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NEW YORK — Chain drugstore retailers and suppliers who are headed to the National Association of Chain Drug Stores Annual Meeting believe the tide is finally turning.
This story first appeared in the April 23, 2010 issue of WWD. Subscribe Today.
After two years of facing a tough economic climate, executives attending the meeting, which kicks off this weekend at The Breakers hotel in Palm Beach, Fla., said they are beginning to see consumers loosen purse strings and spend again. Drugstore chains and mass merchants have spent a difficult year fine-tuning their assortment and rolling out new store formats to retain loyal customers and attract shoppers from other channels, including department stores.
Attendance at NACDS also reflects the industry’s willingness to get down to business, with the number of retail companies increasing 13 percent to 52 firms, versus last year. More than 290 manufacturers are slated to be on hand.
Cosmetics sales are beginning to rebound, with volume for the 52-week period ended March 30 up 2.6 percent to $4.28 billion, according to data from Nielsen. Health and beauty care sales, overall, ticked up 0.3 percent to $62 billion. Even women’s fragrance volume is on the rise, increasing 0.8 percent. Sales of men’s fragrance still remains slightly down.
Inventory reductions at retail, which were particularly aggressive last year, are still occurring, but at a less robust rate. And in some cases, retailers have begun to replace items that they cut out of the assortment last year based on shopper feedback. One vendor reported leaner inventories may have resulted in more frequent shopping trips, but as a result, market basket sizes have declined per trip. With overall sales at the front of the store climbing, the mood at the meeting is expected to be brighter than the more sober tone it held last year.
“The highly anticipated 2010 NACDS Annual Meeting reflects the strength of our industry and our members,” said NACDS president and chief executive officer Steven C. Anderson. “We have exceeded last year’s attendance of retailers and suppliers, and registration is still open. A review of this year’s attendees reveals key leaders who are trendsetters within the industry.”
The positive attitude is expected to waft through the cabanas at The Breakers as one-on-one meetings commence Saturday.
“[Last year] was a year of back to basics and reevaluating the essential needs of the consumer, and 2010 is about fresh opportunity and connecting with the new mind-set of the U.S. consumer post-2009,” said Ido Leffler, co-founder and “chief carrot lover” at Yes To Inc. “The retailers are looking at brands that they can truly partner with to deliver growth, value and buzz while providing their consumer with a tangible positive experience.”
Shawn Haynes, senior vice president of Markwins Beauty Products, said he expects the top-to-top meetings to focus on maximizing stockkeeping productivity, distribution opportunities and cutting-edge ways to reach consumers. Markwins has been aggressive in such strategies, including mobile marketing efforts via cell phones.
Innovation, in Coty Beauty’s view, includes products, in-store merchandising tactics and go-to market strategies.
“Last year, most companies were managing for profitability. This year, Coty is managing for growth,” said Mary van Praag, senior vice president of sales for Coty Beauty. The company’s mass color cosmetics business, which consists of Sally Hansen, Rimmel and New York Color, experienced a 12 percent increase, or $34.9 million in 2009, growing six times faster than the category, said David Russell, vice president of sales, cosmetic strategy and customer marketing at Coty Beauty. Year to date, the overall mass cosmetics category has grown 4.1 percent in the food, drug and mass channels, according to data from Information Resources Inc. for the year-to-date period ended March 28. Sales exclude Wal-Mart.
This year, a major effort for Coty Beauty is to merchandise Sally Hansen as a masterbrand at retail, on par with lines such as L’Oréal Paris, Cover Girl and Revlon. “The reality is Sally Hansen is the number-five cosmetics brand [at mass],” said Russell. Sally Hansen, which has a 54.4 percent share in nail color and grew 17 percent versus a year ago, is generally displayed in the nail care set. Its assortment is sometimes splintered among different categories, include cosmetics, nail polish and beauty tools. By creating a bigger statement at retail, the $362 million Sally Hansen aims to move up the ranks to become the number-four mass cosmetics brand within five years, said Russell.
IRI data shows the mass cosmetics category has grown 14.4 percent over the last seven years. It also has undergone many changes, as some brands have departed — namely Max Factor, Jane Cosmetics and Vital Radiance — and others, including Hard Candy, have emerged in the mass market.
