Supermarket retailers are quickly adjusting their stomach remedy schematics as Tagamet HB, the second product in the fast emerging H2 antagonist segment, goes from prescription to over-the-counter early this fall.
With Pepcid AC (Johnson & Johnson/Merck Pharmaceuticals, Fort Washington, Pa.) on the shelves since June, Zantac (Glaxo Wellcome, London) slated for conversion within the next year and Axid (Whitehall-Robins, Madison, N.J.) under review by the Food and Drug Administration for prescription-to-OTC status, many supermarkets have broken their former pattern of lagging in the marketing of newly switched drugs.
Following the success of Aleve, an OTC analgesic that had $36.1 million in sales at food stores for the 52 weeks ending March 11, 1995, supermarket retailers are keenly aware of the revenue opportunities the H2 antagonists represent.
"The whole Rx-to-OTC switch is a great way to get back the share we lost to discount stores and mass merchandisers," said Randy Coleman, division marketing manager at Supervalu's Southeast division, Anniston, Ala. Coleman described Tagamet as "a high-profile, widely accepted product that will help consumers realize that supermarkets are the place to go for their health and beauty care needs." Supervalu may remerchandise its shelves to give the new H2 antagonists greater visibility. Though most stomach remedies are located on lower shelves, the H2 antagonists may be given eye-level placement, according to Coleman.
Manufactured by SmithKline Beecham Consumer Healthcare, Pittsburgh, Tagamet HB will be marketed for the treatment of
heartburn, acid indigestion and sour stomach. It contains cimetidine, the same ingredient as in its prescription form, Tagamet.
It will have a two-caplet dosage and will be sold in 16-, 32-and 64-count packages. Pepcid AC, which has a one-tablet dosage, is available in six-, 12- and 18-counts. Several supermarkets have promoted the six-count Pepcid AC stockkeeping unit for $2.49. Suggested retail for Tagamet has not been set, but the company said it will be consistent with other antacids on the market.
"We expect Tagamet to be a savings over Pepcid AC on a cost-per-dose basis," said Greg Bradley, director of national accounts for consumer health care at SmithKline Beecham.
Rosauers Supermarkets, Spokane, Wash., is creating a special area in its stomach remedy segment for H2 antagonists. When Pepcid AC was launched, the chain initiated a new schematic, placing the product in a prime eye-level location, between Tums and Rolaids, said Grant MacLean, HBC director. It plans to give Tagamet comparable visibility, placing it one shelf lower than Pepcid AC.
Though some retailers interviewed said they heard Tagamet may be available in early August, SmithKline Beecham said the ship date will be sometime in early fall.
Food store antacid sales for the year ended May 1995 brought in $409.4 million, a 3% increase over the year before, according to Towne-Oller & Associates, New York.
For the year ended March 11, 1995, the top 20 selling antacids at food stores had $292 million in sales, a 2% increase, according to Nielsen North America, Schaumburg, Ill. Arvind Desai, an investment analyst who tracks pharmaceuticals for Mehta & Isaly, New York, predicts that Pepcid AC will exceed $200 million in sales during the first 12-month period after its launch, with Tagamet following at $100 million. Though several retailers interviewed anticipate that Tagamet HB will be bigger than Pepcid AC, Desai said, "Tagamet HB will be facing a much bigger hurdle now because shelf space has already been taken by Pepcid AC. There also will be a significant delay in terms of market entry, facings and distribution." Tagamet may also lag, he said, because of a consumer warning that must be placed on its packaging. The statement advises patients taking theophylline, warfarin or phenytoin to consult their physicians before taking the product.
"For the first 12 months after the introduction, 1995 into 1996, Pepcid AC will have a 70% to 75% share of the market and Tagamet HB a 25% to 30% share," Desai said.
Coleman of Supervalu said he plans to carry Tagamet in his stores the first day it is available. And many other supermarkets will do the same. The earlier they display the product, the better it will help sales, they said.
"I see the introduction of these two strong entries into the stomach remedy category as enhancing the profitability of the segment as a whole,' said Gary Schloss, vice president of grocery-general merchandise at Carr Gottstein Foods, Anchorage, Alaska.
