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NACS 2011 HBC Interview

What are your convenience store best-sellers? Why?

Our best selling products remain the analgesics in both dollars and units. Sheets Energy Strips™ were launched this summer and sales are extremely positive with our celebrity partners such as LeBron James, Shannon Elizabeth and Pitbull having a great impact to product awareness and sales. Energy, vitamins and supplements are currently driving the growth of the category.

How has your product mix changed over the years?

There have been a few factors impacting the assortment including product recalls, heightened frequency of allergies, and products moving from prescription based to over the counter. According to Quest Diagnostics, allergy sufferers have grown 6% since 2005. Claritin is a top 5 product for us in terms of $ sales and is an example of a successful product moving to OTC.

What has captured customer interest recently in this area?

According to current IRI data, the sub-categories showing the most gains include energy, vitamins and supplements as well as sleeping remedies and lip balm. As well, IRI lists Trojan Magnum 3 ct. Condoms as one of the best performing SKUs in the entire category, currently performing +7%.

How has the growth in this category been lately?

The sales numbers within the HBC category have been explosive since NACS classified Energy and Energy Shots as a sub-segment of HBC. However, excluding the energy information, core HBC items have grown slightly and Convenience Valet® has recognized strong gains through many of our new products including Sheets Energy Strips™, Emergen-C and GNC vitamins.

What are the current trends in health and beauty products?

We’re regularly watching trends through IRI and wholesaler data and the Energy category has shown that it is far from being a mature category. Energy is on trend within the HBC category and new products such as energy shots and Sheets Energy Strips™have continued to support the growth of the category overall. New products such as Axe Deodorant have also been on trend.

What is the future of health and beauty products in general in convenience stores?

The future is bright for the HBC category when done well (optimizing category management including pricing, assortment and planogram, etc.) as it is the second highest GM% category in the store (second only to ice). We as manufacturers need to continue to partner with our retail customers to ensure strategies are on-target to successfully compete with the encroachment of drug store chains.

 

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CSP Category Management Handbook, 2012

CSP Published in the Category Management Handbook, 2012

I’ve identified three overarching trends.

1. Increase demand in the energy category
2. The challenge of dealing with product recalls
3. Great potential for allergy product sales

1. Any advice to c-store owners about how to best take advantage of energy product potential?

Yes, retailers have a three-fold opportunity to capitalize on the potential profits from the energy category. First, is to optimize the assortment to include the best-selling energy shots and energy strips such as 5-hour ENERGY® & Sheets Energy Strips™. Product sells best when it is accessible and visible at eye level. Second, is to price the product competitively within the local market and to offer a Buy 2 for $X everyday value to increase the overall customer transaction size. Retailers understand price elasticity of demand across the categories and leverage that knowledge to develop and refine everyday and promotional pricing strategies. Pricing and category destination signs heighten the visibility in-store. Third, is to merchandise it appropriately near the front register to enhance visibility and capture impulse sales. Tracking channel trends and the impact of competitor merchandising efforts on those trends to determine whether/when to adjust their own merchandising-related efforts. As well, secondary locations are crucial to optimize sales of the energy category. Finally, is to promote it throughout the year using multiple vehicles such as pump toppers and to cross promote energy items with other best-selling items.
2. Any other products to watch for in that category?

It is important to stock the best sellers, i.e. 5-hour ENERGY®, but to ensure new items are also offered. Kraft’s Mio and Sheets Energy Strips™ have both put forth significant advertising dollars which is driving consumers to retail stores. Savvy retailers follow these new item trends and aid in creating excitement at the retail level.
3. Could you elaborate on how the recalls have affected c-store owners?

Yes, c-store owners have had empty pegs, shelves and lost sales due to manufacturer’s inability to ship certain items. Retailers have had to be innovative in solving the implications from this on-going recall. Many retailers have sought multiple solutions such as double-facing like items and adding new items to their sets. HBC still represents the second best Gross Margin category in-store so successful retailers are prioritizing these solutions.
4. Do you know of any retailers who have handled the recall situations particularly well?

Western Convenience is a great example of executing innovative solutions. Based in Denver, Colorado, Western Convenience worked with their wholesaler and their category captain, Convenience Valet®, to build new planograms which optimized in-stock items not impacted by the recalls.  Huck’s is also a great example of a retailer who has partnered with both their wholesaler & their HBC supplier to identify suitable replacements for short term solutions.

