Shoppers respond to convenience, brands
Mintel projects the pet products category will grow an average of 3.8% over the next five years to nearly $13.7 billion by 2017.
While the category has remained solid, the drug channel has been losing sales. The channel saw a significant 16.6% dip in sales from 2010 to 2012 to $168 million, according to a recent Mintel study. The market research firm estimates that drug channel commands only a 1.5% of category sales, yet Mintel’s study indicates that convenience is a key driver when consumers shop the pet category.
Pet supplies could be a missed opportunity for the drug channel. “The value of convenience shouldn’t be underestimated, especially as the pet aisle is becoming an increasingly confusing space for pet owners,” according to Mintel’s study.
Impulse purchases play a big role in the category, according to Mintel’s research. Shoppers also respond to brand names and natural products. “Retailers need to evolve from a private-label minimalist category into a branded category with some private-label values,” said Shay Moeller, product manager for Wahl’s North America consumer pet division.
Bob Vetere, president and CEO of the American Pet Products Association, sees a trend toward products that promote pet wellness and safety. “Safety awareness has become a bigger issue in the category, and we’ve seen a lot of advances in booster seats and harnesses, which have improved greatly,” he said. Car restraints and harnesses, airline-specific carriers, travel feeding bowls and other products that make traveling with a pet easier have contributed to an uptick in sales.
Pet grooming products are evolving as consumers look for products that are better for their pets and make grooming easier. Moeller said that grooming products are a big growth area for the category. Clippers, he said, are one of the largest dollar generating items in the pet category. Wahl has expanded its home pet products to meet the needs of the fast-growing home pet grooming market. “Signage is a great way to explain the benefits of grooming,” Moeller said. “It communicates that proper grooming — such as a clipping, bathing and brushing — is a way to keep your pet healthy, happy and smelling great.” The company makes a line of natural pet shampoos formulated using 100% plant-derived ingredients that are safe and gentle for pets.
The litter and deodorant segment, which generates 42% of pet category sales, has been outpacing overall category sales, due mostly to innovation. Lightweight litter is the latest product improvement sweeping the segment.
Cat’s Pride recently introduced Fresh & Light Premium Clumping Litter, a lightweight blend that boasts optimal clumping characteristics to ensure easy scooping and disposal. An innovative, lightweight formula makes the litter easy to lift, carry and pour. Purina’s Tidy Cat followed with LightWeight 24/7 Performance. Mintel sees further growth for the segment over the next few years as products touting premium positioning, high-efficacy and odor-neutralizing performance continue to enter the market.
Total Store Expo 2.0
ARLINGTON, Va. — It may be about six months until the doors open for the 2014 National Association of Chain Drug Stores Total Store Expo, but energy is already building, with more than 90% of the show-floor already sold out.
The mega show — which combines front-end, pharmacy and supply chain — will be held Aug. 23 to 26 at the Boston Convention Center.
The plan is to “take all that was good [from] the inaugural [TSE] and continue it in Boston,” said Jim Whitman, SVP of member programs and services at NACDS. “We will also try to do some tweaking to make it even better. But the traditional format will remain pretty much the same because the format worked.”
More than 5,000 people gathered for the first TSE last August, and according to an NACDS survey, 92% planned to return in 2014. So far, early registration bears that out.
Whitman encouraged attendees to check out NACDS’ revised website. Whitman said he expects the new website, which will be rolled out in the coming weeks, “will be faster and more on point.”
“We have a tremendous amount of resources on the website for you to start your work early in the process,” Whitman said. “… You will be able to access material, we believe, faster and more directly on point.”
NACDS also will leverage its NACDS.TV, which is a video resource for TSE, to increasingly build a communication vehicle as the 2014 event draws near.
Understanding point of diminishing return
As many retailers continue to expand the presence of store brand products because of the high retailer margin percent these products offer, it is important to pause and consider what is the optimal balance of national brands and store brand that will drive overall business results for the retailer.
Drug Store News has partnered with Competitive Promotion Report and IRI to create a series of exclusive reports. This edition focuses on “National Brands and Store Brand Optimization: Point of Diminishing Return.” While there is a role for both national brands and store brands, retailers will be well served to seek to understand the right balance between the two. Too much store brand on the retailer’s shelf may not provide the consumers with the range of options they desire. Retailers and manufacturers must work together using fact-based insights and analytics to identify the optimal mix of national brands and store brands that will maximize retailer margin dollars, category growth, market share and shopper satisfaction for the retailer.
This analysis looks at the major national brands and store brands in the drug channel for the cold/allergy/sinus liquid/powder category over the past two years. The following are just a few of the key findings from this analysis:
- Year-over-year market share for store brand has declined each month since March 2013.
Reckitt Benckiser and Procter & Gamble market share year-over-year has increased every month since November 2012.
− Reckitt Benckiser average market share change year-over-year was 1.25%.
− Procter & Gamble average market share change year-over-year was 1.67%.
- Reckitt Benckiser promotional spending (off-invoice and bill back allowances) was among the lowest of the national brands, thereby maximizing the effect of promotion spending relative to market share.
- Despite relatively high levels of spending on promotions year-over-year by store brand, it has not translated to proportionate increases in sales and market share, reaching a point of diminishing return.
- Despite a 65% increase in hospitalization rates for flu (influenza A and B) and a more active flu season during 2013 as compared to 2012, according to CDC data, unit volumes have declined for drug stores.
- The Tylenol brand provided retailers in this category with the highest retailer margin (39.76%), followed closely by Mucinex (37.32%), Benadryl (36.89%), Dimetapp (34.8%) and Vicks (30.81%).
The Vicks brand has the highest promotional spending and provides retailers with the lowest retailer margin percent of the five leading national brands.
− However, the Vicks brand generates the highest retailer margin dollars.
− Vicks, Mucinex and Benadryl have shown margin dollar growth year-over-year.
A flawed promotional strategy combined with an improperly balanced portfolio of national brands and store brands can result in a significant loss of retailer margin and stifle category growth and market share gains. There is a definite point of diminishing return where too many store-brand SKUs may actually hurt overall business performance.
The CPR National Brands and Store Brand Optimization analysis is a tool that can help manufacturers and retailers find answers to important business questions and help retailers drive overall business performance.
To view the charts, click here.