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PALM BEACH, Fla. — With companies getting their bottom lines in shape, mass retailers and manufacturers came to the National Association of Chain Drug Stores’ annual meeting here focused on building top-line sales.
This story first appeared in the April 30, 2010 issue of WWD. Subscribe Today.
“You’ll see more retailers looking to build sales now that shoppers are back in the stores,” said Joel Ronkin, executive vice president, general manager, North American Fragrances for Elizabeth Arden.
The mood was bright and sunny (despite one day of rain), a positive contrast to the post-Madoff gloom that settled over Palm Beach last year.
“I don’t think there is necessarily optimism that is going too far,” said Candace Corlett, president of WSL Strategic Retail. “However, there is an absence of panic; a calm. People feel they are on top of their game. They have accepted the reality that shoppers are not coming back to the glory days, but that we’ve survived this recession and we know how to sell to a shopper who has become more price sensitive.” Her company’s research indicates that 80 percent of those polled don’t want to go back to their old ways of spending.
NACDS president and chief executive officer Steven C. Anderson agreed in his opening speech that a consistent message emerged at the meeting. “Though you differentiate in the marketplace, improving lives emerges as the common value you offer to the public,” he said. “Collectively, your companies’ competition to deliver value is creating a rebirth. Call it a health and wellness renaissance, with innovations focused on patients and consumers.”
That rebirth is taking several forms in beauty, including an upgrade of the environment, more premium products and more value for the dollar. While there is still a focus on optimizing stockkeeping units, those attending the four-day event at The Breakers Hotel said some items and lines trimmed from the assortment are being looked at again. Wal-Mart has admitted to adding back some eliminated sku’s, attendees said, and some beauty brands that went under the knife last year hope to find space back on cosmetics walls.
Buyers and sellers agreed that putting a focus on sku reduction last year helped shore up bottom lines. Ido Leffler, chairman of Yes To Inc., said optimization pushed his company, “to be more clever because there wasn’t room for mediocrity.”
Bill George, chief operations officer for Markwins International, said his firm’s efforts to boost its productivity through new planograms and item slashing have resulted in “extremely encouraging results.”
Attendees said the beauty category is ripe for opportunities to increase basket size and attract shoppers on the hunt for value.
“It is a new consumer for 2010. They are more savvy and aware,” said Leffler. Arden’s Ronkin noted there is a huge opportunity in prestige fragrances, where 50 percent of shoppers still don’t know mass chains carry many of the same brands as department stores. One industry consultant said third-party consultants are being tapped to help generate more traffic in the fragrance aisle and to create in-store customer engagement projects via “themed-type” marketing projects.
“A lot of buzz about manufacturers wanting to expand categories or pick up new businesses altogether, such as more skin care, men’s products and nail was prominent,” said the consultant, adding that Maybelline was eying taking on L’Oréal’s recent buy of Essie Cosmetics.
The battle for department store shoppers trading down has encouraged several retailers to polish up their beauty offering. Many think strong competition heating up between Walgreen Co., with its purchase of Duane Reade, and CVS will only further elevate beauty’s position. Those at the meeting applauded Walgreens for adopting the Look Boutique model, which will be integrated into about a half dozen Chicago-area stores in the near term. “Walgreens was already working on some things, but it should be smart and use the best of Look [Boutique], too,” said industry consultant Allan Mottus.
In meetings, Duane Reade’s senior vice president, chief merchandising officer, Joe Magnacca joined the Walgreens force, a move that shows the corporate unity, suppliers said. Big chains’ efforts to brush up their beauty image is filtering to other retailers, too. Retailers, including Ron Lalla of Rexall, said redefining beauty in the drugstore remains a focus and that his company is working on a new prototype, a store that will feature a bigger skin care space.
WSL’s Corlett agreed both sides of the buying equation are getting smarter about reaching consumers, and she praised the gift cards retailers gave out as part of promotions around holidays. “That way the woman thought she was getting something other than just a price off,” she said. Further unique avenues to reach consumers are being applied by chains. For example, Bill Baxley, senior vice president of merchandise and marketing for Kerr Drug Inc., discussed his chain’s clever coupon application for loyal customers, which allows them to get coupons via cell phones.
Ingrid Jackel, ceo of Physicians Formula, proudly showed off Wal-Mart’s current beauty advertisement in women’s magazines, which prominently features Physicians, and cited the ad as a good example of the new ways to reach shoppers.
The entire nature of the beauty business could be changed as suppliers try to wean customers off buy-one, get-one free deals. A move that predicted retailers’ shift toward top-line focus was Maybelline’s departure from BOGOs this year. So far, the decision has proven to be a wise choice, as sales have not been affected by the move, said Steve Lutz, senior vice president of sales for Maybelline New York. For the year-to-date period ended March 21, Lutz said Maybelline New York’s business is up 6.5 percent and business at CVS is up 2.6 percent. “This is a big turnaround for CVS,” said Lutz, adding that numbers exclude Wal-Mart.
