WINNING FORMULAS

LAURA KLEPACKI

New products are a driving force to health and beauty care sales, but supermarkets continue to face the challenge of getting out of the gate first and allocating space.

Those grocery chains attending this week's National Association of Chain Drug Stores' Marketplace Conference, June 15 to 18, in San Diego, are drawn primarily on the strength of the number of new products they will see or hear about on the exhibit floor.

With competition from drug chains and mass merchandisers for market share, and an abundance of advertising, especially in hair care and cough/cold segments, it's nearly mandatory to fit new items in to drive growth.

"It is extremely important to have new products on hand," said Doug Moen, category manager of health and beauty aids for Buttrey Food & Drug Stores Co., Great Falls, Mont. "We just feel they are the lifeblood of the categories. Those products are the ones receiving the most media attention right now and the customer will be looking for those products in our stores. So, it is very important to get them on the shelves."

"As far as announcing our new products and seeing others, the NACDS Marketplace is very strong for us," said Bruce McQuiston, director of sales for Mentholatum Co., Buffalo, N.Y. Mentholatum boasts the largest exhibit of the 650 booths on the floor this year, said McQuiston. The booth contains an English fishing troller signifying a new distribution agreement with Lofthouse's Fisherman's Friend menthol cough lozenges. Mentholatum is introducing five new items in topical pain relief and lip care at the show.

The number of new HBC products entering the market each year can be overwhelming, especially for food retailers. According to Marketing Intelligence Service, Naples, N.Y., the number of new entrees in HBC is much greater than in other areas.

"Of all the industries we cover, including food and pet supplies, health and beauty aids has grown the most," said Tom Vierhile, general manager of Marketing Intelligence, a market research firm that tracks new product introductions.

The number of new HBC products introduced each year has nearly tripled from 10 years ago, said Vierhile. In 1986, Marketing Intelligence reported 2,859 introductions and in 1996, it counted 8,204. "It has really been an explosive area," said Vierhile.

In addition to traditional HBC categories, much of the activity has been in prescription to over-the-counter switch segments, such as the H2 antagonists in antacids.

Other new product activity has been seen in homeopathic remedies, herbal products and sun protection lotions.

Vierhile's data show the number of new vitamins and supplements introduced to the market rose from 379 in 1992 to 1,111 last year.

"Things have really gone crazy and you see the influence of these natural products into other food categories and skin care as well," he said.

Ray Stone, executive vice president of the Allen Levis Organization, a Northfield, Ill.-based marketing consultant, said a new product entry can affect the whole category and "without a question, [is] definitely important" to driving growth in HBC.

"New products do a lot of advertising and positioning to draw customers into the retail outlet and to the HBC section," said Stone. Even if shoppers don't ultimately buy that product, they will probably buy something else, he said.

Stone said one area he has been watching is the product proliferation in the analgesics and antacids categories, due primarily to Rx-to-OTC switches.

Meanwhile, some retailers and wholesalers said they have experienced a slowdown of product introductions in a few categories, while others are blossoming.

George Satterwhite, director of nonfood for Affiliated Foods, Amarillo, Texas, said in the past few months new product introductions in traditional categories, such as cough and cold remedies, have been "sort of stagnant."

"Line extensions seem to have slowed down. We don't see as much as in the past," said Satterwhite. And for the moment, he said, it is easier to manage the business because "we don't necessarily have to take on new product extensions that may or may not carry their weight. So it helps from the wholesale end -- but from the retail end, I think it diminishes interest in HBC."

Satterwhite said new product innovation in HBC is key to its success. "The new items do stimulate the category. It draws customers into the aisle in the grocery store, which otherwise might not be one of their favorite areas. With new products, he said, "they'll want to come in and at least look at the new packaging, the new flavors and colors."

But getting new products onto supermarket shelves can be a little more difficult than for other classes of trade, especially compared to some drug chain units, which operate independently, said Carl Parker, division manager for A.M.I., a Corona, Calif., distributor.

"At mass merchants and supermarkets, they have to get the item authorized and it has to go through a central person," said Parker. Frequently, he said, the process is slowed down because there are slotting allowances, distribution fees and advertising allowances to be addressed.

"It's probably easiest to get new products into a drug store. Not just because of the space devoted, but because most stores have options as to what they want to do," said Parker. What the manufacturer does to promote a product is a significant factor in deciding whether or not to sign it on, said Rick Channell, general merchandise manager for Riser Foods, Bedford Heights, Ohio.

"If the manufacturer has freestanding inserts, it is critical to take it on," said Channell. Buyers' decisions to commit to a new item often is based on various criteria.

Laurie Platter, HBC buyer for Fareway Stores, Boone, Iowa, said she looks for a "combination of things," when deciding whether or not to add a new item. Factors include both the buyer's gut reaction to the product's appeal and the manufacturer's promotion and advertising plans, she said.

The assistant HBC buyer for a leading Texas chain said her department reviewed about 30 new HBC items last week. "We do get a lot of new items presented," she said.

While there are not always that many product introductions each week, it is an important process that the department's buying committee has to go through, she said. "We have to be competitive, so we have to try to keep up as much as we can. But we can't have every item because we just don't have the room," she said.

Ronnie Williams, vice president of Millbrook Distribution Services, Leicester, Mass., said it is a lot easier to get a new product onto shelves if it is getting media exposure, offers a new technology or is a patented process. "Because then, people want to be first on their block to have it," said Williams. "If it is another flavor of an existing product, a lot of times it doesn't get the attention. What is the benefit of it?"

Williams said that in some ways, it's easier to get a new product on the supermarket shelf today than in the past because of the systems.

"People tend to be more structured in their planograms and their sets. A category manager or buyer can make a decision to put a product in a certain place, and then they can communicate that out to the other outlets, and it is an easy change," said Williams.

Gary Evey, a spokesman for Spartan Stores, Grand Rapids, Mich., said improving the distribution system has been a priority. "Speaking as a grocery distributor, getting retailer distribution is challenging. At Spartan, we have worked hard at developing automatic distribution systems," said Evey.

In his experience, whether a mass merchant, supermarket or drug store will be first to jump on a product, "really depends upon the chain -- all three are equally interested," said Williams.