NACDS Delivers Innovation to Fuel Growth in Second Half

SAN DIEGO - Retailers were looking for quick-fix ideas to jolt sales during the second half of 2008.

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SAN DIEGO — Retailers were looking for quick-fix ideas to jolt sales during the second half of 2008 — while manufacturers hoped their new launches would fit the bill — as both parties met at the National Association of Chain Drug Stores Marketplace meeting here late last month.

This story first appeared in the July 11, 2008 issue of WWD.  Subscribe Today.

Held from June 28 through July 2, the event drew 4,100 attendees and exhibitors, including 900 retail buyers and nearly 600 exhibiting companies. Many buyers cringed when asked about prospects for the second half of the year. But, trying to be optimistic, they said they have a few tricks up their sleeves. Most said they plan to entice shoppers who are trading down to mass outlets during tough economic times — with the intent of keeping them once times get better.

Sherry Saffert, for example, senior category manager for beauty at CVS, said her chain will add some impulse beauty items for the holiday. Jerry Kuske, executive vice president of merchandising, Rexall Pharma Plus, said he’s trying to hop off the promotional treadmill and instead offer products to layer on sales. Even when consumers are penny-pinching, he said, they’ll opt for a beauty luxury.

“We are not becoming more aggressive promotionally, but instead we are brainstorming [with vendors] to come up with unique ideas,” said Kuske. Direct mail, e-mail and loyalty card initiatives seek to drive consumers into stores. Innovation, he added, continues to drive sales, with products such as Clairol’s Perfect 10 at-home hair color. Kuske is also expecting a new 12-foot natural section to help drive sales in a retail climate he predicted that is “about to be extremely challenging.”

Mass market cosmetics are up 2.3 percent for the 52-week period ended June 14, for drug, food and mass excluding Wal-Mart to $2.78 billion, according to ACNielsen. Fragrances aren’t faring as well. Women’s dropped 4.9 percent to $451 million while men’s scents also tumbled 4.7 percent to $141.8 million, according to the sales tracking firm.

Manufacturers seem to be kicking into overdrive to find new products to stimulate sales. One of the busiest exhibitors was Coty Inc., which was situated next to its recently acquired Del Cosmetics’ booth. Next year, the company plans to integrate into one booth.

On the fragrance side, Coty has big plans for its new Tim McGraw fragrance, as well as Celine Dion’s Inspiration. Although the mass market fragrance business is off, Michael Ferrara, Coty’s senior vice president of marketing, said there is opportunity because of “leakage” from the prestige market. In fact, despite the rough market, Coty’s overall sales are up 10 percent, and the firm has gained 3 percentage points of share in fragrance, which Ferrara feels will only expand with McGraw, Inspiration and the launch of All American Stetson, supported by Tom Brady. “This is a whole new Stetson, it isn’t your dad’s Stetson,” he said.

Also on the horizon for the second half is the February introduction of Kimora from Kimora Lee Simmons, and Halle, a signature scent from Halle Berry in June, which has a very upscale bottle.

“We’ve got the products, the right celebrities. Now our number-one mission is to work on the in-store presentation,” said Ferrara. “We have a window while mass stores attract shoppers in this economy to make an impact so they stay when they have more discretionary income. It’s a critical time to make mass a sanctuary for her.”

On Coty’s cosmetics side, David Russell, vice president strategic and customer marketing, said the company is firmly behind all three cosmetics brands, namely Rimmel, Sally Hansen and NYC, as each reaches very different consumers. He compared the three brands operating simultaneously yet separately to L’Oréal’s different marketing strategies for Lancôme, L’Oréal Paris and Maybelline New York. He added there are plans to leverage technology among the three brands.

Rimmel, for one, is focusing on building its Lasting Finish franchise, which was relaunched in the first half of 2008 with Lasting Finish Lipcolor. “We saw an opportunity to upgrade,” said Russell, adding that Lasting Finish Foundation was launched at the same time.

Rimmel, Russell explained, does not devise tactical launches but instead picks points of interest and drives them. To that end, Rimmel Underground has been assimilated into Rimmel, as focus groups and consumers “did not get why it was different from Rimmel and why it was in two different places in the store,” Russell said. However, some key pieces will remain tagged Rimmel Underground, but they will be merchandised alongside other Rimmel items. “Eventually, we may pull the Rimmel Underground logo” but that remains to be decided, Russell said. He also pledged support for the myriad initiatives Del has in the pipeline. As of July 1, the company was officially merged into one organization with a mixture of both Del and Coty executives. Del’s headquarters in Uniondale, N.Y., are set to close by the beginning of next year. Although retailers were pleased to hear about the plans, they did lament the departure of seasoned veterans from both companies, most notably Coty’s Michaelene Roark, a 37-year veteran of the business.

