NACDS: Against the Current

Beauty took a licking for the first quarter of 2003, but retailers and suppliers gathered for the NACDS annual meeting are digging in for a long fight.

PALM BEACH — Beauty has taken a licking for the first quarter of 2003, but the 2,200 retailers and suppliers gathered here for the National Association of Chain Drug Stores Annual Meeting are digging in for a long fight.

This story first appeared in the May 2, 2003 issue of WWD.  Subscribe Today.

Front-of-store sales decreases, such as cosmetics’ first-quarter 6 percent drop, coupled with general economic uncertainty, drove a ‘get down to business’ mentality at the conference.

As one retailer put it, “opportunities, not issues, is what is important.”

With thunder showers driving conference goers off the beaches and golf course and back indoors Saturday, meetings got under way earlier and more vigorously than usual, with the plush chairs and banquettes of The Breakers public areas taken over by executives for meeting space.

The five-day event concluded Wednesday and included speeches by Lewis Drug president Mark Griffin, the outgoing NACDS chairman; The Washington Post’s Bob Woodward; Dr. Ben Carson, a pediatric neurosurgeon from Johns Hopkins, and NACDS president Craig Fuller, who commented that attendance at this year’s meeting was up by about 200 attendees. Rite Aid chief executive Mary Sammons accepted the gavel as the organization’s new chairman, the first woman to occupy the post. Hopes are that Sammons will encourage retailers to make stores more appealing to women.

In her acceptance speech, Sammons, noted that the industry could be taking better advantage of its front-end. “While our business is driven mainly by pharmacy, we also have the distinct opportunity to capitalize on the dynamic between pharmacy and the front-end to drive sales throughout the store. About six of every 10 people who walk into a traditional chain drug store pick up a prescription and leave without much else.”

As the show progressed and solutions were hammered out, some shining examples of better days ahead began to emerge.

Despite its fragile financial health, Revlon’s retail sales bucked the downward trend with an uptick of 6 percent for the first quarter, according to ACNielsen. And the enthusiasm of Revlon execs was palpable at its annual party Friday at Mar-A-Lago, which serves as the unofficial start of the conference for many. Longtime Revlon model Halle Berry, who has stuck by the brand through its ups and downs, said, “I love being a part of Revlon. Even through all the regimes, I am still there embracing everybody.” (Revlon’s management has turned over three times in the last five years.) “I say with Oscar in hand that I really wear Revlon products,” Berry added.

The evening’s entertainment, Wynonna Judd, walked right out into the audience to engage party goers, even if many didn’t know the words to her songs. President and ceo Jack Stahl also worked the crowd, as did Paul Murphy, Revlon’s new executive vice president of North America Sales.

“We are very happy with our Revlon business and we plan to add two feet of space,” said Kathy Steirly, vice president of beauty merchandising for Eckerd Drug. Jon Rudden, vice president of merchandising for Happy Harry’s concurred: “More than ever, we need a healthy Revlon.”

Carol Hamilton, president of L’Oréal, said the company’s message to retailers is, “We are absolutely determined to create growth in the beauty category.”

The brand has given retailers a reason to cheer with its hair care innovations such as L’Oréal’s Couleur Experte, the at-home dual-process hair coloring kit — drugstores are realizing $21 rings and products are flying off of shelves.

This year, the company is banking on Cashmere Perfect, a new foundation, to lure more shoppers to the category. Some L’Oréal efforts don’t just involve products. The company is working on retail programs to streamline logistics and merchandising. “We’re committed to making it simple,” said Hamilton.

Retailers said that the loss of Olay cosmetics contributed to the weak cosmetics sales, along with teen brands, which have hit a plateau.

Michael McNamara, president of Neutrogena Global, said that its cosmetics line is here for the long haul. And after carefully nurturing the fundamentals of the business since its 1999 launch, it is ready this year to gear up with more promotional products.

Meanwhile, Del Laboratories celebrated its spring launch of its Sally Hansen Healing Beauty color line, with a party decked out in red, white and blue. As a party favor, executives lined up for photos which were superimposed on the cover of famous magazines. The company also gave free makeovers and samples of the line at The Breakers Walter’s Salon.

Procter & Gamble, which earlier this week upped its bid for the Wella business, continued an 11-year tradition with makeovers using its Cover Girl and Max Factor brands in the resort’s Gulf Stream room, where Eckerd’s Kathy Steirly and her sister got touch-ups prior to P&G’s annual dinner. P&G also put a bit of glamour into its event with its new Crest model, Vanessa Williams, who smiled through photos with retailers.

Product innovation has driven growth at Physicians Formula. The company is the fastest-growing brand for several major chains. Not surprisingly, the company is hoping to grow its space in both drugstore and mass merchant accounts. Physicians Formula hopes to entice retailers to give it room to expand, saying its consumers ring up higher basket sales than other cosmetics brands.

Although some smaller beauty firms are challenged, two niche firms merged to be even more viable. Beauty Beat was forged between former Sassy Doo president Dino Valentino and Michael Eckert of Worldwide Cosmetics. The company markets several leading items such as Bye Bye Blemish, Hotsie Totsie, Marbella and Savina.

Retailers also kept Markwins on its toes by asking how the company has digested its purchase of AM Cosmetics. Bill George, Markwins senior vice president, said that despite some initial shipment woes, products are now flowing and retailers should be in-stock. A production facility in Brooklyn is still operational to keep up with the shipment needs. “Our sales are up and we’re especially excited with a few new items such as Glossy Gloss and Duo-Eye shadow pans,” said George.

