SUNRISE AT SUNDOWN

JOHN KAROLEFSKI

BOCA RATON, Fla. -- It's a new day for Sundown vitamins.

The parent company, Rexall Sundown, posted record sales in its first fiscal year after going public. An impressive new corporate headquarters and state-of-the-art manufacturing facility here position the company for more growth. But mere growth isn't what Sundown brand marketer Nick Palin has in mind. Armed with some 300 vitamins and dietary supplements, he's taking dead aim at one target: making Sundown the dominant brand in the food, drug and mass trades. Sundown is now the third-leading vitamin program, according to the 47-year-old executive. To catapult the company to the top, Palin has rounded up a few good business partners, namely, a growing number of first-rate retailers around the country.

"It doesn't work unless there's a partnership," he says. "When

that happens, it's a very explosive combination. The numbers are absolutely incredible." The numbers behind Rexall Sundown are impressive, too. The company posted net sales of $126.4 million in the 1994 fiscal year ended Aug. 31 -- a 35.7% increase over the previous year. It is the 11th consecutive year of record sales. In 1984, net sales were $11.3 million.

Retail sales, accounting for about two-thirds of the overall business, involve three brands: Sundown (more than 800 stockkeeping units sold through mass merchandisers, drug store chains and supermarkets); Rexall (over-the counter pharmaceuticals and health and beauty care items, vitamins and nutritional supplements sold mainly through independent pharamcies and convenience stores), and Thompson (nutritional products sold primarily in health food stores). Catalog and mail-order sales account for about 15% of the overall business. The remainder consists of direct sales through independent distributors through a subsidiary called Rexall Showcase International. The company has been on a roll for the last few years. In 1993, Sundown Vitamins changed its name to Rexall Sundown and went public in June. That same year, it bought Pennex Laboratories, the second-largest maker of OTC pharmaceuticals and HBC products for store-brand and private-label markets. Last January the company moved into a new 135,000-square-foot corporate headquarters and manufacturing facility near its 100,000-square-foot distribution center. Palin, who is senior vice president of sales of the overall company, also points out that a growing export business now includes 60 countries. But U.S. sales of Sundown vitamins remains the meal ticket for this confident brand marketer. "Our program is fitting in just beautifully today. We've been on the right track all along, as evidenced by our growth," he says. For Palin, future growth won't hinge on a flurry of new products -- although there are several to offer today's health-oriented consumer. Growth also won't come from widespread consumer advertising and promotion -- although spokesman Dick Clark has given Sundown a high profile. No, growth will occur because the retailer -- and the store environment itself -- will make it happen. "We recognized early that the key in any program was the sales velocity and profitability of the retailer," Palin explains. "When we started the business, there were other brands out there. We came in late and had to have a better way of moving product." His formula consists of a lower price point, broader selection and better service. It leads to "an aggressive stance of moving product," he says. "And today, that product movement and that gross margin is the most important thing out there." A dedication to in-store merchandising underlies this commitment to the retailer. It's what distinguishes Sundown from the rest of the pack, according to Palin. "We just don't sell into the retailer and let products languish," he points out. "We take a proactive role in making sure they're properly presented and maintained, and that stock levels are kept very high. That increases sales. "We can only afford to do that when the retailer cooperates with us and purchases sufficient product to meet demand. We can get sales -- utilizing our merchandising staff -- that double or triple what other brands do," he says. Several factors go into the equation of deciding whether or not Sundown's merchandising staff takes charge of the section. They include size of the sections, location of the stores, overall store traffic and whether the company supports any other programs with the retailer. "It's a negotiation," says Palin. "We always bring it to the table and talk to the retailer about the service we have. We know how successful the program is, and we try to sell it to the retailer. Those retailers who try it absolutely swear by it. The numbers are absolutely phenomenal."

Palin tells the story of the food retailer who Rexall convinced to try a 2-foot set with three shelves. In short order, it grew to 2 feet with six-shelves, then went to 4-foot to 8-foot to 12-foot sections in some stores. "This retailer based our space strictly on our sales ability. It went from a minor presence to a major presence. We now have it on a full-service program," he says. This service program, in place with many chains, calls for Rexall Sundown personnel to handle the in-store merchandising of the category. "Service is essential in the vitamin category," says Palin. "Because vitamins sell very rapidly, they are subject to being out of stock or not being cared for in the proper way. Any retailer who neglects service will not achieve the sales velocity that they can. It's a critical area." So critical, in fact, that Sundown employees check up on the vitamin set even if there's no official service agreement with the retailer. Palin calls it a "sweep." "Even if the retailer has its own service people, we will back them up with our own independent people who go in, eyeball the store, make sure the tags are on properly, make sure the product is faced properly and that the signage is in place," he says. This attention to detail is evident also in the planogram for the vitamin section, according to Palin. Each one is customized, based on demographics, geographic area, past history and input from the retailer. Internally, the company also handles the business with a thorough attention to detail. "We do weekly reports on all our customers, tracking their sales progress. Then we evaluate that to see if it's meeting what we expect for that retailer, and if the product mix is in accordance with what we know."

Sums up Palin: "We know what the goal is: sales and profitability for the retailer."