Convenience Loses

Of the 15 traditional nonfood categories tracked by Information Resources Inc., Chicago, supermarkets generated just over $9.3 billion in sales. However, supermarkets were able to show dollar gains in just five categories: soap, up 3.7%, vitamins 7%, weight control 4.4%, batteries 2.4% and adult incontinence 3.9%.

Meanwhile, the drug store channel, which generated over $10.2 billion in sales, reported dollar declines in just three product categories: toothpaste, cleaning tools and light bulbs. Total food, drug and mass channels, excluding Wal-Mart Stores, which generated over $24 billion in sales, were down in five categories: toothpaste, shampoo, razor blades, cleaning tools and light bulbs. The trend is that drug stores and others continue to pick up share of nonfood from supermarkets.

Some of the ups and downs in category performance this year are a direct result of the recession's impact on purchase habits. Generally, when it comes to nonfood categories, supermarkets are positioned as a place of convenience rather than a destination stop. In times of economic stress, the destination stop that offers the best price will win out over convenience.

Soap

Sold in both nonfood and Center Store aisles, soap is the largest volume of the nonfood categories. The category saw a big sales boost with the H1N1 swine flu outbreak this year. Hand sanitizer sales zoomed 19%. Purell's website (Johnson & Johnson) featured a “Facts About Hand Sanitizers As Public Concerns Over the Swine Flu Increase” page, which touted Purell as it pertains to helping to prevent the spread of swine flu, proper hand washing and product availability. The page referenced the Centers for Disease Control and Prevention (CDC), which recommends hand washing and — when soap and water are not available — hand sanitizing to prevent the spread of germs. While category dollars rose in all three channels, units were flat to down, reflecting manufacturer price hikes as ingredient costs rose. Aside from the hygiene aspects, soap manufacturers have concentrated on other health and well-being benefits. Dove (Unilever) launched NutriumMoisture to preserve both skin proteins and lipids to retain moisture. Dial (Henkel) introduced an antioxidant body wash with cranberry and antioxidant pearls as a defense against dry skin and a yogurt apricot and almond formulation to condition skin. Dial added a pheromone-infused body wash for men. Olay (Procter & Gamble) takes a step further with age-defying microbeads and ribbons for cleansing and moisturizing, adding skews of botanicals and spa exfoliating seaweed extracts.

Int. Analgesics

Safety issues shadowed the analgesics category this year. The U.S. Food and Drug Administration advisory panel recommended limits on dosage and use of acetaminophen, a commonly used painkiller and the active ingredient in Tylenol (McNeil/Johnson & Johnson), among others. Concerns centered on liver damage through misuse or overdose. The FDA also issued new label requirements for acetaminophen and nonsteroidal anti-inflammatory drugs — ibuprofen, aspirin, naproxen and ketoprofen. The new labeling requires manufacturers to list potential risks of stomach bleeds for NSAIDs and liver damage for acetaminophen. The new labeling takes effect April 2010. Regardless of the FDA's scrutiny of the category, analgesics are known to be effective in relieving the many symptoms of pain, and consumers have gravitated to maximum-strength, fast-acting and symptom-specific products.

SUBCATEGORIES

Vitamins

Sales advances in the category are bright as the recession has forced consumers to cut back on the cost of prescription medications and seek alternatives to stay healthy. With health care reform in the headlines, consumer emphasis is on prevention and health maintenance. This trend benefits vitamins/supplements, a category that has grown through products targeted to specific health conditions. Popular segments include bone and joint health, cancer prevention, cardiovascular health, cognitive and mental functions, energy and endurance, eye, skin, digestive and heart. This category will be supported by aging Baby Boomers, a group that accounts for about 30% of the U.S. population. The category has come under greater regulatory scrutiny with the government's Good Manufacturing Practices implemented over the last year. The sector is also tackling a Food and Drug Administration labeling recommendation as an addendum to the Adverse Reporting bill that requires manufacturers to notify FDA of all serious adverse events for dietary supplements and over-the-counter drugs. The category is also subject to negative reports of supplement usage. Vitamin E suffered a sales fall-off after reports on health risks in using the vitamin.

Cold/Allergy/Sinus Tabs

The category has survived government restrictions with products containing pseudoephedrine being sold from behind the counter and the Food and Drug Administration's warning last year that cough and cold pediatric products should not be used in children under the age of 2. Despite sales restrictions and safety concerns, the category is performing well, aided by consumers' desire to self-medicate. Homeopathic remedies are also reportedly doing well as consumers take preventive measures and are concerned about safety issues. Sales spikes depend upon the strength of the flu season, which many are focused on this year because of the spread of the H1N1 swine flu virus and the anticipation that a second round of the virus could hit harder this fall, complicating the regular flu season. The category continues to enjoy a lift from the Rx-to-OTC switch in late 2007 of Zyrtec, an allergy medication from McNeil Consumer Healthcare. Year-end figures show a significant rise in dollars in 2008, possibly reflecting Zyrtec's impact. While supermarket dollars were flat for the recent period examined, sales in drug stores and other channels remained strong.

