POWER UP 2004-05-17 (2)

Liza Casabona

Supermarkets looking to power up nonfood sales should look to cross merchandising and effective category management of batteries as consumers turn increasingly to portable electronics, said retailers, manufacturers and industry experts.

"There are not many categories in nonfoods that carry the sales dollars and the potential increases in sales dollars that batteries do," said Al Jones, vice president of procurement and merchandising, Imperial Distributors, Auburn, Mass. "Because people need them, they are a commodity item, a use-up. There are not a lot of items like that. You're not going to sell many more spatulas or dog collars, but you certainly can sell more batteries."

That potential has not been fully embraced by supermarket retailers, industry sources said.

"Grocery has not converted the heavy user. They've gotten the convenience shopper. The heavy user is going to clubs or home centers," said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas.

Overall, the battery category in the food channel has declined in the 52 weeks ending Dec. 28, 2003, according to data from Information Resources Inc., Chicago. Dollar sales slid 5.5%, while unit sales declined 2.2%.

Supermarkets aren't making the most of the opportunities in the battery category, said retailers and industry observers.

"One of the real keys [to this category] is, we believe, that you have to take a consumable like batteries and make sure that it is in front of your consumers all over the store. Major competitors in the mass market have up to 50 touchpoints for these products in their stores," said Dave McConnell, president and chief executive officer, General Merchandise Distributors Council, Colorado Springs, Colo. "Cross merchandise whenever it's appropriate."

The battery category figures prominently in GMDC's "Merchandising for Success" study, due to be released at the organization's GM Marketing Conference in Orlando, Fla., June 4 to 8.

"In general, supermarkets do a poor job of cross merchandising batteries and maximizing sales on them. The big concern in a grocer's mind is theft. The big deal in the mass merchant's mind is sales. Grocers are absolutely limiting the possibilities of expanding their sales based on not having those secondary locations for batteries," Jones said.

While it is difficult to find space, battery displays reap four times the benefit in a fraction of the space that a category like soft drinks requires, he pointed out.

"Visibility is key at retail. Batteries are a prompted purchase, which means that when shoppers see a battery display, they will be reminded of the need," said Lou Martire, vice president of trade relations at Energizer, St. Louis.

"If you walk into a Wal-Mart, Home Depot or another class of trade like that, there are batteries everywhere. Some supermarket chains are doing a good job cross merchandising batteries in different places. Most do not.

"Batteries are impulse. The more places people see them, the greater the chance that they will actually make a purchase," Jones said.

In Wal-Mart, particularly during the fourth quarter, large displays cover the entire front end of the store at almost every register, he pointed out. Supermarkets tend to limit batteries to small assortments on limited facings.

"If you don't have enough exposure to your consumer, our study is showing us that they are not going to look at you as a destination. You might be a fill-in, but you are not going to be where they go to restock," McConnell said.

In addition to cross merchandising, an emerging segment of specialty batteries has built up around the new generations of portable electronics, providing additional areas where supermarket operators might be able to drive general merchandise sales, observers noted.

Duracell, Bethel, Conn., and Energizer introduced the Ultra and e2 batteries, respectively, designed to power new electronics better. Many supermarkets still cling to the standard alkaline and private-label arenas because they have proven successful, however.

"Alkaline used to be premium, and we've had a lot of years of it being premium. I'm not sure we have advanced to the next level yet," said Bill Mansfield, vice president, GM/HBC, Pueblo International, San Juan, Puerto Rico.

Some retailers have started to carry assortments of new, higher-performance batteries while still relying on alkalines to diversify the mix they offer.

"I still sell the good old alkaline batteries, the No. 1 selling battery," said Carl Day, owner, Day's Market Place, Heber, Utah. "The other batteries, e2 and the Duracell Ultra, are picking up. We're allocating more space for them, and movement is picking up."

Some retailers said that to a certain extent, it's consumers, not store operators, who need to be convinced of the superior performance record of the higher-tier batteries like the e2 and Duracell Ultra.

"The ball is in the manufacturers' court to either convince the consumer of the advantages for buying a premium product, and then the retailer will definitely follow through. If they can't do that, then the retailer will go back to what built that business originally, and that's the alkaline. We'd love to sell higher retail products. We'd love to sell technologically advanced products, but ultimately, the manufacturer has got to convince the consumer that's the way to go," Mansfield said.

Both e2 and the Duracell Ultra did make it into the top 20 battery brands in the 52 weeks ending Dec. 28,2003, reaching $7.7 million and $5.3 million in sales dollars, respectively, according to IRI.

Growth in the battery category is attributable to the higher-performance batteries that have been introduced, said Energizer's Martire.

Higher-performing batteries might also lead the way to adding more specialty products, such as rechargeable batteries and other products. However, supermarkets don't currently approach the category that way, stated observers.

"The first thing that has to happen is that supermarkets have to quit looking at this as a battery category and look at it as a portable power category. Anything where you need power for something -- cell phones, drills, even auto. Those areas are huge. They're just not taking advantage of it," said Manning. He advocated that retailers not only expand the tiers of batteries they offer, but also move beyond the traditional AA, AAA, D, etc. products to batteries designed for specific products.

Industry observers said savvy retailers will look to the manufacturers and make use of the services they offer.

"There is a war on for market share, and retailers need to pay attention to that and take advantage of that," Jones said. Manufacturers measure sales by dollars, and as dollar sales slide, they need to protect their market share, leading to more creative selling strategies. Retailers should make sure they are in a position to take advantage of those opportunities, he said.

Building strong retail relationships is also important to manufacturers. Panasonic, Secaucus, N.J., plans joint promotional programs with retailers that are tailored to the needs of local customers, said Christine Denning, marketing communications specialist, brand marketing group, Panasonic.

Panasonic also suggested that food retailers cross merchandise batteries with every battery-operated device available in the store, Denning said.

Giving Entertainment a Charge

Batteries are becoming more necessary in a society where consumers now carry multiple portable electronics, from cell phones and personal digital assistants, to the more entertainment-oriented cameras and games.

"My batteries are up. I'd attribute that to more electronic instruments that need batteries: kids' toys, remote controls, MP3 players, wireless key boards -- everything is going to battery power," said Carl Day, owner, Day's Markets, Heber City, Utah.

"Advanced electronics and rechargeables are impacting what is happening with everyday battery sales, in my opinion," said Dave McConnell, president and chief executive officer, General Merchandise Distributors Council, Colorado Springs, Colo. "As a digital camera user, I can tell you it is easier for me to use my rechargeable batteries."

As more and more devices come out with advanced technology that allows for savings on battery use, a specialty battery category has emerged that supermarkets aren't paying enough attention to, said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas.

MP3 players, digital cameras, digital camcorders and personal digital assistants have been the devices driving growth in the battery category, said Lou Martire, vice president of trade relations, Energizer, St. Louis.

"Somebody will get the specialty battery business, but it won't be the supermarket because they are too focused on alkaline batteries," Manning said.

Not all industry players trust the new products, however, leaving a gap between the product reality and the retailer's stance.

"The specialty batteries that were launched by the major manufacturers that were supposed to be better for all the new electronics out there have not produced the way that they would like them to," said Al Jones, vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass.