Nonfood merchandisers are confronting a stream of changing lifestyles as it pertains to health-wellness and the environment. The nonfood category excellence winners profiled on the following pages are at the forefront of these changes as they invest in new product innovations that will help tomorrow's shoppers better maintain their health and protect the environment. Suppliers are more than ever focused on getting it right in the aisle or at the counter as they bring new products and services to market. That means better retail education, information and data analysis.
Light Bulbs Winner: GE Lighting
* CONSUMER INSIGHTS: Develops products and merchandising based on consumers' lighting needs.
* CATEGORY MANAGEMENT: Pulls from multiple data sources to customize planograms at the store level.
* PRODUCT INNOVATION: Improves on CFL light quality.
GE CONSUMER AND Industrial, named an Energy Star Partner of the Year for six years running by the U.S. Environmental Protection Agency, carries clout with food retailers about to convert their planograms to new energy-efficient products by 2012.
That's when consumer demand for traditional incandescent light bulbs will begin to fade as the 100-watt bulb will be phased out under the new energy law, followed by the 75-watt bulb a year later and then 40- and 60-watt bulbs in 2014.
One retailer said, “We couldn't make the category without GE's leadership and vision of the category beyond 2012.”
Francois LeBrasseur, manager of channel development for GE's C&I unit, based in Louisville, Ky., told SN the transition to energy-efficient products is a moving target for retailers. “A lot of work is going into preparing our retailer partners in what is going to be a world post legislation,” he said, adding that the world will be dominated by compact fluorescent light bulbs (CFLs).
GE's work consists of consumer research, advances in lighting technology and making sense of new light bulb options for consumers at the point of sale and on the packaging.
It starts with consumer research, said LeBrasseur. GE has found consumers are interested in saving money as well as saving the environment, but they also want comfortable, quality light in their homes. The company is merchandising two light bulb lines — Energy Smart and Reveal — to satisfy those needs.
Last year GE produced 271 Energy Star-qualifying lighting models. The majority, 99.3%, of the 2008 compact CFLs were Energy Star qualified. The company has made the CFL look more like a traditional light bulb by putting the GE Spiral CFL inside the glass bulb.
Consumers have resisted CFLs because of their high price and harsh light. GE is working to improve upon the color tones that CFL light produces and has just introduced a CFL with variants in light intensity under the Reveal brand.
“GE owns the light bulb category and they are the innovator,” said Paul Weitzel, managing partner, Willard Bishop. “They provide strong category leadership and help retailers build an efficient light bulb set.”
A nonfood director of a California chain said GE has “developed additional options in CFL bulbs, and they have presented several options in CFLs to prepare us for the new legislation.”
OTC Medications Winner: McNeil Consumer Healthcare/McNeil-PPC (Johnson & Johnson)
* STRENGTH OF BRAND: Portfolio extends across multiple OTC categories.
* TYING INTO CONSUMER TRENDS: Delivers products that meet specific health needs.
* MARKETING/PROMOTIONS: Heavily invests in brand support.
RETAILERS POINT to McNeil's broad-based portfolio of OTC brands and the team's depth of expertise in helping them better position their stores as health and wellness providers.
Scott Preston, general merchandise business director, United Supermarkets, Lubbock, Texas, said McNeil is focused on SKU rationalization and key category item “growth drivers.” In his opinion, the company demonstrates leadership in seasonal sales opportunities. McNeil is No. 1 in the allergy, cough, cold and sinus category with brands such as Sudafed, Benadryl, Actifed and Zyrtec, which was successfully switched over the counter last year. McNeil holds a 20.5% market share in the seasonal category, according to Kalorama Information, a market research group.
Besides the respiratory category, McNeil holds the No. 2 position — capturing 19.5% market share — in anti-infectives and the No. 3 position — capturing 7.3% market share — in analgesics.
“McNeil's biggest strength is their brand breathe. They are able to get a seat at the table with any retailer on almost any category because their portfolio is so broad and they are also strong in every category. Their biggest brand is Tylenol, which stretches across not just analgesics but cough, cold, allergy, sinus,” said Ted Taft, managing partner, Meridian Consulting Group.
Preston added, “McNeil has a clear understanding of consumer trends and how to capitalize on innovative promotions and packaging with value offerings.”
This was demonstrated with the Zyrtec launch. The company leveraged its relationships with the health care community to spread the word that Zyrtec would be available without prescription. They worked with pharmacy benefit managers, national retailers and employers before the launch to educate and inform them about the switch. Millions of Zyrtec prescription users received switch information and a coupon from their health plan and employer. To further capture market share, the company also introduced Zyrtec D, containing a decongestant for those allergy sufferers already using other OTC brands.
This year, the company, based in Fort Washington, Pa., expanded the Zyrtec line with children's Perfect Measure, pre-measured spoons of medication, and Easy Eye Drops. The company also launched AllergyCast, an iPhone application that allows allergy suffers to get the latest allergy and weather information.
