NEW FRONTIER 1998

CHAPIN CLARK

Health and beauty care retailers have reason to celebrate as the National Association of Chain Drug Stores Marketplace Conference, a top showcase for new HBC products, gets under way in Philadelphia this week.

In a trend cutting across all segments of the business, executives say, consumers are spending more on high-end new products -- if they believe they are getting true innovation for their money.

Exhibit A is Total.

Since its launch last December, Colgate-Palmolive Co.'s new antibacterial toothpaste, backed by a $100 million promotional budget and Food and Drug Administration-approved claims that it is the only anticavity, antiplaque and antigingivitis toothpaste on the market, has already become the category's No. 1 variant with an 11.1% dollar share, according to the New York-based manufacturer.

Total is also priced 25% higher than Colgate's regular toothpastes.

"Total was just a gangbuster hit, and it's still doing extremely well. It continues the trend toward moving people up to a premium-priced toothpaste," said Al Jones, vice president and market manager for HBC at Imperial Distributors, Auburn, Mass.

Crest Extra Whitening and Enamelon, two high-end toothpastes introduced at the beginning of this year, are also selling well, Jones said.

"In the future, you'll continue to see premium products launched by everybody, and the retail threshold in food stores will continue to go up," he said. "The economy is good, people have more disposable income, baby boomers are getting older -- the money is there to be had. If people believe there is a value there, they'll buy it."

Already the dominant player in wet shaving -- its Sensor Excel is the category's best seller -- Boston-based Gillette Co. has bet $750 million in research-and-development costs, plus $300 million more in first-year promotional expenses, that consumers will embrace its technologically advanced Mach 3 shaving system. Now shipping to stores, the Mach 3 razor has three blades and is covered by some 35 design patents.

"I think Mach 3 will do just as well as Sensor did," said Sandra Sage, HBC category manager at Genuardi's Family Markets, Norristown, Pa. "That should give a good bump to the second half of the year."

Betsy Turgeon, HBC category manager for Big Y Foods, Springfield, Mass., said, "The Mach 3 will be a home run, because Gillette is spending so much money to launch the item."

Citing Mach 3's relatively high retail price point -- 35% higher than Sensor Excel's -- Don Stuart, a partner in the consulting firm Cannondale Associates, Wilton, Conn., was skeptical.

"I would say Gillette pushed it a little too far," he said. "The current product is pretty darned good. Is there enough of a perceived benefit to justify the price-point premium? I doubt it."

"Consumers are responding to the premium segment of the market, which makes us feel good, because it means more profit," said David Himel, HBC category manager at Associated Grocers, Baton Rouge, La.

"Hopefully, the Mach 3 system will be the next great item in that category," Himel said. He admitted he was a little worried about the higher price. "But we said the same thing when Sensor came out. People will respond to it if the product offers a benefit."

Retailers say shoppers have warmed to Thermasilk, a niche line of shampoos and conditioners from Helene Curtis, Chicago, that hit stores earlier this year. Thermasilk products are specially designed to counteract the damaging effects of heat-styling appliances like blow-dryers and curling irons.

"In hair care, you've had a lot of updates to lines, but Thermasilk was a really new item technologically," Jones said. "It did so well, [Helene Curtis] oversold on the introduction, and they had to cut back on their advertising until they could get more product in the pipeline."

"Thermasilk has been phenomenal," said Himel. "In fact, we're having trouble getting it because there's been a shortage."

Genuardi's Thermasilk sales have only been "OK," Sage said. She said she was looking forward to the September launches of two hair-coloring lines, L'Oreal's Feria and Clairol's Revitalique. Retail prices for both lines are expected to be about $9 or $10 a box, well above the average for hair-coloring products in mass outlets.

"I think those hair colorings are going to be real strong," she said. "They should really create excitement in the category. The Revitalique packaging, especially, is just gorgeous."

Facial cleansing strips, a new skin care subset that sprouted last summer with the launch of Andrew Jergens Co.'s Biore brand, continue to sell extremely well.

"Biore took off like gangbusters and has yet to slow down in sales," said Big Y's Turgeon.

Jones agreed, noting, "That whole area has really expanded the dollars in the skin care category."

According to Information Resources Inc., Chicago, sales of facial cleansers, propelled mainly by strip introductions, generated $517 million for the 52 weeks ended April 25, a 42% increase over the prior-year total. Biore, with $92 million in sales, is already the No. 1 brand, followed by Pond's, which had $69 million in sales, thanks in large part to its own strip product, which debuted in November of last year.