Skin care was on the lips of nearly everyone at the show. Countless new skin care items were unveiled and retailers clamored to learn more about upscale skin care tests.

Brooks Pharmacy’s Michel Coutu proved that even regional chains could set the industry spinning. Last fall Brooks created an upscale skin care department selling Vichy and Avene in three stores and is now expanding the concept to three more by this summer. One of the units will boast a completely revamped beauty look. “Drugstores need to do something to differentiate themselves. They have to be viewed as something by consumers and not just a 7-11,” Coutu said. He believes American women are getting the skin care message and are ready to take on regimens similar to Europeans.

CVS also has unveiled trial skin treatment departments in three stores and according to Chris Bodine, the chain’s executive vice president, merchandising and marketing, they are “doing well.” The concept, he confirmed, will be expanded.

Sammons of Rite Aid agreed that chains need to expand their store visions. While Rite Aid does not have a like concept, she commented, “we are looking into doing some things of our own.” Allan Levin, ceo of Happy Harry’s, said his chain is not right for such a revamped department, but would consider importing a line as part of a regional consortium the company is a member of.

Some skin care news is quite unorthodox for the category, such as Olay’s new vitamins from Pharmavite. While the concept follows the belief that women want to be beautiful inside and outside, one vitamin veteran is skeptical the line will succeed. “I’ve not seen this concept ever work,” he said, citing Revlon’s failed vitamin attempt in the late Nineties. Unless Procter & Gamble is cross marketing the Olay vitamins in both the cosmetics and vitamin departments of stores, “the line is not going to get that visibility,” the executive said.

Other skin care initiatives were more conventional, such as those by Beiersdorf’s Nivea, which is playing up the Nivea For Men brand with a new Fresh Cooling Balm After Shave and a Revitalizing Q10 Lotion. Nivea also will expand its night treatment line with Restorative Night Hand Creme, which launches in July.

Unilever hopes to rock the skin care market with its Dove Essential Nutrients, slated to hit stores in July. And retailer private label is staying in the act as Eckerd unveils a spa line called Naturally Mira, an expansion of its cosmetics brand Mira. The line, which comes complete with salts, gel and lotion, is entering select stores now and will be fully shipped by the end of summer.

Health was also top of mind as Drugstore.com announced a new “department” on its Web site called Healthy Woman. The new area is the online retailer’s solution to helping women navigate toward products aimed at improving health, such as vitamins, antioxidant and antiaging products and natural skin care.

And the hair care contest is hotter than ever. While many retailers are thrilled with the recent innovations coming from beauty, concerns still abound.

“There’s a lot of cannibilization going on,” said Alberto-Culver’s Jim Marino. “There have been two major launches this year [Dove and Fructis] and most retailers placed an inordinate amount of effort on them and a lot of promotional dollars on them. But 12-week numbers from IRI show that hair care sales are down 1.2 percent.”

Karen Fondu, general manager for Maybelline/Garnier, is pleased that the recent Garnier Fructis hair care launch has garnered so much excitement, and that the Garnier brand, which also offers hair color, is poised for future growth. “We’ve spent $240 million on the Garnier brand since 1999 to position it and connect it to the consumer. I still believe Garnier will be a major beauty care company,” she said. The brand overall, Fondu added, now generates $94 million in annual sales, up from $30 million in annual sales in 1999, excluding Wal-Mart.

Though promotions from John Frieda, Fructis and Dove will surely drive those brands’ sales in the third and fourth quarters, the discontinuation of Vidal Sassoon and the underperformance of Salon Selectives, Physique and Thermasilk won’t help the category either. Jerry Dowell, a leading industry consultant, said that the retail chains he consults — CVS, Rite Aid and Eckerd — are disappointed that the last six months of 2003 will be absent of any new significant hair care launches.

“I don’t know if I remember a time that nothing new was coming from Unilever, L’Oréal, Procter & Gamble and Clairol. That’s a strong theme,” remarked Dowell.

Sun care, another critical element of skin care, was making waves at Annual. The Sun Safety Alliance announced last year at NACDS that it is now moving into a merchandising phase that will help drive shoppers to certain stores and to products that offer sun protection.

Otherwise, new merchandising concepts and increased cooperation between retailers and manufacturers were steady topics.

Johnson & Johnson’s Paul Nunneri, vice president of customer development, focused on how drugstore chains must build shopper loyalty and improve the shopping experience.

Soft Sheen/Carson is testing a new ethnic merchandising display — aimed to improve the shopping experience as well as the category’s sometimes lackluster image — in as many as 90 stores this year. Company president Candace Matthews said the test will reveal how to merchandise products, where educational vehicles should be placed and how much space each set should dedicate to women versus men’s products. Matthews expects the test to continue for the next 12 to 18 months before becoming permanent fixtures.

Retailers said Revlon is working on a fixture called Revlon Express that will allow retailers such as supermarkets or smaller drugstores a better opportunity to present the Revlon story.

Alberto-Culver’s Howard Bernick is introducing many beauty retailing veterans to the manufacturing side of the business by offering them trips to visit the company’s headquarters in Melrose Park, Ill. His goal is to get people walking through the company’s adjacent manufacturing and filling plant. “It’s amazing how many customers haven’t ever seen a lab.”