SN Asks: Stemming the Flow of HBC Dollars

CHRISTINA VEIDERS

COLORADO SPRINGS — The Global Market Development Center, repositioned with a broader worldview and dedicated to growing the nonfood sector, has its work cut out for it. Information Resources Inc.'s numbers for the 52 weeks ending June 15, 2008, show that of 48 health and beauty care categories sold in supermarkets, 32 posted minus dollar-volume signs and 41 declined in unit volume. GMDC's president and chief executive officer, Dave McConnell, admits it's an uphill struggle for supermarkets to maintain an edge in HBC sales, especially over the formidable drug and mass classes of trade. However, McConnell sees huge potential for supermarkets to advance in this area given the right positioning of their stores around wellness. To that end, GMDC will hold its Health Beauty Wellness Marketing Conference starting this weekend, Sept. 5-8, in Phoenix. McConnell spoke with SN about the present state of HBC at supermarkets and what GMDC is doing to address some of the challenges food retailers face in winning the market share battle.

SN: Assess the food channel's HBC performance during the last year.

DAVE McCONNELL: In general, I'd consider the performance lackluster and disappointing. As a trade class, food continues to lose share to drug and mass, and that is an area of real concern.

SN: What challenges face food retailers today in marketing HBC?

DM: The growing trend toward consumers more aggressively managing their health and wellness regimens, in tandem with medical professionals, affords food retailers a big opportunity. Food is uniquely positioned to satisfy the nutritional requirements of this consumer while also offering a selection of wellness-oriented health-beauty-wellness products that augment their dietary requirements. The caveat in this opportunity is that food retailers cannot continue to reduce their traditional health-beauty-wellness product offerings and expect to attract or satisfy that consumer.

SN: What can supermarkets do to stem the flow of dollars to other channels?

DM: It's important to understand that this opportunity isn't limited solely to traditional health and beauty care products and extends to general merchandise opportunities as well. As an example, we've found that categories such as household cleaning and media can position retailers not only as a source of nutritional and wellness products, but also positions them as a source of consumer information through health- and lifestyle-oriented programs that are delivered via DVDs, books and magazines.

SN: How much progress in establishing a strong health/wellness position needs to be made in the food channel?

DM: A number of retailers have been early adopters and have made tremendous headway in connecting with their customers, but there is a lot more work to be done to fully develop strategies that leverage all of the opportunities that exist in GM and HBW. Companies such as Safeway, Kroger, Hy-Vee, Wegmans, Ukrop's and, of course, Whole Foods have focused on connecting with the wellness consumer. But many other food retailers are just beginning to stick their toes in the water. The pace of change in the food channel needs to pick up. The key is speed to market, and many of our members appear to be sitting on the sidelines when they should be moving forward more aggressively.

SN: What merchandising opportunities do food retailers have?

DM: One of the most important recommendations to come out of our studies is to leverage the health-beauty-wellness categories with the pharmacy and other key general merchandise and Center Store categories. To do this effectively, retailers have to make a commitment to break down internal company silos and collaborate. This means deploying cohesive companywide strategies developed by marketing, merchandising, pharmacy and store operations executives. In such an environment, not only will retailers see new opportunities for HBW, but for the entire store.

SN: Kroger is testing a new HBC set. The effort is to make HBC more accessible and appealing to women shoppers. What is the significance of this?

DM: As we identified in our “Women's Well-Being Strategies” study, we believe women are absolutely the key consumer element that food retailers must satisfy to build their HBW business. With women still making the decision on four of five transactions that occur in a store, Kroger is focusing on a big sweet spot in which most food retailers have underperformed.

SN: Rate supplier cooperation in helping food retailers build their HBC business.

DM: Our experience is that our supplier members — both general merchandise and health-beauty-wellness — have a sincere interest in partnering with our wholesalers and retailers to grow their businesses. Excellent evidence of this has been the volume of work GMDC has produced in the area of health and wellness over the last 10 years. Our supplier and wholesale/retail members have collaborated to develop these studies, and actually fund them through a combination of monetary contributions by suppliers and retailers providing stores to test and validate our merchandising theories.

SN: Is GMDC pursuing any new initiatives or studies related to HBC?

DM: We're just completing the selection process for hiring a firm to work with our Education Leadership Council to develop a “Wellness Consumer Shopping Habits” study for delivery in 2009. As we look at these consumers, we'll be focused on determining their level of interest in buying wellness items in retail outlets, including food; what wellness means to consumers; and the wellness categories that consumers identify as most important. The study will look at the mind-set of the target consumer today and will identify new trends that we'll see evolving over the next five years.