Biore shipped three new line extensions to stores last month. Johnson & Johnson, among many others following suit, is coming out with a clear pore strip in September.

Overall, the number of new HBC products has dropped slightly, according to New Product News, Chicago. From January through May of this year, there were 2,123 introductions, including line extensions and "one-time-only promotional items," the magazine reported. That's 5.2% fewer than the total of 2,239 at this time last year.

These days, probably no category accounts for more HBC stockkeeping-unit proliferation than nutritional supplements. It's an area of nonfood that will continue to grow rapidly, with new -- and often pricey -- product mutations appearing on a regular basis, industry observers say.

"Clearly, supplements are where the action is," Cannondale Associates' Stuart said. He predicted a category growth rate of between 300% and 400% over the next five years. "I don't think you're going to see a more exciting area of the store."

He pointed to the imminent entry of major consumer health care manufacturers like Warner-Lambert, Morris Plains, N.J., and Whitehall-Robins, Madison, N.J., as evidence that the category, often regarded with skepticism by retailers and consumers alike, is about to go mainstream in a big way.

"Every [manufacturer] is going to be in supplements. If you have a heritage in 'good-for-you' products, you have some credibility."

Looking ahead, retailers said they were particularly intrigued by new herbal lines from Centrum, manufactured by Whitehall-Robins, and One-a-Day, manufactured by Bayer Corp., Pittsburgh. The lines, shipping to stores later this year, will include such talked-about herbs as gingko biloba, kava and St. John's Wort, retailers said.

"They will certainly create excitement in the category," said Steve Lauder, an HBC category manager for Supervalu, Minneapolis.

"That should be real exciting," agreed Sage. "It'll be interesting to see how consumers respond to those."

Sage said Genuardi's has taken a number of steps this year to position itself as a supplement source, like doubling the number of SKUs in its private-label assortment, adding 200 SKUs from Rexall-Sundown and developing a monthly in-store flier that promotes an "herbal of the month."

"Obviously, one of the biggest trends is do-it-yourself health," she said. "We've been trying to provide more information and more healthy products for consumers.

"The Sundown line has done extremely well for us," Sage added. "Osteo-Bi-Flex is doing extremely well."

Osteo-Bi-Flex, Rexall-Sundown's patented arthritis treatment combining glucosamine and chondroitin, was introduced at retail last summer and has become the third best-selling nutritional supplement in the country, according to the Boca Raton, Fla.-based manufacturer. Fiscal 1998 third-quarter sales of Osteo-Bi-Flex were $25 million, the company said.

"It looks as though glucosamine-chondroitin is an especially strong seller," said Himel. Associated Grocers will begin offering Osteo-Bi-Flex, which sells at a suggested $15.19 for a 48-count bottle, to its retailers sometime later this year, he said.

1997's Top 10 New HBC Products

Advanced-formula toothpastes were strongly represented among last year's top 10 new health and beauty care products in the supermarket channel, as ranked by Information Resources Inc., Chicago. These items pulled in $233.8 million for supermarkets, or 1.5% of the total $15.1 billion in HBC sales generated by the food channel.

Colgate Whitening, Mentadent Whitening and Crest Multicare, at Nos. 2, 5 and 7, respectively, accounted for $70.3 million in sales during their first 52 weeks on the market. The Nicoderm CQ patch, IRI's top "pacesetting" new product of 1997 -- counting all categories in all classes of trade -- raked in $33.7 million in supermarkets its first year out.

DOLLAR VOLUME FOR 52 WEEKS OF 1997

NEW PRODUCT (in millions)

1. Pampers Baby Fresh (Procter & Gamble Co. $52

2. Colgate Whitening (Colgate-Palmolive) $37.6

3. Nicoderm CQ (SmithKline Beecham

Consumer Healthcare) $33.7

4. Playtex Gentle Glide (Playtex Products) $28.7

5. Mentadent Whitening (Unilever Home &

Personal Care USA) $18.9

6. Ivory Moisture Care (Procter & Gamble Co.) $16.8

7. Crest Multicare (Procter & Gamble Co.) $13.8

8. Willow Lake (Lamaur) $12.6

9. Clairol Hydrance (Clairol $10.3

10. Mennen Lady Speed Stick Invisible Dry

(Procter & Gamble Co.) $9.4

Source: Information Resources Inc., Chicago.