THE POWER GENERATORS

STEPHANIE LOUGHRAN

Batteries have gone high-tech. For retailers, this translates into a growth segment that is delivering more profit.

The segment was spawned with Duracell's rollout in 1999 of its Ultra that created a second tier to Duracell's Copper & Black line. In a short period, Ultra has reached the No. 4 sales position of the top 10 brands with sales of $225 million for the 52 weeks ending Sept. 10, according to Information Resources, Chicago. Last month, Duracell, backed by parent Gillette Co., Boston, began shipping its next generation Ultra with M3 technology (more fuel, more efficiency, more power) to supermarkets and mass-market merchants.

However, this time out of the box, Bethel, Conn.-based Duracell faced competition in the super-premium segment from rival Energizer Holdings, St. Louis, Mo., and Panasonic, Secaucus, N.J. Energizer has launched the e2 Titanium and Panasonic offers its Digital line. IRI ranks e2 at No. 12 of the top-selling brands with $2.4 million in sales.

Consumers' love of gadgets, battery-operated toys and the fast-emerging digital electronics industry have led manufacturers to develop more powerful and longer-lasting batteries for the high-drain segment. Consumer electronics products reached $81 billion in 1999, a 7% increase over $75 billion in 1998, according to the Consumer Electronics Association, Arlington, Va. The CEA expects that figure to top a record $85 billion by the end of this year, as consumers' desire for high-drain products such as wireless telephones, digital cameras and portable compact disc players continue to surge. The CEA estimates that almost 27 million portable headset audio products will be sold this year alone.

In fact, the CEA said the average American household spends $1,000 per year on consumer electronics, double the amount they spend on toys, furniture, sporting goods or jewelry.

The alkaline battery category's $2.6 billion growth, up 9.3% over the last year, can largely be attributed to these new entries. Sales in all mass-market channels of distribution were up. Supermarkets' sales rose 8.7% to $630 million, according to IRI, compared with the drug channel's $622 million and $1.38 billion generated by the mass merchandisers.

According to market research firm Frost & Sullivan, San Jose, Calif., the high-drain segment is projected to account for up to 60% of the battery market by 2002 because of the growth of high-drain applications. Right now, it represents 15% of the category volume, according to an Energizer press release.

With the entry of these more powerful and longer-lasting batteries, grocery retailers surveyed by SN said there have been mixed results at the checkout, however.

Delores Chewning, a general merchandise director at Richmond, Va.-based Ukrop's Super Markets, said consumers buy the super-premium batteries without hesitation. "People who have the need for these products understand the difference," she said -- despite the slightly higher price tag. She said that the stores definitely see these power generators as profit generators, as well.

Michael Thompson, a health and beauty care and nonfood manager at Shop Rite, Lacey, N.J., said they have promoted the batteries by taking a dollar off for all Price Plus cardholders. "People like sales, so there has been a bit of a bump."

With Shop Rite's sale, four-count AA and AAA blister packs of Energizer e2 (equipped with advanced technology in its reclosable package and improved fuel-gauge tester) retailed at $3.89, while C, D and 9-volt one-count batteries priced at $2.99. Normally, consumers are charged up to $2 more for these high-tech batteries.

Jimmy Briggs, general merchandise/HBC category manager, Affiliated Foods, Little Rock, Ark., told SN that consumers who understand why they pay a premium price for super-premium batteries will know it's still a value.

"If Energizer can convey the longer power convenience for high-tech electronic devices through advertising, I think the batteries will do well." He said sales feedback for the products are too early to track, though. Briggs said the batteries would sell especially well in middle-class and upscale neighborhoods.

Other grocery retailers weren't as enthusiastic, however. Apparently not aware of the hundreds of millions of dollars spent by manufacturers on media campaigns to promote these ever-more powerful batteries, some retailers cited lack of ad support and called for more consumer education. Kathleen Brown, general merchandise buyer at Giant Eagle, Pittsburgh, said the batteries have not been selling "spectacularly well." She said the battery companies have not been doing their part to advertise and push the new line of products.

Tyler Wallace, assistant nonfood manager, Macey's Foods, Sandy, Utah, said sale discounts and display placement are equally important. Without prominent displays, the e2 has been slow to catch on at Wallace's particular store. He said the ideas behind these high-tech batteries are smart though.

Denny Voight, nonfood buyer at Rosauers Supermarkets, Spokane, Wash., agreed. "The batteries are selling fair, from the information I receive at the store level." He said that super-premiums are "good batteries, but people aren't going to know that until they buy them." Voight added, "To a certain degree, I don't think [consumers] understand that they last longer -- there has to be an education given, particularly by television advertising."

Still, the battery manufacturers are prepared to spur fourth-quarter sales with consumer promotions.

Duracell announced last week it will partner with VH1, an entertainment production company of MTV Networks, New York, in its first-ever "My VH1 Music Awards." The awards show, Nov. 30, will be based on consumer voting through the VH1.com on-line music service. Duracell is encouraging consumers to vote by mailing in a paper ballot available on special Duracell Music Awards retail displays or by logging onto VH1.com. Duracell consumers who participate have an opportunity to win a grand prize of two tickets to four popular music concerts nationwide with first-class airfare, hotel accommodations and $5,000. First-prize winners will receive a CD from a "My VH1 Music Awards" nominee. While supplies last, any purchase of two saver packs or three regular packs of Duracell Ultra or regular alkalines will instantly receive a free CD case valued at $12.95. The two grand-prize winners will be announced in January.

Energizer announced there will be a "Power 2 Win Sweepstakes" slated to begin Oct. 25. Consumers can enter to win a pair of high-tech prizes, such as two RCA Lyra MP3 players, or two Hewlett Packard digital cameras. Consumers can tear off an entry form at retailers or go to www.energizer-e2.com to enter, no purchase necessary. An Energizer spokesperson said 375 winners will be announced Feb. 19, 2001.

Panasonic's Digital battery line will also roll out a fourth-quarter offering, just in time for holiday digital gift-giving. Starting this week until Dec. 31, the manufacturer will offer free headphones with mail-in proof of purchase of any two packs of Digital batteries. Customers must also mail in a certificate from the display. "Headphones denote portable CD players, which work well with the Digital batteries," said Christine Denning, marketing communications specialist, Panasonic.