EYE CARE SALES MIGHT IMPROVE IF RETAILERS COULD SEE THEIR WAY CLEAR TO GIVE MORE SHELF SPACE TO THE CATEGORY

PETER MALBIN

With more eye care products now on the market, supermarkets are facing a merchandising challenge.

Allocating space for a growing category of eye care products is difficult in grocery retailing, said nonfood executives. It becomes even more tricky with products that carry high retails, turn slowly and yield narrower margins.

"If I tried to carry everything that doctors prescribed, I probably would need a 4-foot section of three shelves [in eye care]," said Charles Page, health and beauty care coordinator for Chattanooga, Tenn.-based Dixie Saving Stores, which has 225 units in Tennessee, Georgia and Alabama.

Instead, each store's eye care section consists of one shelf of 2 to 3 linear feet.

"You can get into a tremendous inventory and still not have all that people want. If I had more inventory, it would probably cost me in the long run. The amount of sales would not offset the inventory," he said.

Eye care, which generated $986 million in sales for the year ended June 16, 1996, according to the latest available statistics from Chicago-based Information Resources Inc., has been active with the entry of prescription to over-the-counter drugs. These include Opcon A, Naphcon A and Vasocon antihistamine eye drops used for red eyes and eyes affected by allergies.

"The release of prescription products creates awareness and excitement," commented Jim Cousineau, vice president of pharmacy at Brookshire Grocery Co., Tyler, Texas, which has 119 grocery stores in Texas, Arkansas and Louisiana.

"The government felt these products were safe to use over the counter," said Larry Press, a pharmacist at Country Counter/Stop 'n' Shop, Cleveland.

The eye care category also includes products for soft and hard contact lens wearers, such as saline solutions in various forms, moisturizers, soaking solutions and enzymatic cleaners. Then there are eye drops that retain moisture, create artificial tears, relieve redness and treat allergies.

The eye care category's total sales figure of $986 million was down 1.2% and unit sales slipped 2.7% from the previous year, according to IRI.

Retailers had no real explanation for the overall sluggish category performance except to point out the effect of private label and the high retails of branded eye care products.

All the top name brands showed a decline in dollar and unit sales compared with a year ago. Some were down by a few percentage points; others were down by more than 20 percentage points. Only private-label products recorded an increase in dollar sales, up 26%, and unit sales, up 12%.

"Eye care products are quite expensive," said Cousineau. "Consumers are turning to private-label products."

Steve Lauder, category manager for Supervalu, Minneapolis, agreed the products are very expensive. "It's not uncommon to spend $6 for some of those items," he said.

Kim Botkin, nonfood buyer at Gerland's Food Fair, Houston, said that contact lens products, in particular, were expensive for consumers.

Private-label eye care products are often 30% to 40% cheaper (than brand names), said Page.

For example, Dixie's private-label eye drops range from $1.49 to $1.99, while Visine costs $3.69 to $3.99 and Murine ranges from $3.29 to $3.69.

Dixie carries a private-label 12-ounce saline solution, which retails at $1.99 to $2.69. Bausch & Lomb's 12-ounce saline solution, meanwhile, sells for $3.99.

Page said eye care sales are up for Dixie Saving Stores, and private-label products are selling extremely well. "I try to carry the No. 1 item in the market and I carry a private-label product," he said.

There are a few brands that do all the business in eye care, said Lauder. Among the leading companies are Bausch & Lomb, Ciba, Allergan and Alcon.

"Private label is also a very important contributor," Lauder noted.

Of total sales, the supermarket channel had $252 million, about the same as the previous year. The drug channel reaped the most money from eye care sales, $411 million, but this was down 7% from the previous year. Mass merchandisers had $322 million in sales, up 6%.

Even though the drug channel leads in dollar sales, its overall unit sales were about the same as those of mass merchandisers (75 million units), indicating the extent to which mass merchandisers are discounting the prices of eye care products.

Supermarkets, meanwhile, recorded about 54 million unit sales. Sales would probably be far higher if supermarkets were able to carry all the eye care products on the market, but space limitations prevent this, said retailers.

Some retailers, like Pine Bluff, Ark.-based Mad Butcher, with nine supermarkets, have not expanded their eye care sections. "We don't have a very big section," said Roger Burks, senior vice president. Eye care products are merchandised off the shelf at Mad Butcher.

Retailers complained about the thinning margins on eye care item sales due to the competitive pricing of mass merchandisers. This factor also may be discouraging supermarkets from devoting more space to the category.

Margins are not as good as they once were, Page said. "Wal-Mart sells stuff at lower margins and forces us to do the same thing. This has cut into our margins," he said, noting that margins on eye care were 20% to 30% at Dixie Saving Stores.

"They are competitive items," stated Randall King, health and beauty care buyer at Byrd Food Stores, headquartered in Burlington, N.C. "The margins are not real good on eye care products."

"It's not a toothpaste category, but it's better than vitamins," said Botkin of Gerland's. He said the margins on eye care products, about 20%, are lower than for other first aid products.

"Retailers' net margin might be getting a little thinner," agreed Brookshire's Cousineau.

Many grocery stores surveyed allocated about 4 feet to eye care products, whereas mass merchandisers devote about 8 feet to 12 feet for eye care. With limited space, merchandising is crucial for the category.

Like many supermarkets, Dixie Saving Stores stocks eye care products in the first aid department. "I merchandise it close to the cold and allergy department. A lot of people [who need eye care products] have allergies also," said Page.

Eye care is a strong category, a consistent seller, noted Cousineau. "You want to have the products reasonably near the pharmacy because you can anticipate a good number of questions from the people doing the shopping like 'Which product is right for me?' and 'What do you know about this one?' "

While many eye care products are steady year-round sellers, eye drops sell particularly well when the pollen is heavy. "We see a dramatic increase in sales with the pollen [rising] when people use eye drops to clean their eyes out," said Burks of Mad Butcher. "It's at different times of the year, particularly spring and the latter part of summer."

According to industry sources, consumers buy eye care products about four to six times a year, and 63% of contact lens wearers use five or more lens care products. About two-thirds of shoppers for eye care are female, and 70% of these shoppers are between the ages of 18 and 34.

Doctor detailing is very important in the eye care category, Lauder noted. "People tend to go with the product their doctor recommends." There is a 65% compliance rate with doctor's recommendations in the eye care category, it was noted.

Eyeing the Competition

Year-end figures indicate the effect deep discounter pricing is having on the eye care category. Although the drug channel captures the most dollars, eye care units sold through drug and mass merchandiser stores are running about the same. This is largely due to the competitive pricing from the mass merchandiser channel.

Supermarkets, which maintain more than a fourth of dollar sales, have not maintained their unit volume from the previous year.

Eye/lens care solution sales and unit volume by channel in millions of dollars

Dollar Volume /-% Unit Volume /-%

Food $252 0.1% 54.2 - 1.9%

Drug $411 - 7.2% 75.4 - 9.7%

Mass $323 6.6% 75.2 4.7%

Total $986 - 1.2% 204.8 - 2.7%

Source: Information Resources Inc., Chicago. Infoscan data for 52-week period ended June 16, 1996.