David Greenberg, president of Maybelline New York-Garnier, said Maybelline’s new promotional strategy “was a leap of faith that brought more margin and more sales to stores.”
Procter & Gamble’s brand Olay aims to grow top-line sales this year with a consumer driven campaign behind Pro-X. Joe Arcuri, vice president, North America Female Beauty, said the brand, which was the leading new skin care item launched in 2009, launched a 28-minute infomercial Thursday. The informational ad looks to drive trial of Pro-X, which Arcuri acknowledged is “low,” but he added that once consumers use it, “repeat is fantastic.” The infomercial, he said, “will help all channels because it raises awareness of trial. It provides retailers with a trade-up opportunity and helps grow the category and dollars.”
More creative marketing to attract shoppers was evident at the gathering. Burt’s Bees is celebrating its 40th anniversary this year, and the firm, despite being owned by multinational firm Clorox, continues to drive guerilla marketing techniques to grow awareness. Its recent Times Square effort involved toothpaste sampling and smoothie giveaways, drinks that were powered (and blended) by cyclists, according to Burt’s chief executive officer, John Replogle. “Our story is that Burt’s Bees is a master growth brand; it’s not niche anymore,” said Replogle, adding Burt’s has an 87 percent brand awareness and is more competitive to Aveeno these days than a smaller, natural firm. “We have graduated from just being considered a natural brand.” At Annual, Burt’s was presenting its 4-foot in-line set and talking up its little-known branded boutique business, which boasts 36 stores in Asia. Replogle said Burt’s is exploring a showroom boutique concept in the U.S.
At Revlon, a return to glamour at its opening night party ushered in the likes of spokesmodels Jessica Biel and Elaine Irwin Mellencamp. Alan Ennis, Revlon’s president and ceo, said Annual continues to be “a good opportunity, in a short space of time, to listen to [retailers’] latest thinking and to reinforce our strategy and build on opportunities for profitable growth.”
Men’s products are also helping build top-line volume.
Beiersdorf’s vice president of marketing, Nicolas Maurer, said competition in the men’s arena has helped the body wash category, as it continues to serve as an entry point for men into beauty, with hopes they will move up to face care. Maurer echoed fellow manufacturers in the belief that growing the top line is prescient for retailers. He cited CVS’s Mike Bloom, who spoke during a presentation at Annual, regarding the balance between store brands and national brands, and how each serves a purpose. At this time and for this climate, Bloom, CVS’ senior vice president of merchandising and supply chain, said to create excitement at retail and to grow margin, the burden lies with national brands. For Nivea’s part, Maurer said last year the brand increased household penetration by 50 percent and grew share in all its brands, including Eucerin, Nivea and Aquaphor. “We see private label brands growing (in some beauty categories), but in terms of the recession most beauty consumers don’t experiment. When the category is driven by aspiration then the store brands are even more challenged.”
Value also is driving more brands to dollar stores, such as Dollar General and Family Dollar. Several beauty brands, including L’Oréal, Maybelline and now Wet ‘n’ Wild, are selling to the value segment. Brands said they “aren’t ashamed” to sell to dollar stores and that many are starting to look more like drugstores without pharmacies, thanks to the influx of former chain drugstore executives into the industry. Beauty companies such as Parfums de Couer stressed the value offered by their firm’s alternative designer fragrances, as well as its Body Fantasies, which president James V. Stammer said bring specialty store-style scents at value prices.
Serving as a getaway between meetings was P&G’s Beauty & Grooming Zone, perched atop the Ocean Terrace.
There, about a dozen or more makeup artists, stylists and P&G staff buzzed about to groom and beautify the hundreds of guests visiting the Zone, which this year included both men’s and women’s brands. The enclosed space offered a shopping and service opportunity, including haircuts, styling, shave and makeup applications by celebrity makeup artist Molly Stern. Brands — such as Gillette, Braun and Old Spice on the men’s side, and Pantene, Frédéric Fekkai, Clairol, Venus, Secret, Olay and CoverGirl on the women’s side — were merchandised on shelves for guests to pluck and drop into shopping bags. The powerhouse unleashed its beauty muscle Sunday evening during a near four-hour event that kicked off with a cocktail party. There, retailers mingled with Pantene brand ambassador and host of “What Not To Wear” Stacy London; uber hair stylist Frederic Fekkai and members of his Palm Beach salon staff, as well as Olympic Winter Games competitors. Dinner was preceded by a sentimental salute to the Olympians’ moms, a tie-in to P&G’s “Thank You, Mom” Olympic Winter Games campaign. London then took the stage along with beauty and lifestyle expert Rebekah George to introduce beauty looks representing Pantene’s new hair care line up. A performance by Colbie Caillat capped off the night.