Fat-free items, iced teas turbocharge sales; competition gaining on drug's share of consumables

Drug Store News, Jan 9, 1995 by James Frederick

Roughly $12 billion. That's what consumables were worth to drug chains in 1994 sales, if you factor in not only candy, beverages, gum, cookies and snacks but also such supermarket staples as bottled water, cookies, diapers, pet products and laundry detergents. It's a major piece of business for drug chains, and it holds huge potential in categories like ready-to-drink iced teas and fat-free cookies and snacks.

Drug chains saw a mixed performance in consumables last year, according to data supplied by Information Resources, Inc. Mass merchandise chains--led, of course, by the still-furious on-slaught by Wal-Mart Stores--took sales away from both drug and supermarket chains in virtually every consumables product category. The result: Perennial drug store performers like candy and gum saw a slight slippage in sales, while products like soft drinks and snack nuts saw bigger declines--all at the hands of the mass merchandisers.

Nevertheless, the fast-rising sales tide in hot new product areas like fat-free cookies and ready-to-drink teas was enough to give all boats a big lift--and the growth should continue through 1995, according to industry watchers.

The said, here's a look at three categories that should continue to spark much of the growth in consumables:

Big tea sales brewing

The explosive popularity of ready-to-drink iced teas and fruity drinks has been the biggest thing to hit the category in years, and their growth should remain strong this year. Drug chains are well-positioned to benefit.

The reason: Many chains have installed coolers to merchandise the single-serving containers and capture the impluse sales that are the segment's lifeblood.

"It's just going through the roof, that category...and it's just so much fun to watch something like this," enthused Helen Berry, a spokesperson for the Beverage Marketing Corp., a trade group. "There's still a lot of room for growth."

Berry predicts that ready-to-drink teas should continue to boom ahead at a compounded annual growth rate of 36.5 percent between 1992 and 1997, then slow to still healthy, double-digit gains.

IRI reports that sales of ready-to-drink teas in food, drug and mass merchandise outlets nearly doubled in the 52-week period ending Sept. 11, 1994, to $385 million. Snapple, Lipton and Nestea continue to lead the market, according to the last available reports from IRI, but AriZona has also come on like gangbusters since its more recent roll-out--particularly in non-supermarket outlets like drug stores--and controlled label brands are making big regional inroads.

In fruit juices, big success stories like Coca-Cola's Fruitopia should also keep sales climbing steadily.

What's more, beer manufacturers including the Stroh Brewery Co. and G. Hileman Brewing Co. have expanded production to keep up with demand for teas and fruit drinks. Heileman, which produces AriZona, said it will reopen one of its breweries to turn out the fast-growing brand. Stroh has created a new division, Captiva Beverage Co., to produce store-brand teas under a variety of labels.

"Our findings indicated that this category's tremendous growth should continue for at least the next two to four years," Stroh noted. "The ready-to-drink tea and fruit juice drink business has much broader consumer appeal across all age and demographic groups than other 'new age' beverage segments."

One thing driving growth is combined ad outlays that now exceed $150 million for the top brands in the category. But the convenience and high-impulse nature of ready-to-drink beverages, and their quality and taste, are behind the boom.

Lower-fat, higher sales

Cookie sales jumped 10.4 percent in food, drug and discount stores combined in the 52-week period ending last September, IRI reports, reaching $4.17 billion in combined sales. Drug chains shared in the growth with a 9 percent gain, giving them 4.1 percent of the total U.S. cookie market.

Fueling those healthy gains is the remarkable success of low-fat and fat-free products from Nabisco, Keebler and others. The phenomenal acceptance of Nabisco's Snackwells line of fat-free cookies has rocketed the brand into second place among all cookie products, topped only by combined private label cookies.

According to IRI, Snackwells exploded 144.8 percent in combined-outlet volume in the year ending Sept. 11, 1994, exceeding $300 million in sales and eclipsing Nabisco's Oreo brand.

Candy still a standout

Consider this: Per-capita consumption of candy in the U.S. grew from 16.1 pounds to 22 pounds between 1981 and 1993, according to the U.S. Department of Commerce. What's more, noted Lisbeth Echeandia, editor of Confectioner Magazine, each U.S. resident spent an average of $64 on sweets.

Given the frenzied pace of new product entries, the increasing merchandising savvy of drug chains and the aggressive brand-marketing efforts of companies like Hershey Foods, Leaf, M&M/Mars and Brach & Brock Confections, consumption levels should continue to go up.

Drug chains have held on to a 25 percent share of the business by exploiting the low price points and high-impulse nature of candy.