POWER HUNGRY

CHRISTINA VEIDERS / Additional reporting: JOEL ELSON

Driven by the growth of power-eating portable electronic devices, super-charged alkaline batteries are lighting up supermarket retailers' lives.

Marketers report that high-tech devices, which include such products as digital cameras, cellular phones and remote-controlled toys, are the fastest-growing sources of AA and AAA battery sales.

Currently high-tech devices account for 18% of AA and AAA battery sales. This percentage is expected to reach 29% by the year 2002, according to manufacturers' reports.

According to a Salomon Smith Barney report, the alkaline segment represents 87% of total battery sales.

"We believe the wider use of high-drain products will fuel demand for longer-lasting batteries. We are actually finding people will upgrade with all the electronics," said Gary Bloom, senior category manager at Dominick's Finer Foods, Northlake, Ill.

"Everyone carries a pager or portable cell phone. You want that longer life or anticipated longer-life [battery], and you will spend more [for it]," he added.

Larry Schimpf, nonfood director at Clemens Markets, Kulpsville, Pa., also sees the emergence of high-drain products spurring demand for super-charged alkalines.

"The more products that use [alkaline] batteries, the more people will buy them," Schimpf noted.

"They appeal to families with children that have Nintendo systems and toys and games that eat up battery power," said Larry Miller, nonfood buyer at John C. Groub Co., Seymour, Ind.

The charging up of the segment began earlier this year when manufacturers began rolling out their longer-lasting cells.

Bethel, Conn.-based Duracell, a division of Gillette Co., Boston, was out of the box first in May with Ultra premium-priced AA and AAA batteries. Eveready, St. Louis, was hot on its competitor's heels with Energizer Advanced Formula, available in all cell sizes. Panasonic Batteries, Philadelphia, introduced reformulated AAs and AAAs under the Alkaline Plus label this summer. Promotional material for Rayovac's Maximum, introduced last year by the Madison, Wis.-based manufacturer, also touts the brand's performance in high-drain devices.

Two very different marketing approaches have been taken by the category leaders in introducing these more powerful alkalines.

Duracell, perhaps following the lead of its parent company's marketing approach to launching trade-up, premium products like the Mach 3 razor, is positioning Ultra alkalines to stand apart from its general-purpose Duracell alkalines. To boot, Ultra has been tagged with a 20% higher retail. An AA four-pack is priced at $4.99.

"We are very excited about the continued share growth of Duracell Ultra in the food channel," said Tom Murray, Duracell Ultra product manager. "Ultra's growing share in food reinforces our belief that battery consumers are willing to pay a premium price for the premium performance of new Duracell Ultra batteries. As distribution of this new line continues to increase, we are confident that retailers who support Ultra will enjoy even greater profits from their battery category."

According to ACNielsen figures supplied by Duracell, Ultra captured 4.8% of all alkaline unit and dollar sales in the food channel for the three-month period from June through Aug. 31, 1998. Ultra sales within the food channel totaled $1.3 million for the four-week period ended Aug. 22, 1998.

Jim Denny, nonfood buyer at Dierbergs Markets, Chesterfield, Mo., said "Marketing Duracell super-charged batteries as a premium product sounds like a Gillette idea. Duracell is trying to get a premium price on a battery like Gillette does on a razor. I don't think it will work."

Energizer and others have simply re-engineered their alkalines and integrated them as a powerful upgrade of their conventional line, with no price hikes. Industry reaction to Duracell's strategy is mixed. Other battery marketers, for example, are betting Duracell's strategy will lead to consumer confusion, causing shoppers to opt for lower-priced brands.

But Bloom of Dominick's doesn't believe Duracell's higher price will be an impediment to consumer spending. "Duracell, in our market, has a very good following and the lion's share [of sales]. We'll have to see what impact its pricing will have, although we feel people will stay with that [brand]," he said.

When Schimpf of Clemens Markets first heard about longer-lasting batteries, he was skeptical about their sales potential, but he now concedes, "They're doing real well.

"We have done extremely well with Duracell's Ultra. Despite the 20% higher shelf price, people are buying them."

Clemens also carries the Energizer battery line and is waiting to take delivery of Energizer Advanced Formula batteries.

Jeff Manning, vice president of general merchandise at Bashas' Markets, Chandler, Ariz., sees consumer confusion in the aisles. "People think the batteries that are out there now are long-lasting. They wonder why they should pay more for another one.

"I imagine Duracell will keep trying to market its premium line and then position its regular batteries against Energizer," he said. Manning described sales of Ultra as "warm" to date. Energizer Advanced Formula is expected in Bashas' stores soon.

At John C. Groub Co., Duracell Ultra has yet to reach store shelves. "We didn't do anything with Duracell Ultra because the supplier is marketing it as a premium product. It looks like a way [for the vendor] to get more money out of something that the other [battery] companies are doing anyway," said Miller.

"Duracell markets their longer-lasting, super-charged batteries as a different product," he pointed out.

Groub's battery display racks offer Energizer Advanced Formula as well as other Duracell batteries. Miller said Energizer's longer-lasting alkalines "are just being passed through as part of the Energizer battery line with a little blurb on packaging about more power."

Ultra is parked in the slow lane at Dierbergs Markets, according to Denny.

"We're not seeing much shopper interest or extra movement in Duracell's longer-lasting alkalines," he said. "Customers are still buying Duracell's regular alkalines. They aren't willing to pay more for extra longer-life. They're apparently convinced regular alkalines are already longer-lasting."

Dierbergs carries both Duracell and Energizer lines, which are displayed on battery racks and film endcaps. "Both sell very well," Denny said.

Bill Amirault, marketing manager of Panasonic's Battery Sales Group, said it's too early to judge Duracell's strategy. Its success or failure will depend on whether consumers recognize a parity among the competing brands. "If [consumers] see comparable performance, will they be willing to pay an additional 20%?"

In a June research report, Salomon Smith Barney, New York, said, "We are skeptical of consumer willingness to pay a price premium for an Ultra battery. In addition, the alkaline battery business at retail is already a more stockkeeping-unit-intense, slower-turn business than many other consumer nondurables. We find it unlikely that retailers will discontinue carrying competitors' products -- and we therefore believe market segmentation may be cannibalistic to Duracell's existing business."

Meanwhile, the battle to gain market share through new super-charged alkalines will continue to heat up going into the fourth quarter. Manufacturers are spending millions to get the word out that their alkalines are the most powerful or offer comparable results.

Energizer launched a challenge promotion earlier this year offering consumers $8 in product coupons if they are 100% satisfied with their batteries. If not, they get a full refund. Going into the fourth quarter it begins a co-promotion with American Express. The company claims its Advanced Formula lasts 60% longer than conventional batteries and 10% longer than Duracell's.

Duracell is spending $60 million to promote Ultra, which it claims lasts 50% longer than regular alkalines.

Earlier this year, Panasonic ran a promotion that offered consumers a free pack of Plus Alkalines if they turned in a competitor's package. Panasonic says its Plus batteries are comparable with all others in any application.

Retailers say such claims succeed in attracting consumer attention and achieving greater awareness.

"The ongoing claims by these battery manufacturers about their products outlasting others may positively influence consumers' perceptions about longer-life batteries," said Denny of Dierbergs.

"Manufacturer advertising will give consumers a clearer understanding of what these super-charged batteries are all about," said Dick Swain, president of Valu Merchandisers Co., the nonfood subsidiary of Associated Wholesale Grocers, Kansas City, Kan. "When people understand it's a value-added product, they will accept it."