Physicians Formula kept mum about its new product offerings, and said only that between 50 and 100 items are planned for 2009 across the firm’s franchises, including Organic Wear and Mineral Wear. Ingrid Jackel, Physicians Formula’s chief executive officer, said the new items would “infuse new technology in our core categories, which have been exciting retailers out of their sluggishness.” She added that she’s seeing the market — nervous about the second half and beyond — embrace one of two strategies: Heavy promotions with circulars and increased trade spending to compensate for lackluster traffic and increased product giveaways. “Strong brands will come out of the storm,” said Jackel. “Short-lived strategies like these educate the consumer to always look for these types of deals. Innovation keeps consumers excited.”

Although natural and organic were hot topics in educational sessions, there were fewer than expected natural launches, as a result of the confusion about proving an item’s natural content.

Jane Cosmetics, however, did unveil its new efforts to follow up on the success of BePure minerals with a line called Aquaceuticals. Several chains, such Target and HEB, are expanding natural beauty sets, while as previously mentioned Rexall Canada is adding 12-foot natural sets to its assortment, so the category is poised for growth, suppliers said.

Alain Torcat of Excelsior Beauty is reaching out to stores to help them build special assortments of foreign beauty brands with a natural positioning. He said to expect to see a natural beauty set debut at Sephora Europe in the fall and in Boots stores in December. Torcat’s past projects include developing Walgreens’ European Beauty Collection, which is currently being refined and streamlined to better reflect what American consumers want. To that end, slimming body products will be cut. In the U.S., he is currently working with Meijer on adding a beauty adviser to its more upscale beauty assortment of 17 beauty brands. Torcat is also working with HEB on a beauty adviser for its many shelves of skin care, as well as the development of a masstige natural program.

Natural care manufacturers included Giovanni Organics, which attended Marketplace touting its D:tox System, a line that uses activated charcoal, volcanic ash, acai and goji berry. D:tox includes a purifying body wash, a bar soap, an exfoliating body scrub and a replenishing body lotion. Products will retail for about $9.95 each.

German-brand Lavera also exhibited, showing off its new antiage skin care line, Lavere. There are three ranges targeting three different age groups, those 25 and older, 35 and older and 45 and older. Item prices will range from $60 to $242.

Some chains took advantage of competitors’ lapsed exclusive deals. Yes to Carrots, which had been sold as a drugstore exclusive at Walgreens, was the most talked about beauty booth at the show. When asked what was new, two Rite Aid executives directed a reporter to Yes to Carrots, where visitors were tasting carrot juice and learning of the firm’s new additions, including Yes to Cucumbers, which targets normal to sensitive skin, and Yes to Tomatoes, which is formulated for combination and oily skin. The brand recently entered Duane Reade and Ulta, too.

Lumene, a former CVS exclusive, was also at Marketplace telling its story and planning expansion of its 8-foot sections into more Target and HEB stores. With its roots in Finland, Lumene has some innovative ingredients, as seen in its new Energizing Cocktail, a serum formulated to add radiance with cloudberry and cranberry extract, and Time Freeze, a cooling eye stick. The color portion of the brand, which is sold in CVS stores, is being compressed to focus on skin care.

Last year’s big story, minerals, has died down. Although, there was one new vendor, Deluvia, showing its mineral selection called Demure. The company has had minerals available in specialty stores and hopes to get distribution in mass, especially stores such as CVS and Wal-Mart, the latter of which the firm said is strongly targeted to the upper-middle-class consumer. Deluvia said its products offer retailers a 50 percent margin as opposed to 30 percent, and a Demure minerals starter kit which retails for $50 is now available. The Clearwater, Fla.-based company does not use fillers or parabens in its color mineral formulas and is planning a $2 million ad campaign next year to help promote its products.

Markwins’ senior vice president marketing, Shawn Haynes, described how the company has been slow to roll out Beauty Benefits, a mineral line with skin benefits. But said the effort is paying off as retailers “get” the concept. Direct mail, buy-one-get-one-free offers and mobile text programs are helping drive sales. A one-week regional program with HEB used all three tactics earlier in the year and helped push the brand’s sales up 18 percent, said Haynes. Mervyns and Sears, he added, is completely redoing their respective cosmetics assortment, and are getting into beauty “in a big way.” Value brand Wet ‘n’ Wild, he said, is growing, due to the economy, while Soho branded cosmetics cases will now have removable fashionable pins for spring 2009. The brand is also branching into accessories, such as suntan lotion bags, tote bags and passport carriers.

