HIGH-END GROWTH 2004-10-11 (2)

CHRISTINA VEIDERS / Additional reporting: Dan Alaimo

PHOENIX -- The shine is on the upper end in hair care.

Despite the higher tickets of $4 to $6, vs. 99 cents to $1.49 of value brands, the high-end segment is where sales are being generated, observed supermarket buyers interviewed by SN on hair care trends during the recent General Merchandise Distributors Council's Health and Beauty Care Merchandising Conference here.

"It used to be that the growth was in the value-price brands," said Charles Yahn, vice president of merchandising for Associated Wholesalers, York, Pa. While price is still an important factor, he added, value is now sought in the quality of the more upscale (mass) products. "Some of the cheaper brands are not growing share the way they once did," Yahn noted.

Two brands in the upper-end segment scoring consistently good sales are Garnier's Fructis (L'Oreal) and Dove (Unilever), the retailers said. Both hair care lines were popular in Europe before being launched in the United States last year.

Fructis stands out on the shelf with its distinctive green bottle. It is described as a fortifying system of fruit acids, vitamins B3 and B6, fructose and glucose. The formula works to strengthen and shine hair, according to the Fructis Web site. The brand's tagline is "For Hair That Shines for All Its Strength."

Dove contains "weightless moisturizers" that are said to add vibrancy. The hair care lines build on the brand's franchise in the personal care segment: Garnier with its hair color line, and Dove with its cleansing products.

"The top-growing brands are Fructis, Dove, Brilliant Brunette [John Freida] and John Freida," pointed out Doug Schwab, corporate director of wholesale health and beauty care, Supervalu, Eden Prairie, Minn.

Tom Vierhile, executive director at Productscan, Naples, N.Y., said L'Oreal and Unilever put a lot of marketing dollars behind their launches of Fructis and Dove. Both are considered global brands by their respective companies, he said. "Part of the game is standing out in a very crowded hair care category," acknowledged Vierhile. Besides the unusual fluorescent color and shape of its container, Fructis has a fruit-based formula that appeals to consumers looking for natural-type products with better-for-you attributes, Vierhile said.

Mona Doyle, president of the Consumer Network, Philadelphia, agreed that what is driving consumers to higher-priced hair care is the desire to look good, feel healthy, and treat themselves because they feel worth it. "The trend has gone from the Body Shop to the mainstream," she remarked. Doyle also believes consumers are willing to pay for attractive and elegant packaging. "Consumers have an appreciation for these lovely designs and shaped packages. They like how these products look in their shower."

Retailers also pointed to other factors driving demand, including:

Innovation and technology that delivers specific benefits.

Consumers' desire to combat aging and pursue health and wellness.

Consumers' demand for quality products with high performance.

The success and cachet of the professional-salon segment.

"Technology and newness is behind all this," noted Schwab. "It could be new around the packaging or new usage. We have to make sure we continue to understand the customer and demographic changes, and make sure we put in those products to support what our customers want."

Al Jones, senior vice president of procurement and merchandising for Imperial Distributors, Auburn, Mass., said, "If the manufacturer can convince people the technology of the product is better and does more for them, they're going to be successful. They can do it at a higher price point."

Commented Sue Vodika, HBC buyer and category manager at Bashas', Chandler Ariz., "Innovation is what we live on. So when Fructis first came out, it was big because of the green bottle."

Targeting the right demographic also helps move product. "It's the baby boomer generation wanting to take better care of themselves and trying to hang on to as much hair as they can for as long as they can," said Bill Mansfield, vice president of general merchandise and HBC, Pueblo International, San Juan, Puerto Rico.

Mansfield also noted that fashion is driving the upper end. "The names that show up in the salons are the ones that female customers, and even male customers, want on their bathroom shelves. Consumers are really paying close attention to hair care. While value is important, quality is more important."

Candace Corlett, principal at WSL Strategic Retail, New York, called the trading-up in hair care "a wonderful contradiction," given the fact that consumers spend cautiously in an uncertain economy.

"We are seeing women connected emotionally to hair care," she said. "When they believe, they look at the price tag last."

She added, "You are seeing the middle being squeezed in a lot of categories besides hair care. People are believing higher-priced hair care and skin care perform better. So if you are in that camp, you are going to go for the brand you want. If you aren't in that camp, then you are going to buy the cheapest one because you don't believe in the performance of the high-end brand."

