Supermarkets are refusing to relinquish profitable ground in the killer battery category.
Battery sales are up at food chains, and retailers' margins are holding, according to those polled by SN.
"The battery business is very good and still very profitable, with 28% to 34% margins. It's nothing we'd walk away from, even though it's more competitive," said Dan Black, buyer-merchandiser of general merchandise at Raley's, West Sacramento, Calif.
Paul Urko, nonfood buyer at Piggly Wiggly Carolina Co., Charleston, S.C., called the category "formidable," adding that sales at the 105-store chain are growing at a rate of 3% to 5% a year.
"In spite of batteries being very competitive in the past few years, we're making money on the category at 30% to 35% margins," said a nonfood executive with a Southeast chain, who asked not to be identified. Sales of the total battery category, which includes alkaline, heavy duty, general purpose and other types, are up 2% for the 12-month period ended Feb. 28, 1995, according to Towne-Oller & Associates, New York, a subsidiary of Information Resources Inc., Chicago. Towne-Oller tracks sales based on product movement from distribution centers among reporting retailers and distributors. Retailers have implemented several defensive strategies to combat the squeeze that is being put on batteries by mass merchants and warehouse clubs. · Many retailers have increased exposure to the high-impulse category by placing more displays outside the in-line section. Batteries can easily be found on power panels, pallet displays and checkstands at supermarkets. · Retailers have been quick to take advantage of the seasonal and cross-promotional opportunities that batteries provide.
· Competitive pricing of selected multipacks has enabled some retailers to compete directly with the category killers.
· Advertised feature prices and manufacturer rebates have helped supermarkets drive battery sales.
"The problem is that batteries often are buried in the middle of an aisle by hardware or somewhere at the back of the store. Not all consumers notice the section. Therefore, there is a need to display batteries in more than one location," said Debbie Jarvi, category manager of batteries and film at Associated Grocers, Seattle.
Associated Grocers' retailers that use power panels at front endcaps seasonally and at checkstands have enjoyed "dramatically higher sales of 35% to 40%" in the category, stated Jarvi.
"Eveready and Duracell batteries are matched in sales at our retailers who work on 15% to 25% margins. Lithium batteries offer growth potential, but manufacturers still need to educate consumers about them," she added. At Spartan Stores, Grand Rapids, Mich., the increased battery exposure from cross-merchandising and seasonal opportunities has put more dollars through stores' registers, said Sherrie Stinebaugh, supervisor of consumer affairs and public relations.
In the spring and summer, and again during the fourth quarter, which has longer periods of darkness, Spartan promotes flashlights with batteries.
The chains also highlight batteries in spring clean-up and fix-up promotions, and cross-promote them with smoke detectors with a reminder that it's time to change the batteries.
Black of Raley's said that in addition to heavy third- and fourth-quarter promotions and feature pricing, Raley's now promotes batteries more in summer to build volume for the camping season.
"When advertised at hot prices, we retail batteries at three to four cents above cost. We promote the category aggressively throughout the year in ad campaigns and on floor stands and pallets with different battery types to give broad exposure for an impulse item," he said. In addition, Raley's merchandises eight-packs of AA batteries, and four-packs of C's and D's. "This compares to the 12-count megapacks warehouse clubs and mass merchandisers offer. A 12-pack may be a good value but I'm not so sure customers feel comfortable buying that quantity," Black added. Supermarkets have maintained their share of category sales by offering competitive prices on selective multipacks.
The category is up for the 650 retailers that Fleming Cos.' general merchandise division, Dallas, supplies with Eveready, Duracell and Panasonic batteries. Retailers are using "lowball retails on AA batteries in larger eight-packs, and making full margins on AA, C and D batteries in two- and four-packs displayed at checkstands, on power wings and off-shelf displays," said Earl Rogers, category manager for batteries at Fleming Cos.' general merchandise division in Dallas. He added that Fleming's larger chain accounts also keep their battery retails lower by buying direct from the manufacturer, which eliminates the handling fee. Power wings at endcaps and shipper dumps are supported by ad features on C, D and 9-volt batteries offered at a single price point. "This has been an effective way to build battery sales," said Rogers.
Spartan Stores, in addition to everyday low pricing in batteries, emphasizes price features. "We use a lot of manufacturer coupons and rebate offers to call attention to the category. Shippers are placed around the store, at checkout lanes and in-line, and with film," said Stinebaugh. She explained that wholesale clubs avoid using consumer rebate offers and in-ad battery coupons. So Spartan is taking advantage of that by placing rebate pads at battery displays. "Manufacturer support with point-of-sale materials, the rebates and coupons drive sales," said Stinebaugh. Duracell, Eveready and Rayovac batteries comprise the bulk of sales at Spartan, with AA the best seller, followed by D, 9-volt, C and AAA, she added. Urko of Piggly Wiggly said the chain's battery feature pricing is competitive with the total market, including mass merchandisers, drug stores and other food retailers. The chain supports its ad feature by setting up off-shelf in a corrugated floor shipper. Urko said, "How low the feature price goes depends on how daring we want to be at any given moment."
The executive from the Southeast retailer said the chain uses $1 in-ad coupons to bring customers to stores, where batteries are merchandised at several locations.
"This exposes customers to the Duracell, Rayovac, Eveready and Panasonic batteries. We find a high-low approach to be more profitable than everyday low pricing in batteries. We'll normally feature one brand of any size battery in a four- or eight-pack at $3.79 to $3.99. This price drops to $2.79 to $2.99 when the customer redeems the in-ad coupon," said the executive. Food Basket in San Angelo, Texas, doesn't even attempt to compete with Wal-Mart or the clubs in the battery category, said Lester Headrick, director of nonfood. "Instead, we compete against our major supermarkets, because you're never going to match Wal-Mart or club store pricing. We include batteries in ads and store fliers," he said.