A BIG-TIME PLAY FOR HBC 2004-11-15 (2)

DAN ALAIMO

CINCINNATI -- With the No. 1 U.S. manufacturer of household products turning more of its marketing might to health and beauty care, supermarkets need to take notice as it will impact their business sooner rather than later. In this exclusive interview with SN, Doreen Bayliss, North American manager of health and beauty care at Procter & Gamble here, gives the reasons why HBC has become a priority for P&G, and explains the importance of this move for supermarkets.

SN: Why have health and beauty products become increasingly important to P&G?

Bayliss: P&G's health and beauty portfolio is extremely critical to accelerating our stated growth goals for three primary reasons:

1. Tremendous potential in HABA [health and beauty aids] to grow profitable volume for us and our grocery partners. Consumer demand for health and beauty care advances is growing at a rate disproportionate to many other categories.

2. Health and beauty is a global proposition where we have built considerable scale. P&G has three times the HABA dollar share and dollar sales of its next closest competitor. We have share leadership in 19 HABA categories, including four that are billion-dollar brands. Leveraging our HABA scale includes bundling meaningful initiatives for greater retail impact, combining considerable resources to drive substantive business opportunities for grocery, and delivering "solutions" for the health and beauty consumer that prompts multiple HABA purchases per trip.

3. Leading-edge health and beauty products have a visible impact on our stated goal to improve the lives of consumers/shoppers. Research shows the irrefutable interconnectedness between health and beauty. Playing a role in delivering well-being for our consumers is a winning proposition for everyone.

SN: How significant has this business area become to leading supermarkets, and how will it become more significant in the future?

Bayliss: The importance of HABA will only get greater in the future for the grocery channel. Consumers feel that well-being comes from many different areas, including healthy foods, medicines, self-care devices, vitamins and supplements, exercise, cosmetics, good skin and hair care, good oral care, meditation, etc. No channel is better suited to meet these needs [than supermarkets], and the retailers that get it right will win loyalty.

SN: What demographic, social, and technical/pharmaceutical trends are driving this business now, and how will this change in the future?

Bayliss: Population trends are clear that Hispanics, who have some specific and unique HABA needs, need to be an ever-increasing inspiration. The same can be said for the 50-plus age group -- nutraceuticals are an emerging opportunity here. Separately, today's consumer is obviously much more empowered than ever before. With the accessibility of information today, shoppers feel confident and want to make their own choices as they seek solutions for their families and their own well-being. Finally, as consumers age and their life circumstances change, their priorities change as well. In each life stage, unique values and priorities affect their attitudes toward health and beauty, including the way they shop and the products they buy. Retailers need to stay in touch with the needs of their most loyal shoppers and create the right retail environment [selection, adjacencies, information and services] that validates them and earns their continued loyalty.

SN: How are competitive forces impacting supermarkets' approach to health and beauty now, and how should they expect to change in the future?

Bayliss: Three primary forces should be affecting supermarkets' approach to health and beauty:

1. Mass continues to eye expansion into formats that line up well with the expanding definition of well-being. The food channel will have to keep pace by matching the quality and breadth of HABA offerings, as well as leveraging strong equities in healthy food, convenience, pharmacy and trip frequency for a one-stop advantage.

2. Nontraditional outlets [boutiques, etc.] are increasing their share growth in beauty. Supermarkets will need to understand what boutiques are uniquely delivering for their shoppers, and how they can adjust their plans to capture more of the growing boutique trend.

3. The drug channel has obvious strengths in pharmacy and an ever-expanding list of services in health and beauty. Their locations and small-box formats represent ease and convenience to shoppers. Food retailers need to consider these desired attributes.