TENACIOUS PERFORMERS

LAURA KLEPACKI

Supermarkets have maintained their share of the top 10 health and beauty care categories, despite the rapid proliferation of supercenters.

The top 10 categories account for 48.5% of department dollar volume of the approximately 50 supermarket HBC categories tracked by Towne-Oller & Associates, New York, for the 12 months ended March 31, 1995. The research firm, a division of Information Resources Inc., Chicago, reports HBC sales from distribution centers among its reporting retailers/distributors.

For the period, sales of the top 10 HBC categories in food stores grew to $6.84 billion, up $175 million from the previous year's $6.66 billion in sales.

Supermarket performance in the top 10 HBC categories could signify that retailers are taking the big nonfood volume categories more seriously, and beginning to better manage the space devoted to these products.

In the supermarket channel, space devoted to nonfood has historically been at a premium. "We don't have the space that we'd like to in most of our stores," said Laura Abita, HBC buyer at Grand Union Co., a 250-unit chain based in Wayne, N.J., referring to attempts to offer a larger selection of shampoos.

Achieving efficient product assortment is viewed by the industry as a key nonfood strategy for supermarkets to use in the continued battle with alternative formats.

Indeed, the General Merchandise Distributors Council is focusing on efficient assortment in its Educational Foundation research project this year. GMDC will present a report titled, "Efficient Products . . . The Productivity Solution," when it meets this week for its HBC Marketing Conference in Colorado Springs, Colo. The report will detail the efficient assortment process.

That process, which is considered an essential component of category management, is now being tested with the analgesics category at 16 stores operated by Dominick's Finer Foods, Northlake, Ill. The test is being run with half of the stores reducing the number of stockkeeping units in the category by 10% and the other half reducing their assortment by 15%. The results will be compared with eight controlled stores that haven't changed their assortment. The tests will run through July, and findings will be released later in the year by the GMDC.

"Efficient product assortment utilizes retail sales and consumer information to produce more profitable space with less duplication of product," said Ron Turner, GMDC vice president of member affairs and education.

The performance results of this year's top 10 HBC categories indicate that retailers are better managing shelf space; seven out of the 10 categories posted sales gains -- with razors, vitamins and tonics all achieving double-digit growth.

Despite these gains, there was also softening in some key segments, including cold/allergy products and analgesics, the perennial best seller.

In nearly all categories, except deodorants, private label was gaining momentum as consumers increasingly look for better values and retailers seek ways to preserve their profit margins.

There also was growth in high-priced vanity products, including salon-type shampoos and teeth whiteners, according to the retailers SN interviewed for this report.

Keeping their share of the top HBC categories has become increasingly difficult for supermarkets, according to many retailers surveyed by SN, as drug chains and mass merchandisers compete more intensely for market share of these high-volume categories.

"We have had to fight back with increased variety. We lowered our prices and run hotter ads. So our sales have increased, but our margins have dropped," said Dan Van Zant, HBC buyer-merchandiser at C&K Markets, Brookings, Ore., which operates 34 stores.

The section below presents the past year's sales results for each of the top 10 HBC categories, along with a glimpse at some of the factors that shaped category performance.

ANALGESICS

Annual Volume $1.3 billion

HBC Share 9.22%

% Change - 0.01%

Analgesics remained the top supermarket HBC category again, with sales of $1.3 billion, representing a 9.22% share of the HBC category for the 12 months ended in March 1995.

Yet while category activity over the past year was boisterous with the introduction of Procter & Gamble's Aleve and an ensuing battle among leading players for market share, there was no dollar growth. In fact, sales barely remained even, with a loss of 0.01% over the same period a year earlier.

Meanwhile, sales of private-label products were up by about 17% for the year ended in December 1994, according to Towne-Oller & Associates. That could be part of the reason why dollar growth has been lagging, observed Randall King, nonfood buyer at Byrd Food Stores, Burlington, N.C., a 44-unit chain.

"Everything was pretty flat. The cash register ring just isn't as high with the private label, and sales of private label were up a little bit," said King. And the branded items, including Aleve, Tylenol, Advil and others, were discounted heavily, he said.

"They did a lot of markdowns and a lot of $1 and $2 value couponing," said King.

As it stands, there is no relief insight for the painkiller category, for Aleve just announced part two of its aggressive marketing campaign that is expected to include TV and print ads directly comparing its value to that of Tylenol and Advil.

And in addition to being caught in the category's price wars, it is yet to be seen how market leader Tylenol will be affected by the recent reports in the media linking its use, when combined with alcohol, to kidney disease.

DENTIFRICES

Annual Volume $880 million

HBC Share 6.24%

% Change 3.45%

The dentifrice section is looking bright, with a 3.45% sales increase totaling $879.6 million for the past 12 months, accounting for 6.24% of category share.