Vitamins Winner: Pharmavite
* CATEGORY EDUCATION: Informs consumers and retailers on product and category benefits.
* CATEGORY MANAGEMENT: Applies customized retail analysis.
* STRENGTH OF BRAND: Leading vitamin brand; diversification into nutritional snacks.
EDUCATION is the engine that powers the vitamin category.
That's what chains such as Wegmans, Safeway, Meijer, Harris Teeter and Bi-Lo are learning in their supply relations with Pharmavite, the Northridge, Calif.-based manufacturer of Nature Made vitamins, minerals, herbs and other dietary supplements.
Pharmavite, Northridge, Calif., is currently running a pilot program at a select number of these chains' stores to test the impact of shopper education on category purchasing. In partnership with LearnSomething, a provider of elearning solutions, Pharmavite has placed interactive digital signage in aisles and at store endcaps, to inform shoppers on topics such as bone and joint health, heart health, women's health, mood and stress relief, and prostate protection.
Under the same partnership, Pharmavite introduced a consumer-centric education program that links to retailers' websites. At Kroger.com, for example, consumers can go to the Healthy Living tab and click on “choose the right vitamin” to learn about mood and stress as well as a variety of information on health and wellness topics.
Pharmavite takes its education platforms from consumer to in-aisle POS to the pharmacy where pharmacists can learn about dietary supplements and contraindications or drug interactions. They can earn continuing education credits through Pharmavite's Vitamin and Herb University, awarded through the University of Georgia. The newest pharmacy tools are Wellness Wheel and Health States Database. Wellness Wheel provides shoppers with customized information on healthy lifestyle regimens and disease prevention. Health States Database focuses on specific health states and provides suggestions for supplement recommendations as well as supplements to use with caution and/or avoid with certain health concerns or medical conditions.
“They have played an integral part in providing education for our new category managers to assist them in overseeing the vitamin category,” said a director of nonfoods for a California chain.
Research indicates 83% of shoppers' vitamin-purchase decisions are made at home. So it becomes critical for supermarkets to establish a strong category presence in order to capture purchases.
Pharmavite assists retailers to best position their category by approaching each category review or ad hoc analytical request as a customized analytical project. The advantage is to identify new, unique business opportunities and/or threats in each category review.
“They offered a very comprehensive evaluation of the vitamin category and gave concrete recommendations to assist us in growing the category. They have been very supportive in this highly promotional category,” said the nonfood director.
The manufacturer uses shopper insight research to stay ahead of product trends and build the category. Nature Made came out with a liquid softgel line for easy swallowing. Last year the company crossed over to nutritional snacks with SoyJoy, an all-natural, nutrient-rich food baked with whole soy and real fruit.
Pharmavite claims having the No. 1 national brand in the vitamin category in the grocery channel. The brand has grown at a 13% rate over the latest 26 weeks ending Sept. 5, vs. the remaining vitamin category that has grown at a 7.8% clip, according to ACNielsen data.
Company to Watch
NBTY: With sales of $2.2 billion, the manufacturer, based in Ronkonkoma, N.Y., is uniquely structured to drive category growth and market share by being a highly diversified, multichannel distributor. Distribution channels are wholesale/U.S. nutrition, North American retail (Vitamin World and Nutrition Warehouse stores in the U.S.), European retail and direct response/e-commerce channels. The advantage is speed to market of new products. NBTY supplies Wal-Mart Stores, which accounted for 12% of the company's consolidated net sales last fiscal year, Kroger, Supervalu and Publix, among others. The company has grown through acquisitions over the years. Last year NBTY acquired Leiner Health Products, a private-label dietary supplement manufacturer. About 35% of wholesale division sales represent private label. The manufacturer sells Nature's Bounty, Sundown, Rexall Naturals and, in sports nutrition, MET-Rx in bars and shakes. The company claims to have the No. 1 selling brand, Osteo Bi-Flex, in joint care. Targeted products and brands are marketed through each distribution channel in a wide range of price points.
Pharmacy Winner: McKesson
* IT SOLUTIONS: Applies advanced technology to automate pharmacy operation.
* EFFICIENT DISTRIBUTION: Leads the industry in order-rate accuracy and service levels.
* SKILLED TEAM OF EXECUTIVES: Develops customized solutions with dedicated account managers.
FOR GROCERY CHAINS like Safeway, Giant Eagle and Brookshire Grocery Co., McKesson offers not only efficient prescription drug distribution but a full menu of IT solutions designed to reduce pharmacy operational costs and provide better patient service.
“We are all collaborating to achieve a common objective, care that is patient centered, economically sustainable, high quality, safe, efficient and connected,” said John Hammergren, chairman, president and chief executive officer of San Francisco-based McKesson, during the company's first-quarter conference call this year.
