Still Recovering

March 1, 2007
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Still Recovering
By Denise Leathers

With the chaos of 2006 finally behind them, retailers have filled their shelves with private label versions of the latest PSE-free national brand formulations, but consumers have been slow to respond.
The private label cough and cold segment took a big hit last year, thanks mostly to implementation of the Combat Meth Act, which forced medicines that contain pseudoephedrine (PSE) behind the counter or in locked cases by Sept. 30, 2006. To avoid being taken off the shelves, many manufacturers removed PSE from their formulations, either dropping it altogether or, more often, replacing it with phenylephrine (PE). Store brand suppliers tried to anticipate which way the national brands would go with their reformulations, but they didn’t always guess right, sometimes leaving retailers without a true national brand equivalent private label — a serious problem in a category where consumers often compare ingredient decks.
Compounding the issue, reports vice president of sales and marketing Beth Sobel of Lawrenceville, N.J.-based Accumed, was the fact that retailers with net programs had to sell-through their existing private label stock before putting new formulations on the shelf. The national brands, on the other hand, often were able to pull all products with PSE off the shelf at once and replace them with new items. The bottom line is “retailers didn’t always have what they needed when they needed it,” Sobel says. And the numbers reflect that.
According to Chicago-based Information Resources Inc., overall dollar sales of cold/allergy sinus tablets — by far the biggest of the cough and cold subcategories, with almost $2.1 billion in annual sales — edged up 3.9 percent in food, drug and mass merchandise outlets over the 52 weeks ending Jan. 28, 2007. But store brand sales slipped 2.7 percent, cutting store brand share to 21.7 percent.
Store brands also stumbled in the cold/allergy/sinus liquids segment, recording a whopping 23.7 percent decline that brought down sales for the entire category 3.3 percent.
Despite store brands’ dismal performance over the past year, “I don’t see this as a ‘perma-trend,’” Sobel says. “I think we’ll see private label get its stake back.” In fact, she continues, the turnaround may have already begun. After a mild start to the cough and cold season, which may have been a blessing in disguise since it gave store brand manufacturers time to get newly reformulated NBEs on the shelves, winter eventually returned with a vengeance throughout most of the United States, bringing plenty of illness with it.
SUSTAINED RELEASE VS. IMMEDIATE RELIEF
Though sales of most private label cough and cold products were in decline over the past year, there was one bright spot. Store brand sales in the nasal products category shot up more than 20 percent, boosting private label share of the nearly half-billion-dollar segment to 18.9 percent (sales for the category as a whole expanded 8.8 percent). “I attribute [the gain] to a lack of nasal decongestants on the market during the whole PSE to PE switch,” Sobel says. But, she adds, consumers who came to rely on PSE-free nasal sprays over the past several months are likely to continue to use them, thanks to their ease-of-use, portability and comparatively low cost.
Top INDIVIDUAL BRANDS
Category Dollar Sales
(in millions)
CATEGORY
SHARE
Cold/Allergy/Sinus Tablets
1. Private Label Cold/Allergy/Sinus Tablets/Packets$455.021.7%
2. Claritin D Cold/Allergy/Sinus Tablets/Packets$131.46.3%
3. Benadryl Cold/Allergy/Sinus Tablets/Packets$127.46.1%
Source: Information Resources Inc.
Total supermarket, drug and mass merchandiser sales for the 52 weeks ending Jan. 28, 2007, excluding Wal-Mart.
Due in part to the fact that many medicines reformulated to include PE must be taken every four hours while those with PSE generally lasted for six, time-release remedies that offer up to 12 hours of relief from a single dose have become very popular with consumers. The best known, Mucinex, which thins mucus and relieves congestion, posted a 4.7 percent gain over the past year, vaulting it into the number-five spot on the list of top-selling cold/allergy/sinus tablet brands, while Delsym, a sustained-release cough syrup, recorded a 15.9 percent increase, making it the only brand among the top five to register dollar sales growth.
Unfortunately, the time-release technologies used in those formulas are still under patent, forcing private label manufacturers to tout the immediate relief offered by similar store brand products. St. George, Utah-based Deseret Laboratories rolled out just such an item last fall, reports Len Smith, vice president of sales and marketing, retail division. So far, he says, sales of the company’s 400mg Mucinex alternative have been very strong, thanks in no small part to the savings it offers over the high-priced national brand.