CSP Trends

The overall health & beauty care category continues to weather a tumultuous season. Gains within HBC have come from increased demand in the Energy Category, growth of existing SKUs, price increases, and innovative new delivery formats such as Sheets Energy Strips™. HBC has also seen newly introduced health & wellness products such as Protein To Go™, a pure protein shot with zero sugar or fat, performing well and filling the need for healthy snacks. Additional gains in HBC include analgesics overall, with more and more retailers recognizing the value of stocking additional blister packed products.  However, manufacturer recalls and production issues have left many retailers with empty pegs.  Savvy retailers partner with their wholesaler and/or their HBC category captain to find suitable replacements during this unprecedented situation of high out-of-stocks. Finally, due to the unseasonably mild winter, allergy season has arrived early and doctors are predicting the worst allergy season in over 10 years. Proactive retailers and wholesalers will want to be prepared and increase their inventory of allergy related products to include counter displays, clip strips and recommended allergy OTC medication within their HBC set to optimize sales.

 

 

 

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Convenience Store News HBC Article, August 2011

Please discuss your product/program offerings for c-stores and how it has evolved recently. This is normally a tough category for c-stores, would you agree? Please explain how you help them sell HBC and Gen merchandise more effectively and why this is good for their business.

 

Convenience Valet provides the largest selection of nationally branded convenience and travel products within the Health & Beauty Care category. Our program provides category management expertise and planograms both built off multiple data points including syndicated data. I agree – HBC and General Merchandise are tough categories and often overlooked yet can provide retailers with exceptional margin. We know that 79% of products purchased within the c-store are consumed within 60 minutes. We also know that nationally branded products appeal more to this consumer based on sales volume. Our single & double dose over the counter HBC product meets the needs of consumers by providing instant relief. Our products meet the needs of retailers as well by keeping cost of inventory low and by our color coded clear packaging to help categorize products. These categories are profit generators for the retailer with typical gross margins exceeding 50%.

 

2. Is there a formula for figuring out what works/what doesn’t? How do you stay on top of trends?

Convenience Valet is frequently meeting with our manufacturer partners to view new products. We are regularly reviewing data within the convenience channel as well as the Food/Drug/Mass channel to see what is on trend. The formula for success lies on the strength of the product, packaging and marketing support behind it. We have 56 years of expertise dedicated to growing the travel/trial sized products.

 

3. Are items mostly in/out or do you strive for them to have a dedicated section? Please describe your merchandising vehicles.

Most convenience retailers have a dedicated section for our HBC and General Merchandise products. We offer display ready racks that enable the retailer to have dual placement of best-selling or seasonal products. Merchandising the HBC product that is accessible & visible to both the consumer and to the cashier is a key to success in this category.

 

4. Is innovation important for sales in this category? Or is it mostly core items? Please explain.

Innovation is important but core, nationally branded HBC items remain best sellers. Within General Merchandise, speed to market and innovation are more important to enhance margin and profit.

 

5. Please provide any category stats for best-performing retailers–sales, percentage of business, margins, etc. What can retailers expect?

HBC is the second highest gross margin category, second only to ice, at 51% GP. HBC represents 2.18% of all Gross Margin ~ averaging $1009 per store per month, higher than sweet snacks or ice cream. Specific sub-categories to pay attention to include analgesics and allergy medication; combined, they comprise over 55% of the over-the-counter HBC category.

 

6. Is seasonality involved? Please explain.

Seasonality does play a role within HBC and Convenience Valet has developed specific Cold/Flu and Sinus/Allergy racks to meet seasonal demand.

 

7. Is regionality involved? Please explain.

HBC, generally speaking, is less regional. There are a few items that sell better within certain regions such as aspirin powder in the Southeast. Our custom planograms are data driven to incorporate those trends. Overall, though, our best selling items remain the nationally branded HBC items.

 

8. Please mention any “best practices” that you have uncovered for c-stores selling this category, include merchandising and marketing tactics.

Convenience Stores that exceed the norm on these categories follow a few general rules: Stores have a dedicated set that is visible to consumers, stores merchandise the category using an updated data-driven planogram, in-stock product, and the retailer maintains competitive pricing that usually is no more than 10% above drug store pricing. Successful marketing tactics that support this category have included Buy 2 for $X or Buy HBC trial size + Water for $x to increase the market basket.

 

9. Please mention anything we left out that you believe is important for c-store retailers who want to grow this category.

HBC and General Merchandise can be extremely profitable and valuable categories. Convenience Valet, along with our national broker, Advantage Sales & Marketing, are able to assist for category management, custom planograms or niche marketing programs to help retailers grow overall business.

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