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NACDS Cautious on Second Half

Much of the industry’s success hinges on consumers’ unrelenting interest in nail-care products, coupled with retailers’ ability to achieve sales goals.

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PALM BEACH, Fla. — With customers returning to mass-market cosmetics departments with open wallets, retailers at the 80th edition of National Association of Chain Drug Stores Annual Meeting charged beauty companies to bring them fresh and relevant items. And, many want assortments customized for their own stores to differentiate them from the competition.

Color cosmetics sales in the mass market are up a healthy 5.4 percent for the first quarter, ended March 30, according to Nielsen data. The catalyst is the nail category, with gains in the high-double digits across some brands.

However, just as clouds threatened to drive poolside gatherings of high-level execs inside at The Breakers hotel last week, there was fear economic uncertainty could dampen results for the second half of the year. Much of the industry’s success hinges on consumers’ unrelenting interest in nail-care products, coupled with retailers’ ability to achieve sales goals.

To drive that growth, the 60-plus retail companies that attended the meeting — ranging from Wal-Mart to Ulta — asked the 20 beauty companies present for innovation, support of loyalty programs and items that build basket transactions.

Nails were ubiquitous at the event, including at Revlon’s opening reception, hosted by brand ambassador Olivia Wilde, where partygoers were treated to nail-art application, and at the Wet ‘n’ Wild’s suite at The Breakers, where an excited — and pregnant — Fergie showed off favorite shades from her CenterStage Collection from Wet ‘n’ Wild.

“This is one of my favorite lipstick shades,” said Fergie, grabbing a pink shade called V.I.Pink, which donates a portion of sales to amfAR. “This is also a great item,” she added, pointing her slick polished purple-and-gold talons to her eye primer.

The type of buzz Fergie has delivered to Wet ‘n’ Wild is what top executives said they hope to see across all beauty brands. Bill George, president and chief operating officer of Markwins Beauty, the parent company of Wet ‘n’ Wild, said Fergie was tapped after market research identified her as a celebrity that would resonate with beauty consumers. The partnership has been fortuitous, with Wet ‘n’ Wild volume chalking up more than two years of double-digit growth.

Some retailers worry the nail business will have a challenge matching gains accrued in the last year, but suppliers said the category is here to stay and won’t fizzle out, as it did after the Chanel Vamp craze.

Retailers who stopped by Sinful said the company showed that the nail business is on fire. To feed demand for shiny, gel-like nail colors, SinfulColors is adding SinfulShine Gel Polish in 32 shades at Walgreens. The company is transitioning to a new name, called Global Value Brands, to bring Pure Ice and Sinful under one umbrella.

Manufacturers insist the gel technology is still in its infancy. Sources at the meeting said more launches are in the pipeline, including an entry from Essie. Their only fear is an influx of inferior products that could tarnish the experience.

Staying on top of technology and educating women about how to use gels properly to remove any “barriers to use” is the message from Red Carpet Manicure. The company believes gel polish could eventually hit 50 percent of sales, especially since gels are now 55 percent of salon business. Red Carpet also is adding two treatment products to address damage, one is LED-cured.

The healthy state of at-home gels was echoed at Pacific World, makers of SensatioNail. “Nail polish is still driving cosmetics and gels are helping drive nail,” said Joel Carden, executive vice president at Pacific World, who noted gels are 8 percent of nail polish sales, on a path to hit 10 percent by yearend.

Harvey Alstodt, president of MBA Beauty Inc., however, thinks there is a portion of women looking for more natural options. To that end, he’s offering WaterWorks, a water-based nail color. That’s one of several innovative items he showed at the meeting, along with Tweets, a tween nail color carried by Wal-Mart and New York’s upscale Zitomer, and a treatment assortment called Dr. Marvey. “I don’t want to be a ‘me too’ company,” said Alstodt.

No matter what the nail product, retailers hope the frenzy continues since most have allocated major real estate to nail. CVS Pharmacy has more than 2,000 Nail HQ departments, Rite Aid has a large nail area and Wal-Mart’s new planogram features a huge commitment to nails, including treatment, gels and color.

The desire to offer something different was a mantra. Target will test NYX in 100 doors, as well as “brand agnostic” beauty advisors in 150 doors. Attendees identified NYX as an example of a beauty company with out-of-the-box ideas, such as an eyeliner called The Curve in a creative elliptical shape that makes it easier to apply than traditional pencils.

