THE FIGHTING 10

CHRISTINA VEIDERS

Just where shoppers went to buy the leading health and beauty care categories last year was nearly split in thirds among food, drug and mass market retailers, with mass merchandisers increasing their share of the pie.

However, analysts expect mass merchants not only to exert price pressures but to institute innovative merchandising concepts. These concepts are powerful enough to make a statement to consumers about the retailer's commitment to high-volume HBC categories and draw shoppers into stores. Wal-Mart's OneSource nutrition center, which was rolled out to seven test sites last year, is just one example of such concepts.

As to the future direction of market share in the top HBC categories, Jeffrey Hill, managing director of Meridian Consulting Group, Westport, Conn., said, "The dynamics of store traffic, expansion and overall clout in the marketplace are clearly aligned with the mass merchandisers. The trend [in market-share gains by the discounters] is expected to continue."

The fact supermarkets held their 36% to 37% market share of the Top 10 dollar-volume health and beauty care categories tracked within the grocery trade last year was indeed positive.

"I am surprised that food did so well last year, surprised to see them flat overall," Hill stated. He speculated the reason supermarkets didn't lose big to other mass-market retailers was that "the food trade in grocery stores continues to be the primary location of frequent consumer shopping."

The 10 leading dollar-volume HBC categories in all three channels totalled $17 billion last year, up 5.4%, according to InfoScan data from Information Resources Inc., Chicago, for the 52-week period ended Jan. 4, 1998. This represents 37% of the total $46.5 billion HBC business in mass-market retailing.

The IRI categories include: analgesics, sanitary napkins/tampons, toothpaste, cough/cold, shampoo, vitamins, deodorant, antacids, razors, and toothbrushes. Diapers, soap and weight control/nutrition products were among the Top 10 and were ranked by IRI in food stores as No. 1, 2 and 10, respectively, but these categories are more likely to be under the domain of Center Store than HBC. Therefore, these were not counted.

The Top 10 HBC categories in supermarkets generated a total of about $6.2 billion in sales, up approximately 4.6% from the prior year. Market share remained stable, hovering at 36.9%.

The sales gainers within supermarkets were vitamins, up 17.6%; toothbrushes, up 8.4%; and razors, up 7.5%.

In comparison, drug-store sales in the Top 10 HBC categories rose 2.2% to $5.4 billion while market share slipped a point to 31.6%. However, there were five categories -- analgesics, feminine protection, shampoo, deodorant and antacids -- that lost sales.

Mass merchandisers continued to increase their sales and market share at the expense of the other two channels. Volume rose to $5.4 billion, a sales gain of 9.6%. Market share advanced 1.9% to 31.5%. Mass merchandisers picked up strong sales in all 10 categories, with vitamins, razors and toothbrushes gaining in double digits.

The following is a look at sales volume, market share for individual categories and a synopsis of the trends affecting category movement.

ANALGESICS

ANNUAL VOLUME $984.8 MILLION

% CHANGE 2.9%

Supermarkets grabbed the most sales in the $2.6 billion pain-relief category. Total sales across all channels rose 1.7%.

While the food industry increased both sales and market share over the previous year, drug stores lost 3% in sales volume, which fell to $978.6 million. Mass merchants continued to advance. Their sales increased 6.7% to $734.5 million.

Although analgesics are a big driver in health and beauty care, food retailers face heavy price competition from mass merchandisers in retaining this business. The category appears to have stabilized after the slew of prescription to over-the-counter switches, the latest being Actron from Bayer. Leading brands are Tylenol, private label and Advil. Private label represents about a 21% share of the category.

SANITARY NAPKINS/TAMPONS

ANNUAL VOLUME $818.8 MILLION

% CHANGE - 0.7%

Grocery chain and drug-store sales in the $1.7 billion feminine-protection market were flat. Drug stores, with $375.7 in volume, lost 0.8% in sales. However, overall sales rose 2.2%.

Meanwhile, mass merchandisers were stealing sales. They enjoyed a 9% increase in volume that rose to $572.9 million. This was about the same increase as in 1996.

Although overall ad support from manufacturers fell in 1997, supermarkets continued to use feminine protection as a traffic builder by heavily promoting and featuring the category in ad circulars and in-store specials.

The big news last year was that Procter & Gamble, which dominates the category with about a 43% market share, acquired the Tambrands tampon brand. Speculation is that increased ad support for the brand will help boost sales in 1998.

TOOTHPASTE

ANNUAL VOLUME $720.3 MILLION

% CHANGE 1.7%

While supermarkets gained in toothpaste sales, drug stores remained flat at $303.2 million. Mass merchandisers' sales rose 5.7% to $500.5 million.

An overall 2.6% increase in sales of the $1.5 billion category reflects the activity of many new formulations targeted specifically to problem areas outside cavity protection.

The big innovation is multicare products such as Procter & Gamble's Crest MultiCare and Colgate-Palmolive's new Total, which won the Food and Drug Administration's endorsement as a gum-disease preventive. Analysts are waiting to see how multicare products affect individual stockkeeping units of the leading toothpaste franchises.