One solution that combines McKesson's distribution and inventory management expertise with its pharmacy automation leadership is Central Fill. This combination has allowed McKesson to successfully partner with numerous retail customers, including Wegmans and Giant Eagle, to provide an end-to-end central fill solution to aggregate prescriptions from multiple locations and funnel them to a centrally located prescription fulfillment center. Central Fill can help a supermarket pharmacy save as much as 25% in labor costs per prescription while improving utilization of resources and inventory optimization, the company said.
This year McKesson deployed the next-generation pharmacy management solution — EnterpriseRx — to all U.S.-based Safeway pharmacies. The software enables chains to benefit from the centralization of pharmacy operations and helps supermarket retailers compete more effectively.
EnterpriseRx provides users with more control over the entire prescription-filling process. It allows users to access real-time information from any location to better manage pharmacy workload, reporting and inventory throughout their pharmacy operations.
“We use the system across all of our pharmacies and it affords us real-time access to our data, and we've successfully adopted the workflow functionality of EnterpriseRx,” said Jim Cousineau, vice president of pharmacy operations, Brookshire Grocery Co., Tyler, Texas. “As early adopters of EnterpriseRx, our pharmacies are equipped to compete in tomorrow's pharmacy industry.”
McKesson's approach to account management from a customer-service perspective is focused on providing a “one-call” solution. “We don't think the customer should have to manage a long list of contacts to get the answers they need, so we provide supermarket retailers with a single point of contact,” said Jack Fragie, executive vice president of retail national accounts, McKesson U.S. Pharmaceutical.
He noted the company has “strategic account management leads” who work with customers to develop proactive, customized solutions for both short-term and long-term success.
McKesson's ongoing investment in operational excellence, use of Six Sigma methodology and attention to detail means that supermarket retailers get the right product delivered at the right time and at the right price. McKesson leads the industry with order accuracy rates of 99.96% and service levels of 98.5%.
For Doug Kaleugher, CEO of Med-Fast — which operates 20 pharmacies, some in Supervalu stores, in western Pennsylvania — McKesson has been an invaluable supply partner for the last 10 years.
“They do a great job. Their stock levels are phenomenal. They're extremely efficient and their deliveries are always on time, and I've been with other wholesalers. They are the best I've worked with.”
Skin Care Winner: Procter & Gamble
* PRODUCT INNOVATION: Numerous new item launches each year.
* STRENGTH OF BRAND: Olay brand deployed through boutique lines.
* TYING INTO CONSUMER TRENDS: Builds tiers of value and benefits to satisfy various shopper segments.
THE NUMBERS tell the story.
In the anti-aging skin care segment, Procter & Gamble's Olay brand is the leader with a 47% share of dollars spent in food stores, according to Information Resources Inc. figures for the year ending July 12, 2009.
As the numbers demonstrate, food retailers are benefiting in new sales and category growth when P&G applies product innovation.
Of the boat load of new Olay product launches during the year, Tom Vierhile, director of product launch analytics, Datamonitor, Canandaigua, N.Y., pointed to Olay Regenerist DNA Superstructure UV Cream SPF 25, “which attempts to elevate the brand above the pack by promising protection to DNA and from UV rays, a relatively novel claim.”
Under the same line, Cincinnati-based P&G introduced an anti-aging eye roller daily treatment to reduce puffiness and diminish fine lines. In a co-branding move that crossed over into cosmetics, P&G combined Olay Regenerist Serum with new Cover Girl Simply Ageless Sculpting Blush.
Other noteworthy Olay launches were Definity Color Recapture, formulated to give skin a youthful appearance, and the super-premium-priced Pro-X line, a professional line with retails starting at $42 and up.
This is how P&G pushes the envelop in growing categories both vertically in value tiers and horizontally to adjacent segments.
P&G Chairman A.G. Lafley explained it in the company's fourth-quarter earnings call: “In virtually all of our industries, there are three or four value-price tiers. That's what we call the vertical portfolio, and there are three or four benefit segments. In a 4-by-4 matrix you've got 16 different consumer segments. They're all buying what they think is the best value. Women buying Olay Pro-X thinks she's buying the best value for her, and the women buying the most basic complete moisturizer that we sell at $5 to $10 thinks she's buying the best value for her.”
P&G's top executives noted that Olay Pro X has drawn department store consumers, who bought high-priced anti-aging creams, into mass market doors, including large supermarkets chains who are selling the lines.
“They have helped us become very successful in developing a line of products designed to attract a high-end consumer who may be otherwise shopping at department stores, especially for anti-aging products,” said the director of nonfoods for a California chain. “Their Olay anti-aging line has been very successful for us.”
James Tenser, principal, VSN Strategies, a Tucson, Ariz.-based marketing consultancy, said, “P&G's Olay brand continues to lead in skin care by balancing performance and value. The breadth of assortment is impressive, yet the brand's positioning remains clear.”
The challenge for P&G in working with food retailers is to manage the new innovations. “We continually meet with customers to gain input to upcoming innovation as well as complete annual joint business plans,” the company said in a written statement. P&G also conducts market research and shares its deep understanding of consumers and influencers with retailer partners.