Drug chains rushing to bring private label OTCs to the public

Drug Store News, Nov 17, 1997 by Al Heller

Private brand marketing is running at fever pitch in the chain drug industry this year, with no letup in sight. The campaigns have a new twist: the chain name itself is front and center as much as any products in the campaigns.

The reason? Retailers are turning up the heat on differentiation. Private brands are exclusive to their stores, and they're being used to foster strong ties with customers who have plenty of retail choices. "New campaigns make sense for the national chains to establish their name as the brand," said Jim Devine, president of the Chain Drug Marketing Association. "Many of them have invested deeply in assortments ranging up to 2,000 private label items."

Added Brian Sharoff, president of the Private Label Manufacturers Association: "Aggressive campaigns by CVS, Walgreens, Eckerd and Rite Aid are clearly a natural outgrowth of the dominating positions these retailers hold in their markets. We're coming to a situation similar to supermarkets in the United Kingdom, where four or five companies dominate the entire universe.

"Whether a retailer or a manufacturer, a marketer takes advantage of size to move products," Sharoff added. "Understand those basic laws, and don't waste time in end-run battles with smaller competitors. Go head-on with the consumer.

"These campaigns will result in building very strong brand equity for the megaretailers," he said. "Private label products are part of this brand equity loop, and it's a very successful way to push. You don't have to compete in consumers' minds with other names when the brand on the outside is the same as the brand on the inside."

Acquisition pace drives initiatives

At least one other compelling reason is driving recent initiatives: the nonstop pace of chain acquisitions. Operators now run stores in far-flung markets where their names aren't known. As they convert store banners to their own, they must re-earn the loyalties of customers who may have shopped in the acquired stores for many years.

CVS, for instance, is launching a $6; million cable and network television campaign this quarter. "The campaign will be centered around the branding of CVS pharmacy, which is necessary when you acquire a chain the size of Reveo in markets where you have no presence," John Kramer, senior vice president of advertising and sales promotion for CVS told Drug Store News. The campaign will also extend to such front-end offerings as private label and cosmetics. Name conversions of the acquired stores began in September.

Walgreens, which has long been regarded as a premier private brand merchant, kicked off a campaign in September that marks the first time the chain has advertised its private label on television.

The "long-term campaign has no end-date," said Craig Sinclair Walgreen's divisional vice president for corporate advertising. "It borrows from our traditional tagline. `The pharmacy America trusts, and converts it into `the brand America trusts."

The tagline will be added to all new private label packaging, though it may not reach shelves for another six months to a year, as current stock sells off and new stock is displayed. Walgreens will also repackage more than 500 of its 1,000 plus store brand products this year and next, adding the tagline, a more prominent 100 percent guaranteed satisfaction seal and, in some cases, a comparative statement to national brands.

When the campaign began, the chain coordinated a buy-one, get-the-second-at-half-price private brand promotion throughout September "for all items, from ice cream to ibuprofen, and had a good response," Sinclair added, noting that performance figures are first be coming available.

Walgreens also uses shelf extenders with compare-and-save signs to induce trial. "We're trying to teach customers that private label means great value, that they're usually as good as the national brands and they cost less. Customers are more educated about their value, and that creates a tremendous opportunity for us, Sinclair said.

In a similar vein to the CVS effort, Eckerd has released integrated marketing campaigns in markets where it has converted stores from the former Thrift. Kerr. Fay's and Treasury chains. "Part of the issue use have in merging the chains is that they were institutions in their area," explained Frank Newman, president, chairman and chief executive officer of Eckerd.

So where do these major efforts leave regional chains? CDMA's Devine insisted that "regional operators can make an equally hard impact on brand perception," using campaigns such as those run by 20-store Fruth Pharmacy in West Virginia, one-store Evans Drug in Enid, Okla., or eight-store Kopp Drug in Altoona, Pa.

"You don't have to be big. Go on cable so it's cost-effective," Devine said. "Tie in contests. Give free private brand product to store employees so they learn about it and encourage their sale in stores."

CDMA offers its members access to the 825-SKU Quality Choice private brand, which has national distribution and can fill the year-round demand of customers who have homes in two different markets.