Other brands showing their wares include Nature’s Therapy’s Hot-flash Emergency Relief cooling gel, which recently released clinical studies showing that of those who tried the product designed to give relief to women suffering from hot flashes, 80 percent saw their hot flash intensity diminish; 51 percent said hot flash frequency had decreased; 94 percent agreed it was important that the product was hormone-free and all natural, and 83 percent said the items was effective.

Milani said that while the first half may have been tough for some, the company experienced increases, which it credited to its Runway Eyes eye shadows. Looking to drive sales in the slumping lip category, Milani is launching Lip Mixer, which has three layers of formulas in one tube: one with reflective pearls, one with shimmer and another with conditioner. Other new lip items include Glitzy Glamour Gloss, Buzz Worthy lip gloss and Pretty Pairs, which includes a mirror and a lipstick and lip gloss in one package. Big excitement at the brand centered around the $7.99 Mineral Mousse Foundation, which dispenses the product via an airless pump.

Hair care didn’t get much buzz at Marketplace, outside of the success retailers noted for Clairol’s Perfect 10 hair color.

ACNielsen tracks hair care up 1.1 percent in sales to $4.45 billion for latest 52 weeks ended June 14, excluding Wal-Mart. Within that is hair color, which is down 0.3 percent, while conditioners are up 3 percent and shampoos are up 0.4 percent.

However, Alberto-Culver Co. has two big launches planned for both its TRESemmé and Nexxus brands in January 2009, but the firm’s Tom Nestor, vice president of U.S. sales, would not elaborate. Nestor did have a slightly more optimistic outlook on hair care, saying that despite the economy he “doesn’t expect spending patterns to change that much” and that vacations, gas purchases and dinners out would feel the pinch. “An extra $4 to $5 for skin or hair care isn’t a big stretch,” he said.

While many of beauty’s small to mid-sized players continue to fuel the new-product pipeline, leading players L’Oréal and Procter & Gamble Co. are the companies everyone looks to to drive innovation — and the companies that stand to take either the biggest hit or gain, depending on how one analyzes the customer, during an economic downturn.

Contacted after the show, Procter & Gamble’s Gina Drosos, president, Global Personal Beauty, said P&G’s beauty business is poised for growth despite higher commodity costs.

“While we have recently announced price increases in some of our products (driven by increasing commodities costs), our top performing mass products still offer great value versus prestige alternatives,” said Drosos. “Really, the costliest mistake a consumer can make is buying something that doesn’t perform.” New launches in the back half include Olay Definity Color Recapture, a tone-enhancing product that offers daily antiaging miniaturization and sheer coverage to even skin tone. Another is CoverGirl Blast Eye Enhancers Shadows in vibrant shades created by P&G’s global creative director, Pat McGrath.

L’Oréal Paris is optimistic for the second half, too. Carol Hamilton, president of L’Oréal Paris, said that “whatever the economy, if you have innovation it sells because women want to try something new.”

Two new L’Oréal items in skin care and three in cosmetics aim to lure consumers into mass. The most potent form of Revitalift’s Antiwrinkle Concentrate is set to launch, called Advanced Revitalift Concentrate Clinical Action, which will be supported by major TV ads.

Under the Age Perfect Pro-Calcium, there is Age Perfect Pro-Calcium Radiance Perfector Sheer Tint Moisturizer, which is said to reduce age spots, provide sheer tint and stop new age spots from forming. The item will be supported by ads featuring L’Oréal spokesperson Diane Keaton. On the cosmetics side L’Oréal is launching the first Infallible Never Fail lip item in a stick, offering more forgiveness and creaminess, Hamilton said. From the Bare Naturale range, there will be a new mascara targeting the woman “who wants everything from a mascara, but who may not use it everyday,” as well as a lip balm, “the fastest-growing segment in the lip category.” The lip balm will offer 10 shades as well as lip balm benefits. HIP will also see a new lip balm, called Jelly Balm.

Maybelline-Garnier’s Karen Fondu, president of the division, concurred that innovation in products and consumer communication “is key to driving a stronger second half” with an emphasis on value and innovation. “Despite heavy pricing activity in the marketplace, we will be offering new consumer values to drive trial…and encourage purchasing of multiple products building the retailer’s market basket.”

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