Fourth-quarter video sales exceeded many supermarket retailers' expectations, with some reporting business up 10% to 50% compared with the previous year's final-run period.
Strength of hit releases such as "Toy Story," "Independence Day," "The Nutty Professor," "Twister" and "Mission: Impossible," which were given solid advertising exposure by the studios, contributed to the high turns.
Profit margins also were said to be higher than in the past, driven by "Independence Day," which had one of the highest minimum advertised prices for a smash hit in recent years, $14.95, and a suggested retail price of $22.98. If retailers advertise below MAP, they cannot collect co-op advertising dollars.
"Our sell-through business was much better than we had anticipated," said Randy Weddington, video specialist for Harps Food Stores, Springdale, Ark. "The major titles have been selling very well -- 'Independence Day' was doing the best, but still only a little ahead of 'Toy Story.' 'Nutty Professor' is outselling 'Mission: Impossible.' "
"It was one of the most exciting and profitable years," said Rick Ang, buyer at Video Mart, Sacramento, Calif., which racks video departments at Bel Air supermarkets in that area. "There was a lot of good product out there -- 'Toy Story,' 'Independence Day,' 'Mission: Impossible,' 'Nutty Professor' and 'Twister' were big sellers."
"I'm generally an optimistic, positive guy," said one executive with a Southeastern supermarket chain, "but last quarter our sales were way above my projections. Much of it was due to a lot of good new children's titles."
"It was the biggest year yet," said Kirk Kirkpatrick, vice president of marketing at WaxWorks/VideoWorks, Owensbrook, Ky. "A number of blockbusters, including 'Independence Day,' 'Toy Story' and 'Twister,' got people into the stores."
For a large number of retailers, "The Nutty Professor" was the surprise success of the year, while "Mission: Impossible" was a disappointment. "We never had as much success with one title as we are having with 'The Nutty Professor,' " said Denise Darnell, video supervisor for Southeast Foods, Monroe, La. "We've ordered three times our original order and we're running out. We're selling only some 'Mission: Impossible.' "
"Timing is very important," explained one Midwestern distributor. " 'Mission: Impossible' came out at the same time as some stronger family and children's titles. It was distributed at the same time as 'Nutty Professor.' Ten days later came 'Independence Day,' and two weeks earlier 'Toy Story' went on the racks."
Retailers said they are concentrating on new releases this year more than ever. "Customers are interested in the new releases and family videos -- especially at this time of year," said one West Coast executive who did not want to be identified. "We're going with this trend, purchasing a lot more new titles and cutting back on catalog in a lot of our departments. You can't just carry everything if your space is limited, so we let the Blockbusters get that kind of business."
But many retailers also attributed holiday sales success to the combination of new and catalog titles. "We had a good mix -- old and new titles with some really eye-catching display material at checkout and in our video departments," said the Southeastern store executive. "Re-promotions of such titles as 'Willy Wonka and the Chocolate Factory,' 'The Sound of Music' and 'My Fair Lady' -- added to the new titles -- contributed to making for a profitable year," Ang said.
Many of the supermarkets and distributors applauded the studios for offering retailers opportunities for better profit margins.
Tom Dyrhaug, video coordinator at Fleming's La Crosse, Wis., division, said: "Studios were not low-balling. Great strides were made over 1995 when it came to profit margins."
"Studios are making a conscious effort to allow for a larger margin between replacement cost and MAP," said Bill Bryant, vice president for sales, grocery and drug at Ingram Entertainment, La Vergne, Tenn.
Also helping supermarkets boost video sales in the last quarter were a large number of quality sell-through release titles priced under $10.
"There have been a number of releases where net sales were up considerably," said Bryant. "There were strong titles like 'Beverly Hillbillies,' 'Wall Street' and 'Raising Arizona' at the $9.98 price, The amount of this product makes it possible for retailers to support permanent racks and achieve substantially higher margins -- up to 38%."
John Jump, executive vice president of sales and marketing for Sight & Sound Distributing, St. Louis, noted that profits on event movies generally are low because of minimum advertised pricing. "But in the last quarter 'Independence Day' had one of the highest MAPs, and supermarkets were giving extra shelf space to it."
But despite help from studios, continued strong competition from mass merchandisers like Kmart and Wal-Mart made it difficult for supermarkets in certain regions to build margins on sell-through.
"We've been getting a lot of national ad support from studios, and that helps," said Darnell. "But with the heavy competition from mass merchandisers that sell both food and nonfood items and discount video, it is difficult to compete. We've had to discount a lot, making it difficult to have a strong profit margin."
But for the large part, optimism ran high in the last quarter. Retailers and distributors praised the studios for strong advertising support and most indicated that it attracted more visitors to the video department and, in turn, built sales.
"Disney put a lot of ad support into children's titles," said Weddington. "And it went into the older titles as well as the new releases.
"There was tremendous network advertising at the end of the year for new releases," said Jump. " 'Independence Day,' in particular, was supported by tons of institutional advertising."
Kirkpatrick called for more creativity in selecting titles.
"At Christmas, of course, instead of just the new titles, they should have titles like 'It's A Wonderful Life' and 'Frosty the Snowman.' And there should be an awareness of other tie-ins."
For example, supermarkets can tie-in the new film "The Preacher's Wife" to the earlier movie it's based on, "The Bishop's Wife." Another tie-in that can be promoted is "Terms of Endearment," which was the forerunner of "The Evening Star," just out in theaters, Kirkpatrick said.
"A lot of customers are interested in the oldies," Kirkpatrick added. "And everything old is new again. It's all in how it's marketed."
Retailers and distributors ended the year with renewed faith in the potential for the growth of supermarkets as a sales vendor of videos.
"Supermarkets have customers in their stores about three times a week on average," said one distributor. "But only 20% make use of the video department. There is tremendous potential there."