Some of the growth can be attributed to the baking soda items and newly introduced baking soda with peroxide and other teeth-whitening products, said retailers. Also, sales of some lower priced lines have also been doing very well.

"Our sales are definitely up in that category," said Dan Van Zant, HBC buyer-merchandiser at C&K Markets, Brookings, Ore., which operates 34 stores. Actually, "they are up more than the national average."

But C&K has also taken steps to foster that growth and stave off losses to mass merchants entering the area, said Van Zant.

'We have had to fight back with increased variety. We lowered our prices and run hotter ads," said Van Zant. "So our sales have increased, but our margins have dropped."

He said rather than focusing on private label, C&K has emphasized lower-priced branded items such as Ultra Brite, Aqua Fresh and Pepsodent.

Van Zant said he doesn't expect pressure in the category to lift over the next few months.

"Competition is not getting any easier. We've seen more of the discount formats coming into our market. We might have to get more competitive than in the past."

COLD/ALLERGY

Annual Volume $810 million

HBC Share 5.74%

% Change - 1.32%

After experiencing a growth spurt of almost 6% in 1993, sales in the cough/allergy category fell 1.32% this past year to $809.7 million.

While milder winter weather is said to have prevented some dreaded winter colds, growth in lower-priced private-label products may also have played a part in keeping dollar sales from rising.

Larry Miller, nonfood buyer at John C. Groub Co., Seymour, Ind., said category sales at the 34-unit chain have followed the national trend. "Yes, our sales have been down a little bit."

The company has expanded its selection of controlled-label items and tried some new branded items "that didn't perform up to expectations," said Miller.

To make room, some poorly performing cough syrups and cough drops were deleted, he said.

"I'm sure the milder winter had something to do with it. We had more problems with allergies than with coughs and colds, so I am leaning more toward those items."

Looking ahead, Miller said he expects the category to become even more competitive as mass marketers and supercenters continue to "saturate the area."

"I know that we are competitively priced. But people don't come to grocery stores to buy those things. They will go to other stores to buy them. They buy them at grocery stores for convenience," said Miller.

Miller said he thinks more specialty shopping by consumers could be occurring.

DEODORANTS

Annual Volume $779 million

HBC Share 5.52%

% Change 2.89%

After a flat year, deodorant sales are once again picking up. Over the past 12 months the category has grown 2.89% for total of $778.8 million.

The introduction of some deodorants in gel and cream forms, which are a little higher priced, could be triggering that growth,

said Kim Botkin, HBC buyer at Gerland's Food Fair, Houston, a 20-store chain.

While personally surprised by increases in a category that "everybody already uses," Botkin contends that the newer items can generate increased use because of the way the product is dispensed.

"It is real hard to see a real sales increase in deodorants, because everybody already uses them," said Botkin. "You can't find new customers, you can just get them to use more, and I think that's what some of these new items are trying to do."

To bring the new items in, "we had to let the weak sisters go," which included some of the clear sticks, said Botkin. No extra space was allocated.

Over the next few months, more new items are expected to enter the category, which could make merchandising more difficult. But otherwise, Botkin said he isn't feeling the competitive pressure from classes of trade that affect some other HBC categories.

"'Deodorants are something you need to buy all the time, and you won't necessarily wait until you take a trip to those other stores," said Botkin.

SHAMPOOS

Annual Volume $741 million

HBC Share 5.25%

% Change 3.64%

The shampoo category has picked up some shine after a very dull year.

The category rebounded in the last 12 months with sales of $740.6 million, up 3.64% from a year earlier, when movement slipped 3%.

One Midwestern retailer, who asked not to be named, credited category growth at his chain to the introduction of some higher-priced salon-type items and an overall increase in product promotions.

Laura Abita, HBC buyer at Grand Union Co., Wayne, N.J., a 250 unit chain, also said the category is doing well.

"In fact, we don't have the space that we'd like to in most of our stores."

Shampoo sections in most stores range from 12 to 16 feet. "We'd like to see most stores average 16 to 20 feet," said Abita.

Merchandising has become more challenging as new products enter the market and old ones also continue to sell, said Abita.

As for future growth, she said, the chain is currently testing a 4-foot salon section in eight stores.

RAZOR RACK

Annual Volume $523 million

HBC Share 3.71%

% Change 10.01%

The razor category experienced phenomenal growth, with a sales increase of 10.01% for a total $523.2 million. It leaped to the sixth leading category, up from eighth place last year.

"Most of our growth has been in the disposable category," said Dan Van Zant, HBC buyer/merchandiser at C&K Markets, Brookings, Ore., a 34-unit company. "There has been a lot more promotional activity on the part of the manufacturers that come in with hot deals."

It is the promotions that have increased movement, he said. Although he said a new product, the Gillette Sensor Excel, introduced in 1994, also brought some sales to the category.

Meanwhile, private-label sales have been negligible. "We price private label at 30% lower than national brands, but even with that, we don't see repeat sales," said Van Zant.

