Skip navigation


Supermarkets dominate the health and beauty care landscape in this scenic Southwestern market.Particularly in new stores with pharmacies, the four major chains here devote substantial real estate to the various HBC categories, as much as 7% to 8% of total floor space in some locations, SN found in visiting stores this month."It's a competitive market," said Shane Cook, account executive, Great Southwest

Supermarkets dominate the health and beauty care landscape in this scenic Southwestern market.

Particularly in new stores with pharmacies, the four major chains here devote substantial real estate to the various HBC categories, as much as 7% to 8% of total floor space in some locations, SN found in visiting stores this month.

"It's a competitive market," said Shane Cook, account executive, Great Southwest Sales Co., a food broker in Lubbock, Texas. "Everybody has a piece of the pie. It is pretty equally divided. They all do well."

The market leader is Furr's Supermarkets, based here, with 14 stores and seven pharmacies. Second is Smith's Food & Drug Centers, Salt Lake City, with 11 stores, all with pharmacies. The Jewel-Osco New Mexico division here, owned by American Stores Co., Salt Lake City, operates six stores, all with pharmacies. Albertson's, Boise, Idaho, has eight stores, but only the two newest units have pharmacies. All are building new stores in expanding neighborhoods on the fringes of the metropolitan area.

None of the four supermarket chains responded to calls for comment. Other supply sources familiar with the market provided SN with information, but asked to remain anonymous.

The only other major players in the Albuquerque HBC and pharmacy marketplace are Walgreen Co., Deerfield, Ill., with 21 conventional drug stores -- the only drug chain in the market -- Wal-Mart Stores, Bentonville, Ark., with five stores and Kmart Corp., Troy, Mich., with five stores. While Walgreen and Wal-Mart represent a substantial part of the market, the lack of other chain drug store competition leaves the door open for supermarkets to capitalize on HBC and pharmacy sales, industry observers noted. "I would say the supermarkets dominate [over mass and drug] in terms of HBC sales," said Cook.

Without pharmacies, but with very sizable HBC presentations are mass merchant Target, Minneapolis, which operates three stores in the Albuquerque market, and Price/Costco, Issaquah, Wash., with one very large warehouse club. Sam's Club, the Wal-Mart warehouse club division, also has a store in the area, but it has a small HBC presence. There are also two stores of Wild Oats Markets, Denver, in the area with a wide array of organic health and beauty care products.

Albertson's is rapidly becoming more of an HBC force in its new stores with pharmacies, and American Stores operates the biggest and best-designed HBC/pharmacy areas in its new Jewel-Osco stores. But HBC competition among Albuquerque supermarkets is turning into a shoot-out between Furr's and Smith's. After Furr's rolled out its frequent-shopper program Aug. 27, Smith's ran a full-page ad in the local newspapers Sept. 1 challenging Furr's promotion of "Extreme Savings." The ad had item-by-item comparisons across all store departments showing a total cost of $305.65 at Smith's for the selected products versus $371.41 at Furr's. A few weeks later, on Sept 15, Furr's countered with a full-page ad of its own.

Apparently, Furr's frequent-shopper promotion has been an effective marketing tool. "It seems to be attracting a lot of attention. A lot of manufacturers want to get involved," said Cook. For example, in the October promotional book for the Furr's shopper program, 10 pages were devoted to HBC products. Among the offers: $1 off 50-count Motrin IB tablets or caplets; 70 cents off 13-ounce Vidal Sassoon shampoo or conditioner; $1.30 off 60-count Flintstones multivitamin supplement; and 40 cents off 15-ounce Vaseline Intensive Care Lotion. All these products were highlighted by special shelf signs and they were frequently displayed on endcaps.

"The frequent-shopper program helps," said the supplier source who asked not to be identified. "It has been a good program. Furr's does a great job, although they may not be the leader in everything."

For example, "Furr's has a problem with pricing," the source said. The retailer watches the other supermarkets and mass merchants carefully, but not the drug store trade. "Although they want to know Wal-Mart's pricing, they won't match it."

All of the supermarket chains in the Albuquerque area make heavy use of HBC private-label products in-line and on endcaps. A Furr's store dedicated a full endcap to Furr's ultra thin diapers. A Jewel-Osco store featured Sav-On hydrogen peroxide and Sav-On rubbing alcohol on an endcap. In newspaper ads, American Stores' new Daily Rituals premium private-label line, as well as Sav-On items, were highlighted. Albertson's brand cotton puffs were pegged to an endcap near the cosmetics displays.

A pharmacy counter display in an Albertson's was labeled "Albertson's Pharmacist's Special of the Month." It compared the pricing of Extra-Strength Tylenol 50 Solid Gelcaps at $5.19 with Albertson's Extra-Strength Non-Aspirin Gelcaps at $3.89.

Smith's was the most aggressive in the merchandising of private-label HBC products. Various endcaps featured: 15-ounce Smith's Extra-Strength Skin Care Lotion for $2.99 combined on an end with Smith's 1-liter mouthwash for $3.19; 24-count Smith's maxi-pads on a front endcap priced at two for $4; and on an endcap facing a pharmacy window, Smith's hydrogen peroxide and Smith's isopropyl alcohol at two for $1.

Among the newest stores in the Albuquerque area, Jewel-Osco's outshone the rest in size and design of the HBC, pharmacy and cosmetics area. In two stores visited by SN, total space for these categories was nearly 6,000 square feet, about 7% to 8% of the more than 70,000-square-foot stores' layout.