Carr Gottstein plans to display the product in shippers and on the shelf. It is carrying all three SKUs of Pepcid, and plans to feature all three Tagamet HB SKUs.
"The awareness of the new products is very high. And we're getting excellent response from our consumers," he said. Mark Beyer, director of HBC/GM at Copps Corp., Stevens Point, Wis., said while it's too early to predict how Pepcid AC and Tagamet HB will do in sales, the new introductions are a potential boon to profits.
"It will have a big impact on the stomach remedy category. You won't lose with products this strong," he said. Aleve sales at Ray's Food Place, Brookings, Ore., are strong, according to Dan Van Zant, HBC buyer and merchandiser. And Van Zant predicts Pepcid and Tagamet will follow suit.
"I'd expect these H2 antagonists to be just as strong if not stronger [than Aleve]," he said. "Customers have come into Ray's specifically to ask for Pepcid AC." To promote Pepcid AC, the chain ran a temporary price reduction, and plans to start an advertising campaign within the next several days. It also has changed its stomach remedy schematics to accommodate the new items. To prepare for the introduction of new H2 antagonist products, Ray's is using a warehouse distribution program that guarantees Tagamet will be automatically shipped to its stores the day of its release. "The moment it hits the stores there's a spot for it on the shelves," he said. Jons Markets, Los Angeles, is also fully prepared to get Tagamet HB on its shelves, said Wanda Lovelace, HBC buyer. "We're on a program where as soon as it hits the warehouse it will be in our stores, even if it means they have to ship it at midnight. As soon as there's any new Rx-to-OTC product, we automatically get it."
Lovelace said both Tagamet HB and Pepcid AC, as well as other H2 antagonists, will combine to boost HBC category sales. Jons will carry at least a dozen Tagamet 16-count packages and one shipper for each of its stores. It will merchandise the product in its stomach remedy section, near Maalox and Mylanta.
Gary Crawford, HBC buyer at Tom Thumb Food & Drugs, Dallas, and its parent company, Randalls Food Markets, Houston, said the new prescription-to-OTC products will help the stomach remedy line, and will be a great help to overall category performance.
"The more good offerings we give to the consumer, the better it will be for our profits and for our position in the HBC market," Crawford said. Supermarkets have the most to gain in the upcoming prescription-to-OTC switch since, up until the Aleve introduction, they held just a 20% share of the OTC market, compared with drug stores with 57% and mass merchandisers with 23%, according to Bob Ernsberger, trade development consultant for Whitehall-Robins Healthcare and Lederle Laboratories, divisions of American Home Products Corp., Madison, N.J. Ernsberger spoke at the recent National Food Brokers Association conference in Florida. Ernsberger stated that the H2 antagonist segment represented nearly $4 billion in prescription sales.
According to SmithKline Beecham, more than 200 million Tagamet prescriptions have been filled in the United States alone. Company officials would neither confirm nor deny a recent trade report that said SmithKline Beecham plans to spend $100 million in advertising. However, Bradley of SmithKline Beecham said, "We intend to spend as if we're the No. 1 brand in the category." Tagamet HB promotions will include a large educational campaign, including pharmacy education kits. SmithKline Beecham will also support the product with floorstand displays and pharmacy counter units.
"The advent of Tagamet creates a new segment of antacids," Bradley said. "We expect that this will bring a significant amount of new business to the antacid, and incremental profits to the category." Bradley said consumers most likely will purchase Tagamet in addition to other stomach remedies, such as Tums and Rolaids.
Johnson & Johnson/Merck officials, meanwhile, issued a press statement June 20, the day the Food and Drug Administration cleared Tagamet HB, that touted the success of Pepcid AC. The release stated, in part, that only Pepcid AC both relieves and prevents heartburn and acid indigestion, and that it is the only OTC product that controls stomach acid with one tablet. The release also said Pepcid AC has no known clinically significant interactions with other drugs. Lovelace of Jons said, though, both products will help the category. "We're keeping an eye on the whole Rx-to-OTC movement. I think it will be a big segment," she said.
Coleman of Supervalu predicts that Tagamet will do better than Pepcid, saying it is more widely accepted and better known. And he predicts that Zantac will be as big or even bigger than Tagamet.