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A BITTER PILL

When Aleve, the much-heralded nonprescription version of naproxen sodium, made the over-the-counter switch in June 1994, it was the biggest thing to hit the analgesics market since ibuprofen made the switch a decade earlier.Some analysts had projected that the OTC product, manufactured by Syntex Corp. and marketed by Procter & Gamble Co., would add $200 million to the $2.5 billion-plus analgesics

When Aleve, the much-heralded nonprescription version of naproxen sodium, made the over-the-counter switch in June 1994, it was the biggest thing to hit the analgesics market since ibuprofen made the switch a decade earlier.

Some analysts had projected that the OTC product, manufactured by Syntex Corp. and marketed by Procter & Gamble Co., would add $200 million to the $2.5 billion-plus analgesics market.

Fifteen months later, supermarket retailers are scratching their heads, unable to explain why overall category sales remain flat.

Towne-Oller & Associates, the New York-based subsidiary of Information Resources Inc., Chicago, reports that Aleve generated $63 million in sales at food stores alone for the 52 weeks ended July 31, 1995. Total Aleve sales for the same period was $144 million.

Although supermarket health and beauty care buyers reported that Aleve sales have been good, the product failed to expand the category as they and even Procter & Gamble had expected.

"Analgesics has been level," said Shirley Landsberg, HBC buyer at the 80-unit Minyard Food Stores, Coppell, Texas.

"On the whole, there is no real growth in the category," said Jim McCarty, HBC buyer at 99-store Brookshire Grocery Co., Tyler, Texas.

The category also remains flat at Coborn's, St. Cloud, Minn., according to Karen Swanda, HBC buyer. "Obviously, nothing is growing. It's all pretty steady," she said.

Don Tassone, a spokesman for Procter & Gamble, Cincinnati, said the company expected some category growth, but added, "We never said that we were going to grow the category dramatically."

The traditional growth rate in analgesics is 2% to 3% a year, said Tassone. But for P&G's fiscal year ended June 30, 1995, the category grew about 5%, "or twice what you see in an ordinary year," he said.

Towne-Oller sales statistics confirmed food retailers' comments. While food and drug channels posted flat sales for the 52 weeks ended Aug. 13, 1995, dropping 0.1% to $933 million and 0.3% to $1 billion respectively, mass merchandisers continued their vibrant growth with a 12% increase to $649 million.

Total internal analgesics sales rose 2.5% over the previous year, and generated $2.6 billion.

Tassone admitted that category sales are now flat, and explained that this is probably due to less competitive activity after last year's Aleve introduction, which triggered a fierce marketing battle among competing brands.

"We far exceeded our ambitious objectives and shook things up a bit" with Aleve, he added.

Cannibalization has occurred at the expense of other segments, pointed out Bob Ernsberger, a consultant for American Home Products, parent company of Whitehall-Robins and Lederle Laboratories, Madison, N.J. "Aleve has taken market share away from aspirin and other pain relievers," he said.

Terry Born, buyer-merchandiser at Fairway Foods, Northfield, Minn., a wholesaler that services about 250 Midwest supermarkets, said that even before Aleve, aspirin was under attack by Tylenol.

"There are people who perceive they have a problem taking aspirin. A lot of people have switched from aspirin to nonaspirin products, largely because of advertising," he added.

According to Towne-Oller, aspirin sales are about as flat as the overall category, posting a 1% increase to $128 million for the period ended July 31, 1995.

Susan Lavine Coleman, managing partner and prescription-to-OTC consultant at NCI, Princeton, N.J., sees an opportunity for aspirin to rebuild its market share.

"The aspirin manufacturers have been trying to turn [consumer perceptions] around with their campaign to emphasize the cardiovascular benefits of lower-strength aspirin," she said.

However, Coleman said, it will be a slow rebuilding process. "Consumers are more interested in short-term pain relief rather than in prevention. Prevention is a harder sell. But look for the manufacturers to use public relations and medical studies to get their message out that aspirin has had a bad rap."

Despite the slow growth, the analgesics category keeps getting bigger as more formulations vie for space on retailers shelves. "We are pretty well maxed out as to category size, so we probably won't expand," said Randy Guttery, HBC buyer for Bi-Lo's 280 stores, Mauldin, S.C. "But we will definitely make significant changes in our product assortment and mix to better meet consumer's needs."

"I feel there are too many formulations," added McCarty of Brookshire Grocery Co. Here's more of what retailers had to say about analgesics.

Karen Swanda HBC buyer Coborn's St. Cloud, Minn.

Analgesics have been very flat for us. Obviously, nothing is growing. It's all pretty steady.

When Aleve came out it took a big chunk out of the other stockkeeping units in analgesics and it is still doing quite well. But nothing else has taken off.

Our private label, Shurfine, is doing quite well for us. Its success is due to quality and price. It can be anywhere from $1 to $3 in savings over the national brands. Consumers like that, and the bottom line likes it, too.

