FDA’s budget may be cut, report says
NEW YORK — Cuts to the Food and Drug Administration could be in the works, according to a published report.
The Hill, a newspaper that covers Capitol Hill, reported Monday that the House Appropriations Committee suggested cutting the FDA’s budget by $285 million in its proposed 2012 spending bill, bringing its total budget for next year to $3.7 billion.
The article noted that a significant portion of the FDA’s budget comes from user fees from drug and medical device companies, but that advocacy groups had fought for increased funding to the agency during the Bush administration after several high-profile food and drug safety scandals.
The Niche Factor
Happy days are here again! Consumer confidence rebounded 1.6 points in April from a dip in March, according to the Consumer Confidence Index, despite the fact that high-gas-price stories are dominating the airwaves. That suggests consumers may be willing to try new things again — in other words, to buy something new — and that is excellent news for niche manufacturers.
Niche is more than a product that appeals to a targeted consumer or a product that satisfies a specific need. Niche usually means a premium position, a unique point of differentiation that represents an up-sell to the usual fare on the shelf. And if consumers are confident, that means they’re ready and willing to try new, niche products — and to spend more in the process.
But while the end user may appear more open to new product trials, the vibe among retailers and suppliers still is one of caution. Nobody’s willing to pull all the stops out given the course of events over the past few years — a more or less industrywide SKU optimization process was implemented a few years back that many, including retailers, acknowledged cut too deep. Now the subsequent course correction that has been occurring over the past 18 months has seen a lot of valuable niche products folded back into the mix.
Still, more SKUs had been cut than were folded back in. According to many suppliers and brokers in the industry, while retailers certainly are receptive to a value-beyond-the-numbers kind of pitch, they still are selective. “For a while there, particularly during the early ‘SKU rationalization’ phase, niche items sometimes got overlooked,” noted Bruce Funk, president of Elias Shaker. “Retailers now are understanding that these [niche] items can often be key to growing category sales, creating new customers and increasing market basket rings.”
So with that thought in mind, Drug Store News tapped a number of executives familiar with the good that best-in-class niche products can bring to the table in search of that elusive niche metric — that mathematical equation that would succinctly quantify the value of a niche brand that may not be meeting category wide volume or margin hurdles.
Except there really isn’t any neatly-packaged-with-a-bow formula — at least none that conveniently folds into a Microsoft Excel spreadsheet. But there were some keen insights unveiled.
One hard-to-pin-down-with-a-metric quality associated with many niche products is the ability of those products to help distinguish a national retailer’s position within the local community. Call it segmentation or neighborhood marketing; that kind of localized differentiation is what pharmacy retailers are striving for today. “The future is in treating ‘micro-conditions,’” said Curt Behrens, president of P2B. “The days of distribution in 7,200 stores are over,” Behrens said, referencing what one retailer said during a recent supplier presentation. Instead, distribution will be restricted to where that product sells, and that represents a whole new challenge for the niche manufacturer. “Connect the consumer to the product and then to the retailer,” Behrens added. “That’s the crux of this.”
A lot of times that empirical niche value isn’t realized until after it has been cut. “If the [consumer need] is not satisfied by anything else in the set, and that’s the virtue of a niche item, then if you don’t have it, you risk zero sales,” observed Dave Wendland, Hamacher Resource Group VP. “That negative metric is probably stronger,” he added. “But how do you measure missed opportunity?”
Retailers recently were given a significant opportunity to incubate niche products due to the recalls of a few leading mega-brands (e.g., Tylenol) over the past year. It was an opportunity to take space that was easily substitutable — much of that space was in fact substituted with a national brand-equivalent SKU — and test alternative, niche products. “Now, [retailers] are looking at a more sophisticated approach, where they are looking at a combination of gross revenue, product substitution possibility and gross margin in making the call,” noted Jay Borneman, CEO of Hyland’s. Gross revenue and gross margin are easily quantified; but product substitution requires a level of industry analysis that can’t necessarily be captured by a formula. “Where this becomes interesting for people like me is that if I can make the case that I can give [retailers] incremental sales at higher gross margins, I stand a higher possibility of sticking [on the shelf],” Borneman said.
“Shoppers reward stores that supply their ‘problem solver’ brand,” noted Angie Echele, EVP marketing at National Sales Solutions. “Many brands are available in any outlet — niche brands give the shopper a reason to choose your store.” And if those “problem solving” brands are not on shelf, then those consumers may just walk across the street.
“Many aspects of niche brands are not transferable to other brands,” added Rick Wellinger, Emerson Group president. “Retailers lose when they reduce their niche brand offerings. Consumers are more loyal to niche brands and tend to leave the store more often when their niche brand is not available.”
That’s exactly what Alacer Corp. determined when a retailer considered taking its Emergen C supplement off the shelf. “We have a database of 400,000 users that get a monthly e-newsletter from us,” said Ken Vargha, Alacer VP sales and marketing. Alacer tapped that email database with a poll against that retailer’s specific users and asked: What would you do if the Emergen C brand you buy at retailer X was no longer available at that retailer? The feedback out of 1,821 responses was that 46% would shop elsewhere.
It is those kinds of social media connections that can help bring a whole new consumer from a specialty channel into mass. “The best new niche items are … bringing a new consumer into the store from another class of trade, like the prestige or natural channels,” noted Dan Mack, EVP strategic business development for the Swanson Group. “[They] are items that dramatically change the economics of a category, moving the consumer up or returning [him or her] back to the store faster. Or [they] fill a unique white space that currently supports a larger health or wellness regimen or disease state.”
Successful niche products also can make the transition from the direct-to-consumer channel — sometimes called “as-seen-on-TV” — noted Anthony Raissen, president at InterQuantum, a company that specializes in that kind of pre-retail launch marketing. “Direct response is where you see and get innovation,” he said. “You’re able to get out there and identify — do we have a niche?” That DTC pedigree both helps identify the specific demographics buying the new niche product and helps establish a baseline for success, Raissen said.
Another factor associated with niche manufacturers that will never be captured on a category performance data sheet is that niche manufacturers are more likely to innovate and assume much of the risk of that innovation by way of pay-on-scan or guaranteed sells. “It seems the larger companies have pulled back on speculative lines [because of the economy],” noted Craig Keefauver, VP sales for DowellGroup. “In this economy especially, the retailers are looking for less liability [on new product introductions]. Many times it’s the smaller brands that provide that luxury.”
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Kaplan Thaler Group named Supervalu’s agency of record
NEW YORK — Creative agency Kaplan Thaler Group has been tapped to run Supervalu’s latest ad campaign, according to a blog posted on the Kaplan Thaler Group site Monday.
As lead creative agency, the Kaplan Thaler Group’s responsibilities will encompass advertising, digital and direct marketing across all Supervalu banners, including Acme, Albertsons, Cub Foods, Farm Fresh, Jewel-Osco, Shaw’s/Star Market, Shop ‘n Save, Shoppers Food & Pharmacy, Hornbacher’s and Save-A-Lot.
A New York Times report estimated billings would be around $80 million. The first campaign will focus on seasonal foods and value for this summer, the report added.