COUGH/COLD

ANNUAL VOLUME $667.9 MILLION

% CHANGE 1.9%

Aided by the introduction of new allergy and sinus products, sales in this $1.9 billion category climbed 2.4%.

Introduced by McNeil Consumer Products and now with Pharmacia & Upjohn, Nasalcrom went over-the-counter for allergy sufferers. Many chains merchandised the spray, sold at a high price point, in their cough/cold sections. Also, Tavist Sinus was introduced by Novartis Consumer Health. In addition, more formulations of zinc lozenges, claimed to help fight the common cold, were seen on the shelves.

Mass merchandisers' sales again picked up, with a 6.1% increase to $447.2 million. The drug-store channel was flat at $817.9 million.

Food chains have been aggressive in using cough/cold as a seasonal volume builder. The category is characterized as a high-impulse buy and unplanned purchase for most consumers.

SHAMPOO

ANNUAL VOLUME $608.3 MILLION

% CHANGE 5.1%

After a lackluster 1996, shampoo sales began to take off. The category climbed to $1.5 billion and posted a 4.3% increase. The big loser was the drug channel, which lost 2.7% in sales of $310.9 million. Mass merchandisers were up 7.6% to $610.7 million.

Momentum was helped by the number of new and relaunched products that were supported by increased ad spending. Relaunches included Clairol's Herbal Essences and Unilever's Salon Selectives, which Unilever took over when it acquired Helene Curtis.

The company also introduced Thermasilk shampoo and revamped its Finesse line. Other new products included Cortexx, a hair strengthener from Alberto-Culver; Botanical Plus from St. Ives; and L'Oreal's Kids label and Body Vive line. Such technologically improved formulations are expected to keep the category moving this year.

VITAMINS

ANNUAL VOLUME $604.4 MILLION

% CHANGE 17.6

Supermarkets have left the door open to grow the category substantially and there is a good chance it will continue to move up within the Top 10.

Retailers targeting vitamins are investing in a healthy overall HBC department, especially if they decide to position their departments around a wellness motif. The category is high growth with strong profitability. At $2.5 billion, total sales soared 19.1%. All three retail channels posted double-digit increases, with mass merchandisers gaining the most with a 35.8% sales increase on volume of $731.5 million. The drug channel maintains the most market share. Drug sales rose 11.2% to $1.1 billion.

New products and the media are driving the category. Supplements such as Glusosamine, Carbonyl Iron, Zinc lozenges, Echinacea and Chromium received much media coverage.

DEODORANT

ANNUAL VOLUME $601.9 MILLION

% CHANGE 2%

Deodorants came back from being flat in 1996. Overall sales increased 2.5% to $1.4 billion. While food stores posted an increase in accordance with the category's growth, drug stores' sales fell 3.5% to $316.7 million. Mass merchandisers picked up a 6.8% gain on volume of $566.7 million.

The clear segment was revived by Gillette's introduction of clear solids. The company also reformulated its Soft & Dri Silken brand to include silk protein. It is formulated to leave less white residue on skin and clothes. Also, Revlon rolled out Mitchum in a new clear roll-on format and Colgate-Palmolive brought out its Lady Speed Stick Invisible Dry deodorant.

ANTACIDS

ANNUAL VOLUME $469.2 MILLION

% CHANGE 0.5%

The stomach-remedy category is finally settling down after the emergence of the H2 antagonist segment. The category remained flat at $1.3 billion, up 0.9%. Drug stores lost sales, down 3.7% to $458 million. Mass merchandisers grew sales by 7.4% to $400.1 million.

RAZORS

ANNUAL VOLUME $464.1 MILLION

% CHANGE 7.5%

Supermarkets kept pace with category sales growth of 7.4% in the $1.2 billion razor market. Drug stores posted a 2.2% increase with sales of $307.2 million. The biggest gainer was the mass-discount channel with an 11% increase to $461.7 million.

The industry anticipated the big introduction by Gillette of its new Mack 3 razor system, which was launched just this month. Late last year, Schick tried to steal Gillette's thunder with its Protector, a razor that touts the safety factor of its system rather than a close shave.

TOOTHBRUSHES

ANNUAL VOLUME $343.4 MILLION

% CHANGE 8.4%

The $1 billion category, which rose 9.7%, supplanted facial cosmetics for the tenth Top 10 slot within the food channel. Sales of $358.4 million soared 17.5% at mass merchandisers. Drug stores were up 4.1% to $363.8 million.

From ergonomic handles to new bristles, design was a key factor in the growth of this category. Manufacturers incorporated various materials like rubber grips and have concentrated on style and colors. It is a competitive field with more than 200 companies selling products in the category. The leading players are Gillette (Oral-B), Colgate-Palmolive (Colgate), Johnson & Johnson (Reach), Procter & Gamble (Crest), Unilever (Mentadent) and SmithKline Beecham (Aquafresh).

Source: Information Resources Inc., Chicago. For 52 weeks ended Jan. 4, 1998.