We promote our private label right alongside the national-brand counterparts. If we have four facings of Tylenol, we'll have six facings of our private-label Tylenol-equivalent.

There are too many formulations out there right now. The choices are confusing. I listen to the customers as they shop. They are looking at caplets, tablets, gel caps and so on. Then there are all the different strengths, and the 4-hour, 8-hour, 12-hour.

I wouldn't want to have to make a decision if I were standing in that checkout line. We have about 20 feet for our analgesics, so we are able to carry just about every SKU.

Randy Guttery HBC buyer Bi-Lo Mauldin, S.C.

I remember when Advil was introduced. It didn't just jump right up. It took a good while for Advil to find its niche in the marketplace. I was surprised about how strong our share of the market was after the Aleve introduction.

Our analgesic category is very healthy and it can only get better. At Bi-Lo we have typically underperformed relative to our share of the market. And therefore, I will tell you that everything is growing.

I would truly classify analgesics as a potential growth area for us. Right now we're doing category management studies in analgesics to aggressively go after our share of the market.

We are pretty well maxed out as to the size of the category, so we probably won't expand. However, we will definitely be changing our mix and product assortment to better meet consumers' demands.

Aspirin is not doing well, but Excedrin is making a big comeback here.

Overall, our analgesics margins are not good, but they are much better in terms of private label. We have a new private label, Finast, and it is much more profitable in terms of sales than the

national brands.

Probably the most important change manufacturers have made for their customers is the delivery system, the way the product is delivered into the bloodstream. It's part of the magic of today's medicine.

The gel cap is smaller and easier to swallow. The liquid gel gets into the system more quickly than a hard caplet. I believe that our customers have adapted well to the various formulations. So increased selection actually builds category growth instead of cannibalizing it.

Karrie Thomason HBC buyer Spartan Stores Grand Rapids, Mich.

Aspirin is our largest category and it is up 8.5% this year over last. Some of the aspirin compounds like Excedrin have done very well lately. Excedrin is up 40.6% over the previous year.

This is because Grand Rapids is a big compound drug area. Also, Excedrin has had a new and very successful advertising campaign where they target their product as the best one for headache relief. And it's working.

We carry 176 SKUs of analgesics. It is our largest category and makes up 28% of our total SKUs in HBC. Children's analgesics also are doing well and are up 28%. Our No. 1 seller for children is Tylenol, followed by private label.

Betsy Turgeon HBC buyer Big Y Foods Springfield, Mass.

Our analgesics are a profitable category with a high dollar return and the category helps to give Big Y the perception of a one-stop place to shop.

We plan to expand our children's segment. It's especially strong for us. And we will implement it with the new Children's Motrin and the new Children's Advil, as soon as it is approved by the Food and Drug Administration.

Jim McCarty HBC buyer Brookshire Grocery Co.

Tyler, Texas

Aleve did its share and it took away from the other brands to do it. But Aleve is doing very well for us. Advil, though, is our No. 1 product, over Tylenol and Nuprin.

Aleve is a strong third after Advil and Tylenol. But it is a good, strong third. But there is no real growth in the category as a whole.

If we have an area of growth in terms of profits, private label is it. Our private label is doing very well.

Lannie McDaniel director of HBC and general merchandise Horner Foods Tulsa, Okla. Analgesics is a close second, with stomach remedy as our leading category. Some categories, like cough/cold, fluctuate through the year. Analgesics remains steady.

We promote analgesics frequently. And private label has really boosted our analgesics. Private label is what is keeping the category profitable. With competition, you're giving away Tylenol and Advil. You can't put either one of them in an ad and hope to make money. We support the brands to build our image.

So it has taken private label to boost the profit margin in analgesics. .

Terry Born buyer-merchandiser Fairway Foods Northfield, Minn.

I don't think an introduction such as Aleve can necessarily grow the category, because there is only a certain amount of demand built into each product. A new toothpaste doesn't mean that you'll brush your teeth more. A new headache remedy doesn't mean that you'll get more headaches, or buy more product.

Aspirin has been on the downturn ever since ibuprofen came over the counter. In fact, aspirin was under attack even before Aleve by Tylenol.

A Painful Fight

Sales of analgesics remained flat at food stores, with most segments depressed for the 12-month period ended July 31, 1995, according to Towne-Oller & Associates, New York. Aleve (naproxen sodium), which generated $62.9 million in sales during the period, cannibalized sales of products in other segments rather than expand the category for supermarkets.

Segment Breakout at Food Chains

Segment Sales Dollar Market

in millions Volume Share

% Change

Acetaminophen $547.9 -10% 43.2%%

Ibuprofen $319.8 - 3% 25.2%

Aspirin Compounds $209.0 - 6% 16.5%

Aspirin $128.0 + 1% 10.1%

Naproxen Sodium $62.9 +319% 5%

Analgesics Sales In Food Stores

1995 $933 Million

1994 $934 Million

Aleve Sales In Food Stores

1995 $63 Million