Premium-priced hair products take over retail shelves

Drug Store News, July 17, 2000

Successful launches of several new hair care products over the past few years have delivered new shine to the $5.5 billion category.

Even more promising news is the fact that the hits are in the premium-priced sector of the market--a niche that delivers bouncy profits.

According to statistics from ACNielsen, prices for shampoos have increased 1.4 percent in just the last three years. Margins are also up as consumers show they are willing to pay for luxurious tresses.

Among the pricey products attracting shoppers are Helene Curtis' ThermaSilk, John Frieda's Sheer Blonde, Procter & Gamble's revitalized Pantene Pro-V and the L'Or[acute{e}]al Vive collection. Also bringing new sales opportunities are children's hair brands such as L'Or[acute{e}]al Kids, Aussie Land and Johnson's & Johnson's Kids 2-in-i formula.

Brand new on shelves, and getting mostly positive reviews, is Procter & Gamble's Physique--a line that crashed through the price barrier for a mass brand with a starting suggested retail of $7.

And, more new items are set to bow. Following in the footsteps of its successful repositioning of ThermaSilk, Unilever is now sprucing up Salon Selectives. The line will be reformulated and repackaged for a relaunch in August. In addition to John Frieda, another salon hair stylist named Umberto Giannini is planning to unleash a mass brand. Haircuts in his London salon cost $400; the hair care will sell for under $10.

The premium mass brands join salon products that are also luring customers into drug stores such as Paul Mitchell, Sebastian and Nexxus. Chains such as Rite Aid and CYS have fully developed salon sets.

The new product activity is driven by the race for market share in a fragmented category where even a 2 percent share translates into sales exceeding $45 million. The leading shampoo brand is Pantene Pro V, according to statistics for the 52 weeks ended April 23, 2000, with sales of $248 million and a 14.1 percent share. Herbal Essences is next with sales of $137 million. Head & Shoulders scores third at $89 million, Suave at $85 million is fourth, fifth is Pert Plus with sales of $81 million, next is ThermaSilk at $75 million and private labels win honors for seventh. What's notable, however, is that Herbal Essences, Head & Shoulders and Pert Plus sales were actually down, while ThermaSilk sales shot up almost 25 percent for the period.

The salon products and premium items need to get special attention on shelves, said Fred Mulfinger, manager of analytical services of Gladson and Associates in Lisle, Ill. Salon products, he advised, demand a separate home. Despite the interest in presenting upscale products, Mulfinger encouraged retailers to attempt to strike a balance that adequately represents the full breadth of the hair care category. "There are still shoppers who want value," he said.

With the lusty margins of specialty and salon products, Mulfinger suggested putting these at eye level. "Shoppers will reach down to lower shelves for value brands," he added. He also suggested merchandising by brand rather than by type of product. Brand presentation makes shopping the SKU-intensive department easier.

Category management is mission critical in hair care, he said, since there are so many new products. "Retailers should try to make sure they review sales and delete items rather than trying to get everything in. Pay close attention to the dynamics and review what products are producing what percentage of sales."

Even Physique, which is considered a success, isn't selling well enough to justify all 24 SKUs, said some retailers. Three new SKUs are also planned for Physique. Some retailers said a few items within the line must go.

Others added that Physique's price points will be shaved $1 or so.

Still Jane Wildman, global brand manager for Physique, said it is P&G's most successful hair care introduction ever. Sales to date of Physique are estimated at $50 million. P&G has earmarked $110 million for first year advertising. A Web site helps drive shoppers to drug stores such as Walgreens, Eckerd and CVS for Physique.

Another important niche in hair care is ethnic. The category is heating up once again as big players buy some of the niche brands that had dominated the business. Cosmair, for example, now owns Soft Sheen, and Alberto-Culver purchased Pro-Line earlier this year. "The African-American market is growing in size and purchasing power and we're pleased to add the depth of our lines with ProLine," said Howard B. Bernick, president and chief executive of Alberto-Culver.

With the onslaught of new items--and even new segments like kids or ethnic--the challenge continues to be managing the category so that new items are easily added, shoppers' varying needs are served and profits are built.

Drug stores are especially in need of producing the best sets because the channel has lost sales in the category. Drug stores now have only 21 percent of sales, behind mass with 48 percent and food at 31 percent. Said Mulfinger, "Drug stores once owned this business and they can again by offering a balanced portfolio of products including value, middle-priced, premium and salon items."