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CCA’s Five Percent Solution

EAST RUTHERFORD, N.J. -- The skin care brands of CCA Industries aren't as well known as those of, say, Procter & Gamble and its Oil of Olay.<BR><BR>But for many mass market retailers, they are just as important, especially to the bottom...

EAST RUTHERFORD, N.J. — The skin care brands of CCA Industries aren’t as well known as those of, say, Procter & Gamble and its Oil of Olay.

But for many mass market retailers, they are just as important, especially to the bottom line.

In fact, two CCA items in direct competition with P&G — Sudden Change, a skin care line, and Plus White, a toothpaste — have been singled out as top movers at large chains such as Memphis-based Super D Drugs and Eckerd Drug Co. in Largo, Fla.

In addition to Sudden Change and Plus White, which each did around $10 million in wholesale volume last year, CCA distributes and markets over 70 other products, notably Nutra Nail 60 Second nail enamel, which had estimated sales of $6 million, and Wash ‘n Curl hair care, with estimated sales of $16 million to $17 million.

Overall, CCA posted sales of $44.3 million in fiscal 1993, which ended Nov. 30, a 62.3 percent increase over 1992, when sales were $27.3 million.

Net income jumped 117 percent, from $1.2 million in fiscal 1992 to $2.6 million in 1993.

The CCA brands are sold through more than 40,000 retail doors in the U.S. Wal-Mart is one of the beauty supplier’s leading retail accounts, producing 18 percent of CCA’s total sales. Walgreen Co. and Kmart Corp. combine for another 20 percent of total volume.

According to David Edell, CCA’s president and chief executive officer, the firm’s strategy is to carve out a 5 percent market share of huge categories, such as the $5.1 billion hair care market. P&G leads that area with a more than a 30 percent share.

“We are too small to concern ourselves with capturing the major portion of the market share of any of our product categories,” Edell said.

Still, Edell doesn’t consider CCA a niche marketer.

“No product in the world has universal appeal, so what really constitutes a niche brand?” he noted. According to Edell, CCA uncovers new products primarily by internal development, but also when entrepreneurs bring new ideas to the firm.

Unlike P&G or Revlon, CCA doesn’t manufacture its own beauty products.

“We don’t manufacture a thing,” said Edell. “We put our efforts into marketing.”

Some in the financial community view that as a plus for CCA.

“The use of contractors has eliminated the need for manufacturing facilities and gives the company the flexibility to quickly shift its product mix,” said analyst Jerry Levine, who authored a report on CCA for the New York-based financial house Commonwealth Associates.

According to Edell, it is the firm’s flexibility that led it to the launch of its newest and potentially biggest product to date, Triplex.

When a dentist approached CCA with a patented toothpaste that combined baking soda, peroxide and fluoride in one tube for the first time, the company was able to immediately secure a worldwide licensing agreement to market and distribute it.

Competitors such as Chesebrough-Pond’s Mentadent have similar formulas, but CCA is the first to be able to package all three ingredients in one tube without the ingredients interacting, Edell said.

That is important, retailers added, because Mentadent is sold in a large container, with separate chambers for the ingredients. The product takes up excessive shelf space.

Launched last November and supported with a TV campaign that kicked off in March, Triplex is already a top mover in the tooth care category, according to a spokesman for Walgreens.

Al Klein, an analyst for Hampshire Securities Corp., New York, predicted that the item will grab at least a 1 percent share of the $1.5 billion toothpaste market, or $15 million.

Currently, CCA’s largest brand is the Wash ‘n Curl line. Towne-Oller, a New York firm that tracks product movement, ranks two Wash ‘n Curl stockkeeping units in its list of the top 10 shampoos.

Last year, CCA extended Wash ‘n Curl to include Wash ‘n Tint, a shampoo that adds temporary color highlights, and Wash ‘n Straight, a formula created to prevent relaxed hair from reverting to curls.

This summer, a moisture-retaining formula called Lock ‘n Moisture will be launched.

In addition, the company has at least 10 to 12 new products in the works at all times, Edell said, noting that one item scheduled to be launched this year is Quik Fixe, a patented “sponge-like” pad that can be attached to a styling brush.

Tinted makeup will also be added to the Sudden Change assortment this year, while Nutra Nail will be extended to include a range of new color polishes.

While product innovation is essential to CCA’s strategy, retailers say another key ingredient is the company’s entertaining TV spots, which often take a lighthearted approach to problems like smeared nail polish.

Industry analysts estimated that CCA spent about $10 million to $12 million last year on advertising.

“We’ve seen what can happen when you invest in TV time with the success of Sudden Change,” said Carol Allman, group director for Eckerd Drug.

The TV spot for Wash ‘n Curl reportedly helped the line register sales of $3.5 million in its first 45 days on the market.

A commercial for Permathene, a small hair item marketed by CCA, was tested for one week in Indianapolis, and the spot boosted product movement that week in one drugstore chain from 42 pieces to 141.

The company is also willing to take gambles on the TV time it buys. For example, when ABC first aired “NYPD Blue,” CCA grabbed time spots that few national advertisers wanted because of the controversy surrounding the show. Now that the show is a hit, Edell said the risk was a smart move.

While advertising builds demand, the uniqueness of the items bolsters gross margins and average cash register rings, retailers noted.

Triplex, for example, carries a $5.99 suggested retail price, compared with $2 or under for most toothpastes.

Retailers reported that customers aren’t as price sensitive when it comes to the unique CCA items and, as a result, they can achieve gross margins in the 40 to 50 percent range on many of them.

Typical averages for other mass health and beauty aids are in the 20 to 30 percent range.

Many retailers credited Edell’s extensive beauty background for making CCA’s formulas click. Before forming CCA in 1983, Edell was executive director and officer of Hazel Bishop and Lanolin Plus.

His executive team at CCA has grown along with sales. To fill a regional sales manager post, he recently tapped David Kronrad, formerly director of trade relations for Chain Drug Marketing Associates.

Kronrad’s experience as coordinator of CDMA’s Cosmetics Buyers Forum has given him extensive contacts with mass market retailers across the country.

While CCA is coming off a banner year, Edell said there is much more room for growth and innovative products in the mass market. Although he admitted his lines must vie with the growing popularity of home shopping, he doesn’t feel that is the true threat to the market.

“Retailers have to wake up and worry about the consumer. They need to educate clerks because today’s customer is confused,” he said.

He also said he hopes to see beauty marketers bring back celebrities who can make cash registers sing.

“You know what is wrong with the beauty business? We haven’t had an idol to look like since Farrah Fawcett. If we could bring that concept back, we’d build sales,” he concluded.

The second annual HBA Global Expo will be held at New York’s Jacob K. Javits Convention Center June 7-9. The Expo is a worldwide sourcing exhibition serving the cosmetics, fragrance, toiletry and nonprescription drug industries.

In addition to the exhibit portion of the show, two major symposiums will be held this year. The first, to be presented at the New York Hilton Hotel, is called “The New Demographics: Marketing Into the 21st Century.” It will be moderated by Elizabeth Jerrett, president and ceo of Posner Laboratories.

The other symposium, called “New Frontiers in Skin Care,” will be moderated by Dr. Albert Kligman, a skin expert and emeritus professor of dermatology at the University of Pennsylvania School of Medicine.

The Expo will include 28 smaller presentations in addition to these two seminars. An estimated 10,000 beauty executives are expected.