Coty also has updated its New York Color brand to better broadcast its Manhattan heritage. For the new logo, solid-color letters have been replaced with images of the city’s skyline, and the outer carton has been simplified. The brand also is moving into international markets, including Germany, the U.K. and France.
Revlon Inc. is making a big splash in cosmetics for the second half, especially in mascara, one of the fastest-growing categories within beauty. Planned for July is Grow Luscious, the mass market’s first mascara and lash enhancer in one.
“Last year, we were quiet in mascara, but then came Double Twist, our first aggressive entry into the category. Grow Luscious is next,” said Donna Baird, vice president of marketing. Jessica Biel will make her TV advertising debut for Grow Luscious in the second half.
Almay is also launching a mascara, Dial-a-Lash, one that allows the user to adjust up to three levels of lash intensity.
Makeup artist Gucci Westman, Revlon’s global artistic director, will launch her first collection, Revlon DayDreamer Collection. The range includes four nail shades, a limited edition eye shadow quad and five shades of Super Lustrous Lipgloss.
Revlon’s first-half launches, such as Photo Ready, have been “doing nicely,” said Baird, adding that PhotoReady is ranked number seven in Nielsen’s top 60 new color cosmetics launches.
Another category top of mind at the NACDS Annual Meeting is sure to be fragrance. Elizabeth Arden Inc., for one, is playing a key role in driving foot traffic in the category.
According to Joel Ronkin, executive vice president and general manager of North America Fragrances for Arden: “For the first time in years, mass retailers are getting behind a number of initiatives for open sell.”
Wal-Mart Stores Inc., for one, has launched its Keeper Program, which packages a fragrance inside a reusable box that’s merchandised within the fragrance planogram. The box is opened by the cashier at point of purchase and then the box is reused to encapsulate another fragrance. The idea is that the consumer does not need a beauty adviser to unlock a glass case in order to get to the scent, but there’s still a security measure in that the box can only be unlocked after the fragrance has been purchased. The Keeper Program can be found in the majority of Wal-Mart’s 3,500 stores.
Arden, which according to IRI data accounts for 37 percent of dollar market share of all fragrances sold at mass, also has been participating in open-sell testing over the past three to six months at drug store chains, including Walgreens and CVS.
Samling program initiatives include testers within fragrance displays, gift-with-purchase for certain scents, as well as running a paid sampling program called Try First. This CVS program packages together12 vials of various Arden scents for $20 and includes a $20 coupon to be used on a future purchase of one of the enclosed scents.
While Arden would not detail the impact such recent ventures have had on sales, historically, open-sell tests have generated 40 to 80 percent sales increases, depending on the retailer.
Ronkin added there are still many opportunities at the retail level to drive current foot traffic toward the fragrance area. Arden, he said, is now working with a consulting firm to reinvent merchandising and fixturing to continue to engage consumers to fragrance.
“We need to help drive awareness. We are not necessarily going after the department store consumer, but the drug store shopper foot traffic that is already there. It can be more inspired,” said Ronkin.
Coty also is working to bolster the mass market fragrance category, where the company has a 35.8 percent dollar market share, according to IRI, by focusing on improving the in-store experience with an open-sell display that segments designer, celebrity and lifestyle scents, said John Burgfechtel, vice president of sales strategy, customer marketing and sales operations. Coty’s celebrity portfolio is teeming with Halle Berry, Faith Hill, Celine Dion and Tim McGraw, to name a few. Its aim is to bolster the lifestyle segment, where Stetson and Jovan live. After coupling Stetson with celebrities, including Tom Brady, Coty is returning to the brand’s roots with a new campaign. “The customer didn’t see Stetson as a celebrity brand,” said van Praag.
Coty has been working to convince retailers to move their fragrance assortments out from behind glass for the last several years, and to date, 3,000 doors have done just that, resulting in average retail sales increases from between 17 and 31 percent, while overall retailer profit has more than doubled, said Burgfechtel.
At NACDS, spokeswoman Chrissy Kopple said there is a buzz of excitement about its various programs, such as Meet the Retailer, which will feature Bryan Pugh of Walgreens Co., Mike Bloom of CVS Pharmacy and Bryan Shirtliff of Rite Aid Corp. “I think we will see exchanges where people are asking, ‘Where do we go from here? Customers have changed the way they shop now. Let’s go forward to successfully meet their needs,’” she said.