Assortment viewed as edge in hair care products

Drug Store News, Sept 27, 1993

Many drug retailers believe that removing small niche brands from their shelves would be a mistake. They realize that when it comes to commodity hair care brands, they cannot compete on price with the mass merchants and food/drug combos.

The value segment carries little brand loyalty; consumers are buying whatever is on sale at the moment. It makes for a flat category.

Packaged Facts, a research firm, recently confirmed that the shampoo and conditioner category had flattened to 2 percent growth in 1992. That capped the category's worst four-year growth cycle in the market's recent history. Worse news yet was the prediction by the market research company that annual retail sales growth would vary between 2 and 3 percent through 1997.

So what are drug chains doing to keep their commodity hair care business alive? Tired of living with the razor-thin margins they make on these products, regardless of the volume they produce, some chains say they are actually paring even their best-selling brands down to the fastest-moving SKUs to make room for innovative niche products that carry a margin higher than 10 percent.

"All Suave does well, but I have to be selective as to how much I'm going to carry. I can't stock it all," says one retailer.

As the Nielson charts in this section show, growth is coming from new products, and the drug stores are gaining the largest share of the sale of these products.

"Drug stores need to look at niche brands. The real growth in the category is there," says one top retailer.

Best-selling niche brands

The niche brands drug store retailers are using to capture sales vary from chain to chain.

CCA's Wash 'N Curl has had tremendous growth. Products that offer specific benefits or are formulated for specific hair types or conditions, such as the company's new addition, Wash 'N Tint, will further drive the category. Among the others are:

* Perma Shine and Colorvive, cited by retailers as products which are adding excitement to the category;

* Pantene Pro-V, which has universal approval by retailers as a premium line that continues to remain at the top of the sales charts. The brand ranked No. 1 on Nielson's list of top hair care brands in dollar volume in drug stores;

* Aussie's recently introduced line of wash-in color called Intermissions. The company has also introduced a product specifically for color treated hair, called Colorwise;

* Clairol's addition to that niche, a line of products called Color Hold;

Other specialty products were cited by retailers as having the power to pull customers into the store and maintain a high margin.

"Citre Shine is extremely good, and now that Frizz Ease is spending money on national television ads, we expect that brand to do even better than it had been," says one retailer.

When knockoffs =margin

Other quasi-professional brands cited: Focus 21 and the Russ Kalvin brand of knock-off salon products. One chain reports bringing in 14 SKUs from the line and having respectable sell-throughs on the products.

Another retailer feels that the line is doing well because of its low price, but that sales will slack off in the future since customers looking for Nexxus products will be unlikely to trade down to a 99-cent brand.

The Mr. Charles line of generic products has received high marks for providing a low-priced alternative to professional products and for holding a margin higher than 10 percent.

European Mystique, which Nielson reports had a 69 percent growth at drug chains, is also cited by retailers as a good addition to the department. "It's a good value line at 8 ounces that I can sell for less than $1," says Jerry Zlotnick, buyer at Cleveland-based Medic Discount Drug.

Best of all, the growth is mainly at the drug chains; mass merchants have only experienced a 10 percent growth of the product and it appears that food/drug combos by and large aren't carrying the brand.

Retailers are also looking at other trends in the market and are bringing in products that address new customer niches. "I'm looking at the products coming out of the health food industry," says Zlotnick. "Botanicals and natural products seem to be really hot now." He adds that Freeman's Beautiful hair line was priced right and had eye-catching graphics that appealed to a younger customer.

A West Coast retailer gives high marks to Freeman, adding that botanicals are showing growth in that part of the country. [TABULAR DATA OMITTED]