Toothpaste

Both health and cosmetic benefits have driven toothpaste sales in the past. While these trends are expected to continue, the recession has negatively impacted category volume. Sales and units are down across major channels. Consumers faced with higher toothpaste retails have reacted negatively by going on an economy squeeze when it comes to their oral care regimen. With far fewer discretionary dollars, consumers shopped for alternatives to expensive whitening systems and looked for value in products that combined several benefits in one — health and enamel protection, health and whitening, health and fresh breathe. Private-label toothpaste products benefited from consumers' squeeze on expenditures. Retailers have also practiced skew rationalization and cut down on underperforming items to make more room for faster sellers. While retail pricing was a factor for some, oral care prevention was on consumers' minds as they tried to cut down on expensive visits to the dentist by trading up to super-premium products that promised better health and prevention formulas. New products under the Colgate Total line include advance clean and advance sensitive and enamel strength. The company earlier this year launched a disposable mini-brush called the Wisp to satisfy the need for on-the-run oral care. Meanwhile, Procter & Gamble bet that despite the recession, consumers would spend $45 on its Crest Whitestrips Advance Seal. The company also introduced Crest Pro-Health Enamel Shield.

SUBCATEGORIES

Gastrointestinal — Tablets

The stomach remedy segment got a lift earlier this year with the Food and Drug Administration's approval for OTC sale of the proton pump inhibitor Prevacid 24HR (Novartis/Takeda). The decision marks the first successful Rx-to-OTC switch in the U.S. since Johnson & Johnson's Zyrtec was approved in November 2007. Prevacid joins Procter & Gamble's Prilosec OTC and private-label products in this segment. While drug stores showed dollar growth of 3.1%, units were down in all three channels in the overall category. This may indicate that medications to soothe the gut aren't recession proof. Also, private label is a factor when Rx-to-OTC switches loose their patent protection. For example, Prilosec OTC, approved for OTC switch in 2003, suffered a sales drop of 19% due to private-label competition when P&G lost exclusivity of Prilosec in March 2008. However, the prognosis is positive for the category going forward in that common digestive problems, which cause millions of Americans to suffer daily, impairing the quality of their lives, is especially prevalent among an aging population.

Shampoo

The recession impacted sales of shampoo as consumers used up what was in their pantries. Shampoo sales declined for the most part in sales and units in all three channels. Drug store dollars remained flat. Supermarket shampoo sales were the hardest hit — down 5.8% in dollars and 6.4% in units. Interestingly, shampoo/conditioner combo packs, representing a small slice of the market, rebounded in supermarkets, and sales in combined food/drug/mass market channels rose 18% in dollars and 55% in units. Drug stores, however, showed a 17% loss in dollars but were up 74% in units for combo packs. Movement in the combo packs, which have long been losing sales, is probably a direct result of the recession. Two new lines of shampoo products hit the market in the beginning of the year that tapped into the nature plus science concept: Pantene ProV Nature Fusion (Procter & Gamble) and Aveeno Nourish + (Johnson & Johnson). Unilever bought the TIGI line of professional hair products for $411.5 million in January.

SUBCATEGORIES

Weight Control/Nutrition/Liq/Pwd

Despite the recession, weight control nutritional liquids and powders continued to grow. The driving force is obesity. Sedentary but fast-paced lifestyle and consumption of high-calorie and under-nutritious food have contributed to a high percentage of overweight people. All retail channels showed increases in the category with dollar sales at drug stores up 8.8%. However, supermarkets represented 68% of the category dollar volume. While refrigerated products, a small segment, plunged in sales, non-refrigerated product sales rose 4.4% at supermarkets. As long as obesity and weight gain remain a top health concern, the category should continue to perform well.

SUBCATEGORIES

Batteries

According to a study by the Freedonia Group, U.S. demand for primary and secondary batteries will increase 2% annually to $16.4 billion in 2012. Increases will be supported by the rising use of battery-powered products such as digital cameras, portable music players and laptop computers. In addition, the expected recovery in motor vehicle production will support demand for batteries. Market gains will also be assisted by an ongoing shift in the product mix toward more expensive batteries (e.g., rechargeable lithium cells) that deliver improved performance for high-drain electronic devices. However, falling prices for a number of batteries off elevated 2007 levels and generally weaker economic growth will prevent even more rapid gains, according to the report published this year. While dollars were up in all three channels, battery units fell. However, sub-categories showed good growth. Alkaline batteries posted a small increase in dollar sales compared with other subcategory sales at supermarkets.