While he is optimistic about the future of the category, he said he doesn't expect to see the recent gains duplicated next year.

"I personally don't think growth can be maintained at that level. I think it will taper off," said Van Zant.

But for the immediate future at least, he said, "there are a lot of promotional offerings for the latter half of 1995."

SANITARY NAPKINS

Annual Volume $520 million

HBC Share 3.69%

% Change - 0.35%

While ever important as a destination stop for female shoppers, the sanitary napkin category was a weak performer last year, with a sales decline of 0.35% to $520 million, which comes on the heels of a 1.6% decline the previous year.

Deep discounting, along with the growing presence of private label, could offer an explanation for the overall dollar loss.

Retailers have described the category as a "war zone," with mass merchandisers offering lowball prices, and an influx of new items that make merchandising difficult.

Although supermarkets still dominate market sales, "there has been movement to the mass merchandisers with this category," said David Daniel, grocery buyer at Spartan Stores, Grand Rapids, Mich., a 500-store cooperative.

Daniel said despite suggesting prices to retailers that would provide margins of 15% to 18%, most succumb to competitive pressure and offer prices that give only a 4% to 8% margin.

VITAMINS/TONICS

Annual Volume $508 million

HBC Share 3.60%

% Change 10.05%

Americans have continued to fortify themselves with healthy doses of vitamins and tonics, making it the fastest growing HBC category. Sales jumped 10.05% to $507.7 million over the past 12 months, which comes on top of last year's growth of 15%.

Sales for the year ended in March 1995 reached $507.7 million, accounting for 3.6% of HBC category sales. Despite the significant gains, drug stores still sell more. For the same period, drug outlets had sales of $776.8 million, up 8.48% over the previous 12 months.

"We have had sales increases," said Charlie Owen, director of nonfood operations at Ball's Food Stores, Kansas City, Kan., a 21-store chain. "The multivitamins and the antioxidants are hot right now."

Owen said there have been several line extensions and private label has consistently been a major player in the category.

However, competition with drug stores and mass merchandisers continues to be a concern, said Owen. "We tend to price with them as much as possible and run a lot of temporary price reduction promotions," he said.

To capitalize on the increased interest in the category, Ball's allocated increased space allocations by about 25%, said Owen, who expects strong sales to continue into the future.

"I think we will weed out the slow movers, but keep space where it's at," said Owen.

ANTACIDS

Annual Volume $409 million

HBC Share 2.90%

% Change 3.24%

Antacids sales grew 3.24% this year, picking up the pace of a modest 1.1% increase during the previous 12 months.

"I know that our sales are up," said Randall King, nonfood buyer at Byrd Food Stores, Burlington, N.C., a 44-store chain. He conjectured that increasingly stressful lives may be causing more ailments and thus turning more consumers to the category.

At present, he said, there are no bad items in the category. "Everything we carry is a good seller. I probably have to look to expand the space."

King said Byrd's is also expanding is private-label selection. Previously the chain just offered liquid items. Now it is adding tablets.

King added that category sales could be in for a real boon from some pharmacy items such as Tagamet and Pepcid, which are expected to be approved for over-the-counter sale soon.

People will go to HBC sections to buy it, said King, "because those items will be a lot cheaper than through a prescription."

TAMPONS

Annual Volume $373 million

HBC Share 2.65%

% Change 0.61%

While still accounting for only a fraction of total sales, the private-label segment of the tampon category has been skyrocketing. Sales jumped 124% to $9.5 million for the 12 months ended in December 1995, on top of an increase of about 102% the year before, according to Towne-Oller.

Total category sales climbed only slightly, up 0.61% to $373.4 million for the 12 months ended in March 1995.

Like its sister category, sanitary napkins, the tampon segment has become embroiled in price wars with mass merchandisers in a battle for prime female shoppers.

"It is a price-competitive category," said Jan Paton, HBC buyer at Autry Greer & Sons, Pritchard, Ala., a 39-store operator. "But tampons do extremely well for us."

Paton added, "We have a big private-label section of sanitary napkins and tampons, and we have expanded SKUs. It is perceived as a good value."

The Top 10 -- By the Numbers

The top 10 health and beauty care categories at food stores generated $6.84 billion in sales for the 12 months ended March 1995. At drug stores, the same categories brought in $4.95 billion.

HBC Dollar Volume

FOOD STORES DRUG STORES

Analgesics $1,299,685,007 $1,078,239,164

Dentifrices $879,662,438 $354,420,710

Cold Caplets $809,743,533 $819,878,566

Deordorants $778,844,948 $398,066,892

Shampoos $740,625,946 $402,090,048

Razor Rack $523,223,827 $292,507,449

Sanitary Napkins $520,178,587 $253,564,421

Vitamins & Tonics $507,731,160 $776,830,828

Antacids $409,111,769 $391,040,462