PLMA celebrates upturn, retail merger concerns surface

Drug Store News, Dec 9, 1996 by James Frederick

CHICAGO - Amid the din of frenzied retail consolidation, some 1,500 private label manufacturers and thousands of merchants gathered here last month to plot marketing strategies and build store-brand sales.

Despite the shrinking base of retailers, both buyers and suppliers at the Private Label Manufacturers Association's film trade show last month had much to celebrate. Store brands are bigger than ever, and drug, food and discount chains have extended the reach of their own labels into an ever-broader mix of categories - including upscale bath/body products, snack foods and nutritionals.

What's more new statistics from Information Resources Inc. show store brand dollar sales growing 6.8 percent in the second quarter of 1996 PLMA president Brian Sharoff said at the show Nov. 18. Store brands comprised 11.5 percent of drug store unit-share volume, and grew at their second-best rate in five years.

"Today, 83 percent of consumers are regular purchasers of store brands," Sharoff said. "The challenge we face is this: Can we as an industry continue to deliver products that meet the demands of more and more sophisticated consumers?"

In an interview with Drug Store News, Sharoff conceded that consolidation among retailers has caused some concern. But he also noted the upside of the mergers: retail chains that have emerged from the takeovers are stronger, more efficient and better able to exploit new store-brand opportunities because their sales potential has grown along with their store counts.

"As the retailers become bigger, their ability to absorb more [private label] categories also grows," Sharoff said.

Most vendors are watching the shrinking pool of drug chains buying and marketing their products - and the growing leverage of the ever-larger chains. "It's going to affect the way we do business, our approach to those [larger] accounts, and how we direct our sales forces," said Ron Gibson, regional vice president for ViJon Laboratories. "Some [of the smaller private label vendors] are going to be marginalized, and some are going to be devastated."

Talks with buyers and sellers on the show floor confirmed chains, commitment to store brands. Drug chains, including American Drug Stores, Rite Aid, CVS, Walgreens, Revco and Eckerd, were out in force, scouting new opportunities in hot categories, such as upscale skin care and bath (where American's Daily Rituals line and CVS' Down to Earth brand have been hits), fat-free snacks and a slew of nutritional supplements.

"We've all been beating each other up for years over the lowest price, and it's time to take [store brands] to the next level," said a merchandise manager for a major drug chain. "The customer has shown she's ready for it. We see some exciting opportunities with upscale brands."

"The interest level in upscale, premium skin and bath items - what we call affordable elegance - has really picked up," said Norman Auslander, chairman of Lander Co.

Added Jim Demetre, sales associate with Barcolene. "Nobody on the retail side is trying to beat you up on price now. They want quality, and I think the consumer is driving that."

Many buyers were also looking more than ever for complete programs from their store-brand suppliers, including improved packaging, national sales trend data, promotional and display materials marketing dollars, EDI links and other types of support long demanded of national brand suppliers.

With the plethora of manufacturers competing for the big retail accounts with similar products, chain drug buyers at the show weren't hesitant to compare vendors and search for better deals and higher support levels. "We're always looking for alternative sources," said a buyer for American Stores.