level as its Baking Soda & Peroxide, with 6.4-ounce tubes selling for about $2.19. Crest, however, is taking a higher-priced route with its MultiCare brand. At about $2.99 a 6.2-ounce tube, the product will cost almost 50% more than the standard version of the product.
The fact that health consciousness is rising and consumers are taking better care of their teeth is driving development of these products, retailers agree. "There's more awareness on television right now with all the commercials that the toothpaste companies are running. People are taking better care of their teeth today," said Roger Burks, senior vice president at The Mad Butcher, Pine Bluff, Ark.
Health isn't the only force boosting sales of high-end products, he said. Many consumers are starting to view toothpaste as a cosmetic, as well as a health product. Products like Rembrandt and Pearl Drops are moving more as consumers try and get whiter teeth, Burks said.
"In tooth care, what I see is that kids are wanting whiter teeth," he said. They may be looking at it more as a cosmetic, he said of premium toothpaste. "The ladies, they've got the makeup; to complement it I think they want whiter teeth."
As visible as premium brands are, they still account for only a tiny share of total market volume. "Crest is doing about 60% of the volume, and the other 40% can be split among the other toothpastes," said a retailer who asked not to be identified.
And signs are strong that attempts by the big manufacturers to break into the premium segment are beginning to pay off. Some retailers are saying the next hot premium brand will come from Colgate. The company introduced its Platinum Whitening brand in 1994 to challenge Den-Mat's Rembrandt, the leader in the whitening segment.
"The newest one will probably be the new Colgate that is coming out -- the one that has got whitening and peroxide and baking soda in it," said King.
Colgate's new paste will offer retailers advantages and disadvantages. It won't offer the higher prices and profit margins of conventional premium brands. But the product will be backed by a $32 million promotional campaign that should help boost the entire segment.
Gum-erosion products, an emerging segment that hasn't gathered much momentum yet, could receive a boost from another Colgate product, Associated's Himel said. "Gum-erosion products are not doing that well for us right now. I believe it will take a little bit more time before those catch on," he said. Big marketing and promotional budgets could speed things up, he said. "Crest is supposed to be coming out with an anti-bacterial toward the end of the year and it should be pretty big."
Procter & Gamble, Cincinnati, the manufacturer of Crest, would neither confirm nor deny that they are coming out with an anti-bacterial toothpaste in the United States (they are selling one overseas). Colgate-Palmolive Co., New York, has petitioned the Food and Drug Administration for approval of a toothpaste, Total, which contains triclosan, an anti-bacterial ingredient.
For all the talk of health and cosmetics, retailers say one factor still is more important than all others when it comes to toothpaste purchases: price. And when consumers do change brands, it's as likely they'll shift to lower-priced as to the higher-end products.
"We've got a lot of people who are switching over and trying our private labels," Burks said. That's good news for his company, even if it isn't for the suppliers. "It's priced under the premium brands, but it's got a little better gross margin in it for us," he said of his private-label brand.