Deodorant

This is a category where performance counts. Reports suggest that consumers are trading up to high-performance deodorants and antiperspirants that promise better wetness and odor protection. That has helped lift dollar sales in drug stores, even though unit sales are down in all channels. Supermarkets lost dollars in the category. There have been concerns that deodorants and antiperspirants because of aluminum content might be linked to cancer and/or kidney disease. This concern has sparked interest in all-natural deodorants. A new product to the category is Dove Visibly Smooth (Unilever), a deodorant that also works to minimize underarm hair.

Blades

While the overall market (food, drug and mass) for razor blades has remained flat at about $1.3 billion since 2006, unit sales have declined, falling about 5% in the past year. Supermarket share of dollar sales has declined each year, with unit sales dropping by 7.3% in the past year. Even the drug channel, which gained dollar sales from 2006 through 2008, was flat over the past year, and saw a 2% decline in unit sales. The weak economy has not helped the blades market, especially higher-priced cartridges like the Fusion line from Procter & Gamble's Gillette division. Last November, Gillette launched an ad campaign designed to convince consumers that Fusion blades are affordable at a price of about $1 per week. But some consumers are holding onto their razors well after the blades need to be replaced. Other shoppers are shifting to value-priced products in the disposable market as well as to smaller counts of blades and private-label alternatives. In some cases, retailers are moving high-end shaving systems and replacement blades behind the counter to deter shrink, causing consumers to reevaluate disposables and private label. This has helped disposable sales in supermarkets, which declined to a much smaller degree than cartridge sales (0.8% compared with 6%) over the past year.

SUBCATEGORIES

Skincare

Dollar sales of skincare products in supermarkets dropped by 1.3% over the past year, while units dropped 5%. By contrast, dollar sales of skincare grew by nearly 10% in the drug channel, which continues to double the business of supermarkets in this segment. Overall sales across the three channels grew by about 6% to $2.2 billion in the past year, though unit sales were flat. To attract sales from other classes of trade, supermarkets need to counter the perception that personal care products like skincare are a premium convenience item at food stores. In supermarkets and elsewhere, sales of skincare continue to be driven by interest in body and facial anti-aging products and fade/bleach creams.

SUBCATEGORIES

Cleaning Tools — Mops/Brooms

Supermarket sales of mops and brooms dropped by 2.5% in dollars and 6% in units over the past year as the recession induced consumers to hold onto their current cleaning tools. But the supermarket channel still represents a sizable chunk of the market with $457 million in sales, compared with $97 million in the drug channel. The total market, at $881 million, paralleled the supermarket channel with dollar and unit sales, diminishing by 3.2% and 4%, respectively, over the past year. The recession's impact on mop and broom sales can be seen in the 2006-2008 trends: Overall dollar sales growth was relatively strong at 7.4% in 2006, but grew by only 2.8% in 2007 before registering a 4% decrease in 2008. A similar pattern was experienced in the supermarket channel across those years. Imports are a significant part of this segment: In 2008, the value of imported mops, brooms and brushes imported into the U.S. was approximately 50% of that produced in the U.S., according to Market Research.com.

Light Bulbs

The light bulb market has been changing slowly but inexorably with the growing acceptance of the compact fluorescent light bulb, or CFL, which uses 75% less energy than conventional incandescent bulbs. The CFL still only occupies 11% of the household lighting sockets in the U.S., according to the U.S. Department of Energy, but its market share is expected to grow, especially as new federal standards on lamp efficiency take effect in 2012. Of course, price is a factor, with CFLs still several times as costly as incandescent, though CFL prices have been coming down. More efficient incandescent bulbs beginning to enter the market may appeal to consumers who are unhappy with the light emitted by CFLs or dislike their slow start-up time and mercury content. For all the changes in product offerings, sales of the light bulb category have declined in both dollars and units across supermarkets, drug stores and mass outlets. In the slow economy, consumers are undoubtedly conserving energy use in their homes, and those who have bought CFLs are able to wait much longer before buying replacements. In addition, most CFLs are purchased in home improvement, mass and warehouse stores, which may be siphoning off sales from food and drug stores.

Adult Incontinence

An aging population has created a robust market for such adult incontinence brands as Depend, Prevail, Tena and Serenity. Among the three channels of trade, the largest dollar sales growth (8%) over the past year occurred in drug stores, which also saw about a 4% increase in unit sales. Dollar sales in supermarkets grew by about 4%, while unit sales slipped by 1.4%. Overall, combined dollar sales of this segment have seen healthy growth year-to-year since 2006, though unit sales have increased to a lesser degree. Older consumers still pursuing a reasonably active lifestyle are seeking comfort, discretion and ease of use in incontinence products, according to Nonwovens Industry. Less bulky, underwear-like products that stretch easily are appealing to those consumers. As more Baby Boomers, the largest segment of the population, enter their golden years over the next few decades, the demand for unobtrusive yet functional incontinence products should continue to grow.