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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 Decisions, HBC Category March 2012

Health and Beauty Category

Pittsburgh-based InRhythm, Inc.’s “C-Metrics Projected Convenience Store Sales and Distribution” report, which tracks convenience store category sales on a weekly basis, projects that overall sales in the health and beauty category (HBC) for 13 weeks ending February 11, 2012 will be flat. However, one category that did experience some growth was analgesics.

Analgesics, which the report projects will account for 21.1 percent of total category dollar share during this period, increased by 1.7 share points. But, cough and cold remedies’ 16.6 percent HBC dollar share reflected a 1.9 share points decrease and stomach remedies, 7.2 percent of the category, were down by 1.3 share points.

Kera Smith, merchandising specialist for Emmaus, Pennsylvania-based Top Star Express convenience stores, says her company’s overall OTC sales have increased 10 percent from last year. She explains that the growth has come from trial size rather than full size products.

“Though our full size OTC products are flat in sales, trial size sales increased by 16% trial size sales increased by 16%,” Smith says. “We feel price is a contributing factor to the flat full size sales.”

Top Star’s category strategy, she explains, is to “stock the top full size SKU’s to satisfy the customer who looks for the larger quantity while also offering an even broader variety in our trial size products.” She maintains that the company views this is one the keys to continued growth.

 

The chain’s HBC sales have gone up 2% since last year and “we see the category continuing to increase,” she says.

“We don’t feel it will be as significant as the OTC growth, but there is opportunity within the category,” Smith says.

She explains that HBC accounts for .42 percent of store sales (excluding gas, lottery tickets or bus tickets). The OTC subset of that category brings in .18 percent of those sales.

The company’s top subcategories for growth last year were feminine products (23 percent), family planning (22 percent), cough and cold (21 percent) and analgesics (19 percent).

“We expect analgesics to continue to grow for us in the upcoming year,” she says. “We think there is a lot of opportunity within the subcategory so we will be adding six more [trial size] SKUs in 2012.”

Smith attributes a large part of Top Star’s HBC success to “our partnerships with our vendors.”

“Convenience Valet, for example, has helped us POG our stores, not only for their products, but for the entire category as well as promptly informing us about recalls and manufacturing issues and giving us temporary replacement item suggestions to ensure that our shelves stay fully stocked even if there are manufacturing issues that are out of our control,” she says.

InRhythm reports that the skincare/external care accounts for 10.5 percent of total HBC category dollar share, grooming aids 5.1 percent. And within these subsets, Packaged Facts research firm predicts that consumers will continue their quest for natural.

“The U.S. consumer market for natural and organic skincare, hair care, and makeup-which during 2005 to 2010 boomed 61 percent to $7.7 billion-could top $11.0 billion as of 2016,” says the company in its “Natural and Organic Personal Care Products in the U.S” report published last December. “Already natural HBC is such a solid performer, that it can be considered a component of the mainstream personal care market.”

“Green” consumers are more receptive [to these products], even to the point of remaining loyal to natural HBC brands in the recession of 2008-2009, the report says.

 

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