Offering value while also encouraging shoppers to trade up to higher price points or multiple items was a theme.

First-time annual meeting attendee E.l.f. Cosmetics showed how its breadth of assortment offers more than just “one size fits all,” said Shawn Haynes, the brand’s vice president of sales. With its traditional Essentials ($2 and under), E.l.f. encourages shoppers to place multiple items in their basket. It also works to trade up shoppers with its Studio collection (priced at $6 a product), which is growing in chains such as Walgreens.

With much of the action in value pricing, Physicians Formula focused on its unique positioning. Now owned by Markwins, Physicians Formula is the “fastest-growing premium makeup” in mass, according to chief executive officer Ingrid Jackel, who said teaming up with Markwins has been a good fit since its major brand, Wet ‘n’ Wild, is at the opposite end of the price spectrum.

The company also hammered home its “healthy” brand characteristics, which Jackel said hit a sweet spot with consumers. Physicians’ BB assortment of a cream, powder and concealer has delivered “incremental” volume and has not cannibalized from existing items in Physicians’ lineup, Jackel said. “We recently launched in France and it has been a very good experience because it encouraged us to get back to our roots and realize who we are,” she said.

As retailers look for their own fit in the market, they are calling on suppliers to give them exclusives, be it products, displays or promotions. As an example, Chris McClain, president of Advanced Beauty Labs, said the company’s Bodycology line has 16 scents, but that not all of them are in all retailers. “We’re able to segment and target store clusters,” he said.

In his presentation to suppliers on how to sell dollar stores, Family Dollar president Mike Bloom discussed the need for products customized to the value proposition at his growing chain.

The desire for customization stems from better use of consumer data gleaned through loyalty programs, said Wendy Liebmann, founder and ceo of WSL Strategic Retail.

“Prior to now, retailers never knew beyond the transaction what the consumer was doing. Now they know. It’s about what the consumer is buying — and what else they’re buying,” she said. In meetings with suppliers, Walgreens talked up its growing loyalty program. CVS’ program is already well established and has a powerful beauty following.

This year’s meeting attracted high-level speakers and entertainment, ranging from Pat Benatar and Michael McDonald at NACDS events, and Nicole Scherzinger and Train at corporate brand functions. Jody Pinson, the new vice president, merchandising of beauty for Wal-Mart, praised the efficiency of seeing so many beauty suppliers in just four days.

The meeting was a final opportunity for NACDS to tout its upcoming Total Store Expo, which melds Marketplace, Logistics and Pharmacy into one huge show. “We are definitely supporting it and NACDS,” said Pacific World’s Carden. The meeting kicks off in Las Vegas on Aug. 10.

Heard at NACDS Annual…

• Appliances Buzzing: Borrowing a page from Clarisonic and using its appliance knowledge, Conair is bringing out True Glow, a sonic skin-care tool priced under $100. Harvey Alstodt, president of MBA Beauty Inc., is distributing the skin-care device Tanda, which targets discoloration and fine lines. Retailers agreed consumers are ready to buy these appliances at mass stores.

• Yarnell Returns to Beauty: Lisa Yarnell is back in the business and attended the meeting on behalf of Continental Consumer Products, makers of Salon Grafix, which has repackaged and is primed for new launches.

• Fragrance Redux: With color rebounding, retailers hope fragrance is next. Joel Ronkin, executive vice president and general manager in North America for Elizabeth Arden Inc., said almost every major retailer is making huge strides to adopt open-sell environments and to add testers. “Consumers are returning to the category,” he said, adding prestige is already up nicely.

• P&G Innovation Studio: Once again, the Procter & Gamble Co. offered a respite from the sun and work in its studio with free shaves for men, makeovers for women and reflexology for all. The company also showed its health and beauty innovations, including Olay Fresh Effects and Cover Girl Clump Crusher mascara, which one retailer deemed the fastest-selling item in the store.

• Gavel Exchange: Outgoing NACDS chairman Greg Wasson, president and chief executive officer of Walgreen Co., handed over the gavel to Robert J. Narveson, president and ceo of Thrifty White Pharmacy.

• Olivia Wilde Gets Excited: Revlon ambassador Olivia Wilde admitted it is “surreal” when she sees her image in the drugstore and said even as a little girl she loved going to drugstores and playing with makeup. “It is an honor to catch a glimpse of my mug in your stores,” she said.

 

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