SQUEEZING IN THE HOLIDAYS

DAN ALAIMO / Additional reporting: Stephanie Loughran

With all the big hit movies coming out for sell-through this fourth quarter, many retailers will have to squeeze in other video products such as the holiday titles that always sell so well as Christmas approaches.

But retailers polled by SN said they will find the room and, in many cases, will merchandise the holiday videos together with other seasonal goods on the main sales floor in an effort to spur incremental sales.

While in past years, traditional fare like "Rudolph the Red-Nosed Reindeer" and "Frosty the Snowman" sold predominantly on VHS, this year they will be increasingly offered by supermarkets on DVD to take advantage of the burgeoning market for that format. These titles will be accompanied on the racks by newer titles, such as a DVD re-issue of Universal's "Dr. Seuss' How the Grinch Stole Christmas" with Jim Carrey, and catalog product for gift-giving, including MGM's "James Bond Collection."

"We will have a huge Christmas set," said Brad Migneron, director of video operations, Dierberg Markets, Chesterfield, Mo. Dierberg's is still finalizing its plans for Christmas, but its prices on Halloween videos ranged from $7.77 to over $20, with one gift set priced at $100.

"This year, we put together a gift set for the James Bond series, so we are going to promote that pretty heavily," Migneron said. Halloween and Christmas are Dierberg's two biggest promotional times. "Last year, we ran a TV Guide ad and sold out of several titles," he said.

"This should be our strongest fourth quarter ever in video, but a lot of it is still going to be driven by the event titles," he said.

"We will hit it pretty strong," said Craig Hill, video specialist, Harp's Food Stores, Springdale, Ark. "I bought fairly heavily, especially for our stores in the outlying areas where we are not faced with a Wal-Mart down the street."

Harp's will carry the hits, as well as children's holiday titles, like those from Rugrats and Veggie Tales. "We are going to try anything Disney or from the major studios," he said.

VHS remains 65% to 70% of the video sell-through business at Harp's, "but the desire for DVD is growing all the time," he said. The retailer will also tie-in with cross-promoted items whenever possible. "We try to keep it close to the registers and make it an impulse buy," Hill said.

Harp's will sell videos on the main sales floor, as well as from its video departments. "We have four or five large grocery stores where we seem to be doing real well with sell-through. It's really starting to catch on, especially now that the studios have decided to make the titles more affordable," he said. Catalog programs, such as one from MGM, are contributing to this growth, he added.

Retailers and wholesalers at the recent General Merchandise Distributors Council Health and Beauty Care conference in Orlando, Fla., were generally upbeat about the prospects for video during the upcoming season.

"I'm looking for a strong overall holiday season," said Charles Yahn, vice president, nonfoods, Associated Wholesalers, York, Pa. "People are going to be staying home more. Families have become more important since 9/11."

DVD is about 35% of the wholesaler's video sales, he noted. "I know some people are doing better than that, but while ours are growing slower, they are definitely rising. DVD is the future," he said.

In holiday-themed videos, quality is becoming more of an issue as people are looking for the more heavily promoted and licensed products, Yahn said. "If it is not a recognized name and just an ordinary video, we have trouble giving it away." Associated's retailers will merchandise the videos in both their seasonal and video sets, he said.

At K-VA-T Food Stores, Abingdon, Va., the holiday and the hit titles will be typically merchandised in the video departments, said Richard King, director of category management. Meanwhile, "DVD is absolutely growing. That's a fact," he said.

With 102 video departments, Ingles Markets, Asheville, N.C., also puts its sell-through emphasis in those sections, said Dan Spears, HBC/nonfood merchandiser. "In the stores that don't have a video department, we stick primarily with music and just a basic display of children's Christmas videos," he said.

"We've already ordered displays of low-priced catalog product that will retail for $5.99 to $12.99 on DVD," said a nonfood executive with a Texas retailer, who asked to not be identified. "People are updating their libraries, going from VHS to DVD. So we've ordered 144-piece to 288-piece Christmas displays for our stores because Rudolph is going to be around for a long time," he said.

Currently DVD is about 30% to 40% of the Texas retailer's video sales, "but I look for that to go up to about 60% or 70% in December and January," the nonfood executive said.

But for many retailers, it still is a matter of space. "It depends on the title, the supplier and whether they are willing to work with us on a guaranteed or consignment basis," said Bob Schwartz, executive vice president, Gristede's Foods, New York.

