Health and Beauty Benefits

Health and Beauty Care (HBC) has been known to create more pain for c-store operators than it relieves for their customers. Managing it well—knowing the trends, keeping up with new products and line extensions, establishing workable price points and merchandising it carefully—is a precarious balancing act.

The trend today is smaller, both for product packaging and the sections themselves, as the c-store channel fends off mass and drug competitors.

“What does the customer who comes into our store need?” asked Bruce Earhart, vice president of marketing for Handee Marts Inc., which operates 64 7-Eleven stores. “He needs immediate relief, just like everything else in a convenience store. He needs something immediately consumable. It’s just a matter of applying the same knowledge and learnings from other c-store categories to the health and beauty aids.” Promotions, he said, “aren’t needed.”

The industry’s wholesalers are a solid source for trends in this category because they see not only what manufacturers are introducing but what category managers are ordering.

“There really hasn’t been a lot of crazy new innovation as far as the core items are concerned,” said Mike Weirzbicki, vice president for Eby-Brown, the No. 2 industry wholesaler behind McLane Co. Inc. “One thing I have seen that I really think is going to create some excitement is that Johnson & Johnson has developed an on-the-go program for vials. Basically, what you have is a rack merchandiser designed for front-end merchandising. (This) is probably the first innovative thing I’ve seen in quite some time from those people.”

Money Talks

Price comparisons with mass retailers on larger-size packages show c-stores to be at a distinct disadvantage, Earhart said, “so I don’t see us being a player in that. What I do see is the opportunity for, ‘Gee, I’m on my way home from work and my head is killing me. I left my Tylenol on my desk and I’m not going to be home for an hour—I need something right now.’ I think you get additional sales that way by offering that convenience pack.”

The incremental sales opportunities smaller packages offer represent a new revenue stream for many chains.

“If you think about it, the health and beauty section is not an impulse, it’s a need,” said Brad Eaton, category manager for Greenville, S.C.-based Spinx Co., which operates 75 convenience stores and supplies gasoline to more than 60 others in North and South Carolina. “People walk in, they have a headache, they need an aspirin, and depending on how bad the headache is they don’t care if they pay 50 cents or $2.50. They’re going to want something that is going to cure their headache.”

Within the category, vitamins and supplements registered the strongest dollar increase in average shipments per store per week in 2007, said Richard Dvoracek, product director for McLane. While it is still not the largest segment in HBC, McLane experienced more than a 69% increase from the previous year, “and all indicators look as if the trend will not slow down.”

“I don’t see a change in direction,” said Beth Noteman, director of category management for Lil’ Drug Store, a distributor of non-prescription drug and HBC products for convenience stores. “I hear a lot of buzz about being on top of the seasonal changes. Some examples would be lip care, where some 40% to 50% of sales in convenience are done between November and January. I see a lot of interest in customers wanting to be out there ahead of these bumps in movement. I see much more interest in secondary displays for those types of items.”

While unable to confirm it with data, Noteman said, “I can tell you that our single-serve sales have been extremely strong, and continue to be so. From the trend of gasoline prices increasing and consumers having fewer dollars to spend in the store I think you can logically deduce that (they) are going to be drawn to the single-serve price points and sizes out of necessity.”

Nationally in 2007, Dvoracek found, 97% of sales went to national brands overall and only 3% to private label. “We have found that most of our retailers are taking advantage of our numerous offerings with the Consumer Value Products (CVP) line.” They need to be careful, however, “that they do not have too wide of a retail spread between the national brand and control label.”

Consumers will continue to purchase national brand products and that’s where the biggest growth opportunities exist, Dvoracek said, “but it is important to give them an alternative.” McLane offers a controlled label called CVP which is only available to the c-store retailers the company services. “The double-dose products are another alternative that are not really cannibalizing the overall category.”

Merchandising and Promotions
Stocking HBC is complex business. “In that four-foot section you can be talking about 110 items, 30 sub-categories, 30 to 35 different manufacturers,” Noteman pointed out. “That’s an awful lot of work for something that does less than 2% of your in-store sales. Realistically, customers are only able to look at their sets once a year, maybe.”

McLane recommends eight linear feet for HBC, but has found some retailers are moving to four-foot sections. “This category has been loosing space for years,” Dvoracek said. “We suggest merchandising the products on the first gondola as you walk into the store.” McLane will be offering some small-footprint displays from Procter & Gamble, Johnson & Johnson/Pfizer and Lil’ Drug for it fourth-quarter bookings.

Larger competitors like mass merchandisers and drug retailers have helped reduce the c-store class of trade to “really an afterthought,” said Weirzbicki. Still, “some of the manufacturers are a little bit more in tune with c-stores. Prior to the acquisition of Johnson & Johnson, Pfizer was very much in tune with c-store HBC sector; you saw customized promotions that were very successful. For example, Visine promotions that let retailers buy 10 pieces and receive two free. Or Rolaids promotions where you pay for five boxes and get the sixth free.”

Such promotional deals still exist for convenience store operators to boost profitability, but they are on a limited scale that makes it more important for chains to closely follow the trends and be aware of new product introductions.

Spinx routinely merchandises HBC in a three- to six-foot section, depending on the size of the store, as well as gondolas. All new stores have six-foot sets.

Handee Marts has put a 32-peg riser in place above its normal HBC sets. Earhart said he has also “narrowed out” the category as far package size and selected SKUs. “I’m down to the standard remedies,” he said. The HBC sections have been downsized from 8 feet and in some cases 10 feet to 6 feet. As a result, he added, “We’ve actually seen the sales and the gross profit dollars in the category growing this year.”

Handee Mart will continue to refine its offerings by using scan data and by interacting with distributors to create the ideal store sets.

“We’ll start narrowing down the convenience packs, eliminating the ones that aren’t selling and double-space in the ones that are so we’re not running out of what we need,” Earhart said. “We’re not going to carry what’s not selling.” CSD

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