SPOTLIGHT ON COSMETICS

FAYE BROOKMAN

Cosmetics, often difficult for supermarkets given the category's number of stockkeeping units and slow inventory turns, are beginning to command a presence at some stores.

Industry observers point out that the rampant consolidation among mass-market retailers has left fewer chains for manufacturers to sell to -- leaving the door open to cultivate food stores.

"It is an interesting time for the food channel as the lines between mass and food outlets are becoming more blurred," said Marc Pritchard, vice president for North and South America at Procter & Gamble, Cincinnati. "Most traditional food retailers want to take their cosmetics presence to a new level because of the profit and consumer satisfaction rewards that accompany a successful effort. Food retailers are improving their in-store theater, producing beauty-themes events and including activity around the cosmetics category in grand opening events," he added.

For many, that's a dramatic change from a few endcaps of dusty cosmetics.

"There are some food accounts doing an incredible job with cosmetics," said Farnum Miley, president of Rita Ann Distributors, Baltimore, which supplies such chains as Acme Markets, Malvern, Pa.; Wakefern Food Corp. (ShopRite Supermarkets), Elizabeth, N.J.; Dominick's Supermarkets, Northlake, Ill.; Jitney-Jungle Stores of America, Jackson, Miss.; and Winn-Dixie Stores, Jacksonville, Fla. "Supermarkets like the gross margins of cosmetics, and customers like the convenience."

Industry consultant Allan Mottus, president of Mottus & Associates, New York, added, "With so few major drug chains, there are market opportunities to fill a need for cosmetics."

Supermarket retailers and beauty manufacturers have linked to create powerful cosmetics departments in several supermarket chains. For example, Rochester, N.Y.-based Wegmans Food Markets has a new unit in West Windsor, N.J. -- near Princeton -- that features a color cosmetics selection that exceeds most food stores in the Northeast. While many only have a few feet of Cover Girl and Maybelline, Wegmans' new store has the full gamut including L'Oreal, Revlon, Maybelline, Cover Girl, Oil of Olay, Neutrogena and Prestige. The retailer also targets young shoppers with a display of Parfums de Coeur's Body Fantasies and Bons Bons glitter, as well as an area where bright Caboodles makeup kits are merchandised with Markwins novelty nail colors packaged to look like lollipops. There are also Bonne Bell beauty products stocked in the department.

The cosmetics department is very visible -- located in the center of the store near the 25 checkouts. The proximity to health and beauty care and the pharmacy helps show customers that it offers many of the amenities of a typical drug store.

Wegmans is also on top of new product launches. Revlon's new Liquid Lip was prominently displayed on an end-of-aisle fixture during the store's opening this summer.

Wegmans zeros in on carrying cosmetics as a convenience and that is evident in its pricing. With the exception of Vanilla Fields eau de toilette spray, Wegmans was substantially higher priced than nearby competitors, including Target, Wal-Mart, Pathmark, Kmart and Drug Emporium. Maybelline's Great Lash -- a staple in many women's handbags -- is priced at $5.70 at Wegmans, vs. a market low of $3.19 at Target.

Hoping to capture customers with convenience and selection, Wegmans is carrying lines few other traditional food stores carry, such as Jason and La Beaute dans La Nature. There's also a huge bath department with upscale lines such as Paris Presents Body Image.

"Wegmans has to make its stores destination stores, and that's not typical in the grocery industry," said Neil Stern, food retail consultant for McMillian/Doolittle, Chicago. "To do that in beauty, they have to find a unique product that gives them an edge and makes them different."

In the quest to have marketing edges, several supermarkets are adding more natural lines, such as Kiss My Face. Robert MacLeod, president, confirmed the vendor is opening up more distribution to supermarkets. "Customers are getting more sophisticated. They are used to finding natural-beauty products at natural-food stores and are happy to see them at their traditional supermarkets."

Brands aimed at teenagers are also making more noise in supermarkets. Among the food chains reported to be considering more for the younger set are Big Y Foods; Tops Friendly Markets, Buffalo, N.Y.; Wegmans and Acme. Springfield, Mass.-based Big Y stocks Bonne Bell and Wet 'n Wild to appeal to teens. Although Acme doesn't have a special area for teen items, it also carries Bonne Bell and Wet 'n' Wild.

A barrage of new brands aimed at teens and pre-teens has hit the market -- hoping to get food-store distribution. "We see tremendous potential for food stores," said Abie Safdieh, president of Townley Inc., Paterson, N.J., a brand that helped specialty stores such as Claire's grab the teen beauty dollar. "We've developed a wall display and we've carded and pegged the items just for supermarkets." Townley's items are whimsical and priced right to fit into food stores. Products range from glitter body gels to lipsticks with tops decorated with characters called Funky Friends.

Other companies with teen assortments looking to extend into the grocery chains include Fun Cosmetics, X-Tatic, Caboodles, Petunia and Loud Music.

Two new blockbuster brands -- Oil of Olay (Procter & Gamble) and Neutrogena (Johnson & Johnson, New Brunswick, N.J.) -- are also gaining footage in some supermarket doors. Between the two, more than $100 million is being pumped into advertising. Both brands have already carved out more than a 2% share of the business. There's also a key new budget player on the scene -- NYC New York Color which, with prices under $2, is a perfect fit for grocery, according to Bill McMenemy, vice president of marketing for Del Laboratories, Uniondale, N.Y.

With all the dollars in the market to promote cosmetics, Rosauers Supermarkets, Spokane, Wash., is adding its own voice with greater promotions of the category. The chain cut the stockkeeping units, but raised the effort to tout prices on brands such as Wet 'n' Wild, Maybelline, Cover Girl and L'Oreal, according to industry insiders. The chain has also started to add Azusa, Calif.-based Physicians Formula, marketed by Pierre Fabre Inc. Cut was Revlon, whose sales are down, according to numbers provided by Information Resources Inc., Chicago. H.E. Butt Grocery Co., San Antonio, is another supermarket retailer with a tremendous commitment to cosmetics, according to suppliers.

Despite the enthusiasm some food chains have for cosmetics, the department is still too challenging for others. Turns are under two times per year and the number of SKUs needed to present a beauty statement are cumbersome for the grocery industry. However, figures for the 52 weeks ended March 28, 1999, from IRI, reveal that almost all cosmetics-category sales increased in supermarkets. Eye-shadow sales, for example, jumped 8.5%, while nail-polish volume extended 7.4%. Food stores now control about 12% of the $3 billion spent on mass beauty products. Mass merchants are making inroads on drug stores -- while all mass stores are being challenged by two new options. Apparel merchants such as Limited, Too and Victoria's Secret have developed their own brands. Customers appear to appreciate the convenience of buying blush with new blue jeans.

Also fragmenting the market is the emergence of Internet beauty sites. Not only do manufacturers such as New York's Coty and Maybelline have their own Web buying addresses, but there are also companies specializing in selling drug store fare on-line. These include PlanetRx and drugstore.com, as well as BeautyBuys.com. Several drug chains such as Walgreens, Rite Aid and CVS have their own sites. And, for those who want upscale items, there's a plethora of choices such as Jasmin.com and Eve.com. The sites offer the convenience of getting supplies delivered directly to shoppers' doors.

Despite the encroaching competition and the challenge of managing a fashion department in a food store, those who make the commitment conclude that cosmetics profits can make them blush.