"We are not in the video business like Blockbuster. We don't have the space. They are selling videos; we are selling real estate. If we can get a decent assortment in a small footprint, then by all means. But we have to work with the provider," he said.

Many of the retailers served by Unified Western Grocers, Commerce, Calif., have very limited space, noted Larry Ishii, general manager, GM/HBC. "Holiday videos for most of our customers are a nice product to have -- plus sales, a nice profit margin." These retailers will merchandise the holiday videos together with other seasonal products, such as wrapping paper or Christmas lights, and put the displays by the checkstands to deter pilferage, he said.

As a result, the holiday videos won't go out until the weekend after Thanksgiving. "They don't want to tie up that space for a number of weeks when the sales will be fairly minimal. In food stores, most of our sales for Christmas merchandise really takes off after Thanksgiving," Ishii said.

Bashas', Chandler, Ariz., is putting a big emphasis on seasonal videos for Halloween, said George Fiscus, vice president, general merchandise. "There is a mix of Halloween videos we are going with [on] both VHS and DVD. We will be promoting that next to the candy and the seasonal nonfoods -- getting it out of the video department, into the seasonal area for better sales. We did that last year with 'The Mummy Returns' and this year, we'll do it with 'The Scorpion King.' That has helped our sales tremendously in the past," he said.

But the number of hits coming out in time for Christmas will edge out holiday titles. "We are not too focused on Christmas video selections this year, and for no other reason than because of the great number of fourth-quarter video releases of $100 million-plus box-office gross. That doesn't leave much window for anything else," he said.

"But we are excited about the sales that they are going to generate. There are so many great titles coming out in the fourth quarter that we are going to try to support those, get them near the front end, rotate them out on a weekly basis as they are released and really capitalize on that demand," Fiscus said.

For some retailers, the solution to the space problem is getting a shipper that combines the best holiday products from multiple studios from their distributor, Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn., told SN. "The corrugated displays can be merchandised on the main sales floor of the store, or supermarkets with inline sections may elect to create a holiday section to promote seasonal titles," he said.

The growth in DVD households and the number of hit titles coming out in the fourth quarter will make this "the biggest season for home entertainment," said Ken Graffeo, executive vice president, Universal Studios Home Video, Universal City, Calif. "We have been very successful with corrugated displays, and certain supermarkets are putting in sell-through sections just for the holiday time period," he said.

Last year, there weren't enough DVD households for the new format to be important to supermarkets. "But this year it is core to their customer base, so it is a tremendous opportunity for them to capitalize on probably the biggest holiday season for DVD and home entertainment in general," Graffeo said.

To take advantage of the increase in DVD players in family households, Universal is bringing out a new DVD version of its big hit from last season, "Dr. Seuss' How the Grinch Stole Christmas," starring Jim Carrey. Releasing on Nov. 5, it will have many extras that the original version did not, including a director's commentary by Ron Howard, Graffeo said.

"Even though the 'Grinch' did so well last year -- even on DVD -- you have a whole new universe of people who have bought DVD players this year. You have more families and mainstream consumers that have DVD players," Graffeo said. The biggest video trend this year is family product on DVD, he said. "So for a family-themed title like 'Dr. Seuss' How the Grinch Stole Christmas,' DVD is a tremendous opportunity, not only for us, but it is also a real must-have for the new DVD owner," he said.

Films that families can enjoy together are a perennial trend in the holiday season, said Ewa Martinoff, vice president, family entertainment marketing, Warner Home Video, Burbank, Calif. "Holidays are an important time for families, and often a movie is a great way to bring them together," she said, citing the example of "Scooby-Doo" in the Halloween season, and the older animated version of the "Grinch" for Christmas.

"In supermarkets, displays will be holiday-themed with all the trimmings. Floorstands, pallets and inline centers are all part of the strategy," Martinoff said.

The key trend for the upcoming holiday season is the growth of the family market, said Martin Blythe, spokesman, Paramount Home Entertainment, Hollywood, Calif. "We're moving more of our Nickelodeon franchises, such as SpongeBob Squarepants, Blue's Clues, Rugrats and others, to DVD and VHS," he said. The "Nick Jr. Holiday" DVD, which came out recently, allows consumers to sample Nickelodeon franchises like "Dora the Explorer" and "Blue's Clues," he said.