Retailers agreed the middle has fallen away from the category. "It's bifurcated on price and not much in the middle," said Tony Pooler, director of HBC and general merchandise for Save Mart Supermarkets, Modesto, Calif.

"We have a clear segmentation of price shoppers and shoppers who want performance. The middle ground is kind of a wasteland for a lot of people. Various brands have tried to get into the mid-price point areas, but just haven't been able to penetrate for some reason.

"We do see activity in the low end. There is talk of Revlon coming back with Aquamarine and White Rain changing their line. Up at the top end, we've got great performance in the performance brands like Fructis and Dove. Vive also does well when promoted," Pooler added.

Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill., predicted the value brands will hold up over time because there will always be "a core group of people who simply wash their hair, and it simply is not that important.

"What's going on is that you see product lines come to market that have been marketed exceptionally well, and they have driven some of the volume to the upper end and away from the mid-priced brands. It's not that difficult to break new price points if something looks and is exciting."

Where Are the Sales?

When analyzing hair care data for the 52 weeks ending Aug. 8, it doesn't appear supermarkets have much to cheer about. All segment sales, including hair color, are down from the prior year. Drug stores didn't fare much better. So where is the volume going?

"Mass has taken a big bite out of the market," said Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill.

Wisner said it is a mistake not to look at supercenters as food stores. "They are food stores with very well-developed general merchandise departments," he said. "If you look at food stores where people make their weekly food shopping trips, probably their market share is up, but it's going to those retailers that have a better and more developed general merchandise proposition."

Hair Care Sales and Unit Movement in Supermarkets and Drug Stores

Shampoo: Dollars in Millions; % Change; Units in Million; % Change

Food: $615.6; -4.5%; 211.4; -5.7%

Drug: $350.5; 0.1%; 93.6; -0.9%

Conditioner: Dollars in Millions; % Change; Units in Million; % Change

Food: $341.3; -2.8%; 115.7; -5.1%

Drug: $253.0; 0.5%; 66.7; -1.4%

Spray/Spritz: Dollars in Millions; % Change; Units in Million; % Change

Food: $156.5; -8.2%; 57.8; -10.2%

Drug: $141.7; -4.4%; 43.6; -5.2%

Gel/Mousse: Dollars in Millions; % Change; Units in Million; % Change

Food: $200.3; -3.4%; 56.7; -6.5%

Drug: $247.6; 3.5%; 62.1; 1.1%

Source: Information Resources Inc.

Brand Pacers

Hair care category growth at supermarkets is mostly among the higher-priced brands in the $4 to $5 range. Of the top 20 volume brands sold at supermarkets, the following showed growth in dollars for the 52 weeks ending Aug. 8. The others all declined in sales.

Growth Among Top 20 Shampoos and Conditioners Sold at Supermarkets

Shampoos: % Increase; Conditioners; % Increase

1. Garnier Fructis: 143.8%; L'Oreal Vive; 144.6%

2. L'Oreal Vive: 138.4%; Garnier Fructis; 142.2%

3. Dove: 61.9%; Dove; 69.6%

4. Pantene Daily Moisture Renewal: 54%; Pantene Pro V; 39.4%

5. Tresemme: 17.7%; Pantene Daily; 21.5%

6. Pantene Color Revival: 1.4%; Tresemme; 20.1

7. N/A*: Suave Naturals; 5.8%

* Only six out of 20 shampoo brands showed growth. Source: Information Resources Inc.

The Specialty Factor

NEW YORK -- Nearly as many shoppers (27%) purchase their hair care from salons and specialty outlets as they do from the mass merchandise channel (30%), according to WSL Strategic Retail's 2004 How America Shops study, released earlier this year.

The 27% figure was up from 16% when the study was conducted in 2000. "Women are clearly making a statement that products sold in mass retail don't have the cachet, magic and emotional pull of salon products," said Candace Corlett, principal of WSL Strategic Retail here.

Besides salon and mass, when asked where they buy hair care most often, 12% of shoppers said supercenters, 11% said drug stores and 10% said supermarkets, the study noted.

Corlett said supermarkets recognize this purchasing shift and some have begun to stock professional-salon hair care products. "The mass is in touch with this consumer trend," she said. "Supermarkets are underestimating the power of merchandising. They need to bring more photography and information on how to choose products into their merchandising," she said.

Corlett said hair care has become very complicated. "It's gone beyond normal, oily, dry and deep conditioning. The whole concept of hair fitness is very powerful and mass is merchandising it like a commodity."