BURBANK, Calif. -- Supermarket video is surging with record sales in rental and sell-through. So what will it take to keep up the momentum? Ann Daly, president of Buena Vista Home Video, said that a "commitment to the category" is the way to increase business even more. The firm is a marketing and distribution subsidiary of the Walt Disney Co. According to Daly, making this commitment means using hit titles to drive sales of an array of product that is presented in separate sections of the supermarket.
"Supermarkets really have to make a statement of importance about the unique opportunity that a video category provides -- packaged goods married with entertainment. They have something that has the opportunity for a lot of excitement. It has to be treated that way in the store.
"Once that presentation in-store happens, and once the consumer connects the point of sale with the network advertising we're doing for a particular offer, we're seeing sales explode," she told SN in an interview here. Here are Daly's views on the supermarket class of trade, and what retailers can expect from Disney this year. SN: How would you rate the performance of video in supermarkets in 1993?
DALY: Our business with supermarkets grew, so obviously we were very pleased. But it did not grow at the rate of our total business, which is critical for us to rectify this year.
That happened for two reasons. One, we had so much product coming out last year -- new titles and an assortment of previously released titles that are still best-sellers. Supermarkets were not prepared to absorb these titles at the rate that they were available. The volume was beyond what supermarkets could grasp. There's a continuing challenge with the supermarket business -- figuring out a way to absorb that much product. The opportunity shouldn't go to somebody else. SN: How can supermarkets move to the next level in video? DALY: They have to make a commitment to the category. The in-and-out business -- taking in a hit -- is not really going to provide supermarkets with the volume and profit opportunity that is really available in this category. The hits are what everybody carries. They are the ones that are price-promoted most aggressively. If they're not brought in and made a part of a bigger presentation in video, you're going to have a business that's not going to be too exciting. The margins are going to look terrible. If supermarkets want to drive their traffic and become a destination, video can't be in and out. Supermarkets have to make a statement to the consumer. They have to have video in a place in their stores where the customers know where to find it. They really have to make a statement of importance about the unique opportunity that a video category provides -- packaged goods married with entertainment. They have something that has the opportunity for a lot of excitement. It has to be treated that way in the store. Once that presentation in-store happens, and once the consumer connects the point of sale with the network advertising we're doing on a particular offer, we're seeing sales explode. The accounts that have figured out how to use the hits to drive their overall business are very happy with video and are expanding their selection. Those are the accounts saying, "I want a permanent Disney section in our store because we're going to be taking in the product on a regular basis, we're going to be promoting the hits, we're going to be selling other children's product from other studios." It's a real business for them.
SN: So you're recommending a Disney section inside the regular sell-through section? DALY: That's one of the easiest and quickest ways to get yourself in the business with the least amount of risk and the greatest return. It's one way to really jump-start the business. It demands a commitment to an array of product. SN: Which retailers have Disney sections in their stores? DALY: The permanent Disney sections mostly exist in the mass merchant class of trade. They have been in the business for several years, most of them pretty aggressively. SN: Do you envision Disney sections in supermarkets like those in Wal-Mart?
DALY: Not exactly, because I don't think those stores are similar. But I do envision permanent Disney sections that always have new Disney product featured. Certainly we're going to have enough new, exciting product and collections of product that customers can pick up. Continuity programs that supermarkets are ideal to execute in store might dictate a different type of presentation than might be in a mass merchant.
Our whole business philosophy is not to take what works in one retailer and jam it into the other, assuming that they have the same marketing strategy and same customers. But the concept of having a permanent location in the store in a high-traffic area, managed well, with an assortment of new releases and existing product will provide a very handsome return to a supermarket. Disney is one of the easiest ways to do that because we service the most active segment of the population -- families.
SN: What has surprised you the most about working with the supermarket class of trade? DALY: What surprised me the most was the hesitation to look at the video business as anything other than another hit, in-and-out business. We certainly have the hits and they certainly end up getting footballed around in price. But there's a way to make that a win-win because you get the traffic and excitement of a release that very few other product categories can deliver.
In the case of "Aladdin," I don't know a single other product in the history of packaged goods that could have delivered that much revenue in that short a time. We were selling -- from its release up until Christmas -- 22 million units. You can use the magic of Hollywood and the magic of a real consumer event to bring people into the store.
But it means that you have to attend to it. It's not necessarily an easy business. It means you have to manage the hits versus the catalog, and use the hit to drive all-store sales. What's also surprising is another barrier that we've seen to making the business explode in supermarkets. The video business, with its volatility and its ability to drive such a huge amount of business with a very different margin structure, has been traditionally looked at in a product category perspective. A hit with a low margin is being viewed by a buyer as having one value. But from a company perspective, a piece of product that might have a lower margin -- yet be able to drive so much store traffic and so much all-store volume -- should really have the attention of more than just that buyer who's making a judgment based on more traditional criteria for more traditional products. That means that it has to go generally up the management structure. There has to be a much broader company involvement in the decision to be in that business. Sometimes that's difficult to achieve. It means change, and making waves. The companies that are looking at the category as unique and harnessing the unique characteristics of the video business are finding much greater return. SN: For the balance of 1994, what are your goals for business in supermarkets? DALY: The last topic is a goal. To understand what video can be as a category. If you measure it against traditional product criteria, it doesn't always match up. But that doesn't mean that it shouldn't be in the supermarket. And it doesn't mean that it can't achieve company objectives, both in terms of volume and margin.
We're uniquely set up to do that because we're the only brand in the business. When we sell "The Fox and the Hound" on video, we can make a very good consumer connection to buy other products, get a bigger sale, get a bigger margin for the company. Or we can provide an opportunity to drive the business in a much bigger way throughout the entire store with tie-in promotions and all kinds of consumer offers. The other goal is to figure out a way that we can manage our business better, and the flow of product better for supermarkets.
SN: Has that been a problem? DALY: Yes. Our growth as a company has been so dramatic, and therefore our flow of product has been so dramatic, we really will be coming out with a new promotion every week. It is obviously problematic for a lot of our supermarket customers. One step is to have a permanent section so there's always something new. It's a shame they have to miss out on a piece of business that will go to somebody else. So we've got to figure out a way to put that all together. SN: What can retailers expect from Disney in the near future?
DALY: Promotions are increasing. We have the Jim Henson video line, and it just has been exploding for us after a year of reintroducing Jim Henson movies, cartoons and all kinds of wonderful shows. We have the Chipmunks, and Spot, a character who we think is gong to be a huge success. This will be our biggest year. Snow White will definitely be one of the biggest titles of all time.