"SpongeBob, Blue's Clues and Dora are heavily supported through merchandising candy, plush toys and apparel, and we would encourage supermarkets to cross promote and merchandise these popular characters across the store," Blythe said.

This was a "pivotal year" for DVD in the family market, he said. "Last year, the family market in DVD wasn't embraced like it is this year. We began planning more family and children's titles for the third and fourth quarters at the beginning of the year."

DVD sets featuring specific actors, like Audrey Hepburn in "Breakfast at Tiffany's," "Roman Holiday" and "Sabrina" are coming out, as well as a John Travolta DVD collection featuring "Urban Cowboy," "Grease" and "Saturday Night Fever." These create gift-giving opportunities, Blythe said. "The lesson learned is what worked for VHS collections is working for DVD," he said.

Pat Fitzgerald, senior vice president, sales and distribution, Buena Vista Home Entertainment, Burbank, Calif., confirmed the trend to family DVD product. "New DVD growth will be coming from families and their new purchases of DVD players. That will create the desire to own and/or rent favorite movies on this format, especially with all the extras that the DVD offers," he said.

"Supermarkets are getting behind video as a good offering to their consumer. For some titles, videos will be promoted with other products in their stores," Fitzgerald said.

In a first, New Line Home Entertainment, Los Angeles, will bring out a special extended DVD edition of "The Lord of the Rings: The Fellowship of The Ring" on Nov. 12, shortly after the very successful release of a DVD with less features. The four-disc set includes an extra half-hour of bonus footage and is priced at $39, said Justine Brody, vice president, marketing and promotions.

Another gift set includes special "Lord of the Rings"-inspired bookends, along with the four-disc set. The package also includes "movie cash" -- a voucher for one free adult ticket to the second "Lord of the Rings" movie, which hits theaters on Dec. 19. The ticket will be good for two weeks. That gift set will sell for $79.

"Austin Powers: Goldmember" also debuts on video this holiday season on Dec. 3, with a special twist on the DVD features, Brody noted. Consumers will be able to see bonus footage, such as deleted scenes, as part of the movie, rather than watching it separately. "It really changes the viewing experience," she said. A DVD gift set of all three Austin Powers movies will be available for $66.

Sony Music, New York, also is gearing up with gift sets, such as a one featuring "Christmas Eve on Sesame Street," "Elmo's World: Happy Holidays!" and "Elmo Saves Christmas" that will sell for $39.98, said Alan Fergurson, vice president, video sales.

"We're seeing a lot of interest on three-pack DVD sets and overall interest of gift-pack titles," he said. "On the VHS side, gift packs are a real value. On the DVD side, as families start building up their preschool libraries, it's a great way to do it with classic titles."

At DreamWorks Home Entertainment, Glendale, Calif., "Joseph: King of Dreams" and "The Prince of Egypt" have become perennial titles during the holidays, said Kelly Sooter, head of domestic home entertainment. Additionally, "Spirit: Stallion of the Cimarron" will be released with a plush toy gift set, priced under $20 for VHS and under $25 for DVD, for the holiday season, she said.

Holiday Hits

The Top 10 supermarket sell-through titles in VHS and DVD in December 2001

VHS

1)Pearl Harbor - Buena Vista

2) Princess Diaries - Buena Vista

3) How the Grinch Stole Christmas - Universal

4) Jurassic Park 3 - Universal

5) Rush Hour 2 - New Line

6) Shrek - DreamWorks

7) Land Before Time 8: Big Freeze - Universal

8) Snow White and the Seven Dwarfs - Buena Vista

9) Rudolph the Red-Nosed Reindeer and the Island of Misfit Toys - Good Times Entertainment

10) Mickey's Magical Christmas: Snowed In at the House of Mouse - Buena Vista

DVD

1) Pearl Harbor (2-disc set) - Buena Vista

2) Jurassic Park 3 - Universal

3) Rush Hour 2 - New Line

4) Princess Diaries - Buena Vista

5) How the Grinch Stole Christmas - Universal

6) Shrek - DreamWorks

7) 2001 World Series - MLB

8) Snow White and the Seven Dwarfs - Buena Vista

9) Planet of the Apes - 2001 - Fox

10) Lara Croft - Tomb Raider - Paramount

Source: Nielsen VideoScan; Dec. 2, 2001 - Dec. 29, 2001