"Jewel-Osco does a great job merchandising HBC," said Jim Welch, Albuquerque area manager for food broker Westexico Sales Co., based in Lubbock, Texas. "They know how to promote. They work further in advance than other grocery stores and that's the key," he said.

The pharmacy and cosmetic counters are along a side wall in the stores, adjacent to the HBC gondola runs. Large signs on the upper-wall spaces identified "Cosmetics," "Pharmacy" and "Health Care Center." One store had 60 linear feet of branded cosmetics displays, including Revlon, L'Oreal, Max Factor and Maybelline. Gift sets and natural skin care products were prominently merchandised.

Furr's newest store on the east side of town near the mountains has 2,500 square feet of space for HBC; 2,500 square feet for video; a U.S. Post Office Express outlet; and a bank, but no pharmacy. The total size of the store is about 70,000 square feet. Other large Furr's stores visited by SN located the pharmacy in front of the checkouts, far from the HBC area. The largest space dedicated to HBC was 2,800 square feet.

"Furr's uses a lot of shipper displays for HBC items, like shampoos, conditioners, deodorants and toothpastes," said a local broker source who asked not to be identified. "They advertise seven to eight HBC items a week at prices that are competitive with the mass merchandisers."

Smith's newest unit, located in the fast-growing western suburbs, is one of the smallest of the chain's Albuquerque stores at around 60,000 square feet. Consequently, departments like HBC, pharmacy and video were proportionately smaller.

The total HBC/pharmacy area in this store was about 3,700 square feet, with a minimal cosmetics presentation. Cosmetics were merchandised on pegs without the manufacturers' traditional racks that most other chains in the area used.

Instead of positioning the pharmacy along a side wall, like other Smith's and Jewel-Osco's, in this new store it was in a front corner, highly visible to customers waiting on the checkout lines. Low-profile shelves containing most of the HBC inventory were in front of this store's pharmacy.

Smith's uses low-profile gondolas in front of its other pharmacies. Total space for HBC, cosmetics and pharmacy in one west side 70,000-square-foot store was 5,200 square feet, over 7% of the store's space. However, cosmetics was separated from the HBC and pharmacy areas by several aisles of nonfood and greeting cards.

But that store made the heaviest use of HBC products for checkstand endcaps seen by SN in the Albuquerque market. Seven of the 14 checkstands featured HBC products for customers waiting on line. Among them: 6.4-ounce Crest Tartar Control toothpaste for $1.99; 20-ounce Aussie hair products for $3.49; Pantene hair products, Wet 'n' Wild cosmetics, and Schick and Edge shaving products.

Besides the Walgreen drug stores, the most significant HBC player among the other classes of trade in Albuquerque was Wal-Mart. Traffic in Wal-Mart's HBC areas was significantly greater than any other store visited by SN, as was the presence of employees stocking shelves and helping customers.

Because supermarkets' markup is higher on HBC products, the mass merchants do more business in HBC, said Welch of Westexico. "The supermarkets are doing a pretty good job, but mass is ahead. Their prices are cheaper," he said.

"Wal-Mart's prices are a lot better," he said.

"Mass merchandisers don't have to make the same profit that a food store has to make. Wal-Mart has other categories they can make profit on," said the supplier source.

The larger of two Wal-Mart HBC sections visited by SN was 5,500 square feet; the other was 3,500 square feet. Kmart and Target HBC space was 3,500 square feet. Wal-Mart and Kmart position their HBC areas adjacent to the checkstands, but Target puts its HBC in the rear of the store, with a separate cosmetics section.

Price/Costco also devoted a very significant space of about 4,200 square feet to HBC, although the products carried were displayed mostly on pallets and were not directly comparable to traditional retail outlets. The club carried large-size packages stacked to the warehouse's ceilings. Some examples of endcap features: a Glide floss four-pack for $8.99; 58-ounce Listerine Original for $6.59; 250-count Advil for $11.99; and 33.9-ounce Pantene Pro Shampoo Plus for $6.49.

Sam's Club had a much smaller presentation area of about 650 square feet, on two sides of a 65-linear-foot run. Inventory, pricing and merchandising was typical of the warehouse clubs.

The Price Factor

In the Albuquerque market, supermarkets are price competitive with each other, but tend to be higher than the drug and mass-merchant classes of trade.

In a price comparison on recent over-the-counter switches, Wal-Mart generally has the lowest prices in the market, but not on all products, notably on the 10-tablet pack of Zantac 75 and the 2-mg refill of Nicorette. On these items Target and Walgreen's beat Wal-Mart's price.

OTC Price Comparisons in the Albuquerque Market

Zantac 75 Children's Motrin Nicorette Nicorette

(10 tablets) liquid (2 ounce) (2-mg) starter kit refill (2-mg)

Albertson's $3.99* $4.49 $49.99 $27.99

Furr's Supermarkets $4.99 $3.75 $49.99 $29.99

Jewel-Osco $3.99* $4.49 $47.99 $27.99

Kmart Corp. $4.59 $3.79 $45.99 $27.99

Smith's Food & Drug Centers

$3.99 $3.99 $49.99 $28.99

Target $3.74 $3.49 $45.89 $26.89

Walgreen Co. $3.99* $3.99 $45.99 $25.99

Wal-Mart Stores $4.23 $3.43 $45.84 $26.84

* Advertised special, from regular price of $4.99.

TAGS: Walmart