1995: a record year

Drug Store News, May 20, 1996

In 1995, once again the drug store industry recorded record sales, growing 4.8 percent to $86.9 billion.

Walgreens topped the $10 billion mark for the first time in its history, recording $10.4 billion in sales. Aside from the still-struggling deep discount drug chains, the industry's top 20 chains all recorded sales gains, 11 of them in the double digits. The smallest percent gain in sales was still a respectable 5.7.

Most of the top 20 chains also topped their 1994 performance in terms of percent growth. Walgreens, for example, exceeded its 1994 increase of 11.3 percent by 1.3 percentage points. American Drug boosted its performance by 4.4 percentage points, reporting a 9.9 percent gain vs. 1994s 5.1 percent increase. Eckerd upped its performance by nearly 2 percentage points, reporting a 1995 sales percent increase of 11.1 percent vs. 1994's 9.4 percent.

Comp store sales in 1995 also outshone 1994's performance. In 1994, no chain reported reaching a 9 percent comp store sales increase. But this year, the top chains clipped along at a respectable pace for most, with Revco outshining the industry with a 9.4 percent increase, with regional powerhouse Arbor Drugs following close behind with a 9.1-percent increase, and apothecary-type Medicine Shoppe, with a 9 percent gain.

The strength of the channel was evident in the pharmacy end of the business, as the drug channel overall posted a=6.5 percent gain in prescription sales, rising to $42.4 billion, up from 1994's $41.5 billion.

Chain drug, not surprisingly, accounted for the lion's share of the growth, rising 11.2 percent, compared to the independents, 0.5 percent gain.

Together, chains and independents accounted for 43.5 percent of prescription sales through all dispensary types. Chain drug in particular beefed up its market share, both among its retail competitors and al1 dispensary outlets.

In the front end, the drug channel was not as dominant. Mass merchandisers continued to make inroads -- although once again, the food channel felt mass, impact as keenly as the drug channel.

Front-end sales of the entire drug channel rose 3 percent in 1995, reaching $42.7 billion. Independents, however, lost the battle of market share, losing 22 percent in front end sales. Chain drug, in a bitter battle for the more profitable front end sale, managed to record a 5.7 percent increase. But performances were uneven, and there were bright spots.

OTC

Drug chains continued to be the dominant channel for OTC needs -- with the exception of baby needs and diet needs (where the food channel predominates). Mass merchandisers, however, continued their assault, as was evident in Rx-to-OTC switch sales.

Rx-to-OTC switches dominated the OTC department, were switched in the past year. Some, like the H2 blockers, created a new category-within the department. Others, like Nicorette, should revitalize a moribund segment and still others were little more than line extensions.

Drug stores, however, fell a little short of maintaining their traditional share with the switches. In fact, both food and drug were outsold by the mass channel -- in acid controller sales, for example Perhaps to no one's surprise, the sharp pricing of mass merchandisers helped the trade channel account for 32.7 percent of acid controller sales, but only 26.2 percent of total antacid sales.

Toiletries

Hair color, body washes, intensive facial moisturizers, women's shaving cream and breath fresheners were among the products driving toiletries dollar sales growth in drug chains last year.

Overall, the drug channel retailed its dominance as the source for skin care products. But the mass channel continued making inroads in the segment -- and in the rest of the toiletries category. Mass now is the No. 1 source for hair care (by just a few percentage points), shaving needs, oral care and deodorant.

Still, there were bright spots. The best hair care news for drug-stores, for example, continued to be in hair color. It was the only hair care segment that produced dollar sales gains for the channel.

In oral care, higher prices on new brushes and on dental accessories helped the brush/accessory segment stay profitable. While unit sales of toothbrushes and dental accessories dropped nearly 6 percent in drug stores last year, dollar sales in the category totaled $53.8 million, up 0.8 percent over one year ago. And the women's shave segment is growing by leaps and bounds, adding profit and incremental sales to the category.

Bath/personal wash was an explosive category last year, thanks to the advent of body washes. While drug stores embraced the products earlier than the other classes, they still lagged behind in terms of share of sales.

Cosmetics & fragrances

While the market share battle was just as fierce in the cosmetics and fragrance category, the drug channel retained its dominance, and while the mass market grew, most of its market share gains came at the expense of the food channel. Drug was the market share leader in facial makeups, eye makeups, lip products, nail products and fragrances and in 1995 accounted for-51 percent of all cosmetics sales