RETAILERS SEEK NEW LINE AFTER LOSING OLAY

STEPHANIE LOUGHRAN

MATTHEWS, N.C. -- Some supermarket retailers were disappointed by the news that Procter & Gamble, Cincinnati, manufacturer of Olay cosmetics, will discontinue its line of face, nail, eye and lip colors. The upscale line, while too pricey for many supermarkets, allowed some grocers to trade their customers up to higher-ticket merchandise.

"We're able to upsell the customer, typically, and we were trying to do that," said Andy Rhykerd, health-and-beauty care buyer for Harris Teeter, based here. "I'd rather have [customers] buy Olay than something like Wet 'n' Wild -- I'd rather have the higher ring." He said the discontinuation has "opened things up, but I haven't figured out where I'm going with it."

Rhykerd said he had planned to go to the NACDS Marketplace 2001 conference, which took place in Las Vegas June 29 to July 2, with his "eyes open and find something unique and viable" to replace the Olay line.

P&G will concentrate on leveraging its other top cosmetic brands, Cover Girl and Max Factor, on a more global scale, according to Cheryl Hudgins, spokeswoman for Olay cosmetics. The phaseout will affect approximately 5,000 supermarkets that currently sell the line, including stores operated by Kroger, Cincinnati; Albertson's, Boise, Idaho; Publix, Lakeland, Fla.; and Dominick's Finer Foods, Chicago.

Retailers at these chains, in addition to Winn-Dixie, Jacksonville, Fla.; Big Y Foods, Springfield, Mass.; and Wegmans Food Markets, Rochester, N.Y, who also carry the line, were either unavailable for comment or declined to comment on the matter.

Sandi DeSautels, beauty care category buyer for Imperial Distributors, Auburn, Mass., was not previously aware of P&G's decision to cut the Olay color cosmetics line, but she told SN that the effects of the discontinuation would be minimal. "It won't impact retail too much at all because it didn't sell well," she said. "It's a good decision."

When asked by SN what may have been the cause of Olay cosmetics' subpar sales performance, she said the price points were slightly high for the grocery channel, where the customer base is more price-sensitive. At a $6 to $9 price range, she said, "It's not much of an impulse buy."

Rhykerd pointed out that specialty stores have won over a lot of consumers who look for higher-end cosmetics. "Bath and Body Works and that channel of trade has everybody," he said.

He also noted that the Olay skin-care line and the cosmetics line skewed demographic ranges. The skin-care line typically hit customers in their mid-30s and up, while the Olay line hit customers typically in the 25- to 35-year-old range. "[The cosmetics line] hit a different customer than the Olay heritage."

Although Hudgins declined to give the specifics on the returns program and the fixture breakdown over the gradual two-year phaseout, she said the company was "working out the details of the returns with the retailers." She also said that while some retailers will discontinue the Olay line in the spring of next year, other retailers may opt to hold onto the line until the spring of 2003.

Rhykerd said he plans to stop offering the cosmetics brand extension at the beginning of next year, or even sooner. If Harris Teeter or other retailers chose to carry the line out to 2003, he said they would "experience the synergy of being the only people carrying it, but towards the end there will be a lot of out-of-stock. You sit with multiple facings [with no new stock coming in]."

Doug Christopher, an analyst specializing in consumer products at Crowell, Weedon and Co., Los Angeles, agreed that the higher price points were a major factor in the line's failure at supermarkets.

"Olay is positioned a little richer at mass retail," he said. "At that [mass] level, Cover Girl and Max Factor have such a presence, it's hard to get a trade-up."

Olay accounted for less than 8% of P&G's global cosmetic sales volume, and it had a presence in only four markets (the United States, Canada, the United Kingdom and Ireland), Hudgins said. She said P&G will make it a "top priority to grow the shares, profits and volumes of the Cover Girl and Max Factor brands."

According to Information Resources Inc., Schaumberg, Ill., total color cosmetic sales reached $3.3 billion for the food, drug and mass-merchant channels during a 52-week period ending May 20, 2001. Olay cosmetics grabbed $93.9 million in sales during that same period, representing a 2.8% share.

Hudgins said the makeup line successfully accomplished some goals, such as bringing more women into mass retail away from other channels of retail, and had success with some of the technologies, like those used for the Total Effects foundation and lip-color segments.