Another reason for Mucinex’s success is the fact that it offers symptom-specific relief, another hot trend in cough and cold. “The brands segmented themselves so much to better compete that the category became very confusing,” explains Sobel. “Now they’re trying to make it easier for consumers to pick out what they need based on their specific symptoms,” and many private label manufacturers are following suit.
But not every consumer wants to deal with separate medicines for each symptom, especially if they have to be retaken at different times. As a result, reports vice president of sales and marketing Kelly McIntosh, Newmarket, Ontario-based Trillium is in the process of introducing Total Cold & Flu, which will act as a private label alternative to Benylin’s new All-in-One Cold & Flu (Benylin is the national brand leader in Canada). “It’s a lot more convenient,” she says, “and it fits into consumers’ active lifestyles.”
HOMEOPATHIC ON THE HORIZON?
In the wake of last year’s PSE situation, retailers and manufacturers alike are determined not be caught off guard in the event Congress decides to put limits on the sale of other cough and cold ingredients. Says Sobel, “There’s been lots of ‘chatter’ about dextromethorphan, the last remaining OTC cough suppressant, meeting the same fate as PSE. Retailers keep asking me if we’re researching alternatives, if we have a replacement.
“My sense is that the best replacements for dex are on the homeopathic side,” she adds. “[Nasal spray] Zicam has already successfully tapped into that segment, so homeopathic remedies might be an emerging trend.”
NEW FORMS & FLAVORS
While new cough and cold formulations have grabbed most of the headlines over the past year, both branded and private label manufacturers are starting to turn their attention to new delivery forms. Quick-dissolve/fast-melt items that don’t require water show a lot of potential and have already established a place for themselves in categories such as mouthwash and breath fresheners. But the delivery form generating the most buzz in cough and cold is effervescents.
Although only a handful of private label manufacturers produce effervescents, “The brands are really starting to increase their reliance on them for people who don’t like to take tablets,” says Smith, noting that the technology is already popular in Europe.
COUGH & COLD PERFORMANCE
CATEGORY DOLLAR SALES (IN MILLIONS) % CHANGE VS. YR. AGO DOLLAR SHARE UNIT SALES (IN MILLIONS) % CHANGE VS. YR. AGO AVG. PRICE PER UNIT
COLD/ALLERGY/SINUS LIQUIDS
TOTAL PRIVATE LABEL$96.1 -23.7% 15.6% 23.8 -24.0% $4.04
TOTAL CATEGORY$616.0 -3.3% 100.0% 108.5 -6.6% $5.68
COLD/ALLERGY/SINUS TABLETS
TOTAL PRIVATE LABEL$454.8 -2.7% 21.7% 83.6 -9.2% $5.44
TOTAL CATEGORY$2,099.8 3.9% 100.0% 305.0 -2.0% $6.89
COUGH DROPS
TOTAL PRIVATE LABEL$45.7 -1.8% 12.0% 36.6 -3.3% $1.25
TOTAL CATEGORY$382.0 -1.9% 100.0% 196.3 -5.0% $1.95
COUGH SYRUP
TOTAL PRIVATE LABEL$66.0 -4.7% 20.8% 16.8 -6.3% $3.93
TOTAL CATEGORY$316.6 1.8% 100.0% 55.4 -3.0% $5.72
NASAL PRODUCTS
TOTAL PRIVATE LABEL$94.1 22.8% 18.9% 21.4 7.3% $4.40
TOTAL CATEGORY$497.4 8.8% 100.0% 77.7 4.4% $6.40
Source: Information Resources, Inc.
Total supermarket, drug and mass merchandise sales for the 52 weeks ending Jan. 28, 2007, excluding Wal-Mart.
Softgels represent another easier-to-swallow delivery form with plenty of upside potential. Before products with PSE were forced behind the counter, explains Joni Foley, sales and marketing director at Farmingdale, N.Y.-based PL Developments, there were more than 20 cough and cold softgels on the market. But because it’s difficult to put PE in softgel form, “Now, there are only four,” including store brand versions of DayQuil and DayQuil Sinus, and NyQuil and NyQuil Sinus. Regarding the latter, Foley adds that “there’s been a notable increase in sales of sleep products,” and retailers and manufacturers need to make sure supply keeps up with demand at shelf level.
“We are working on different inclusions into the drop segment, providing the consumer with different mouth sensations,” adds Dave Barnett, president, F&F Foods Inc., Chicago. “These sensations will give either a heating or cooling effect.”
In addition to their renewed emphasis on product form, manufacturers are searching out new flavor options. “We also are working with new flavoring technologies to provide a different and more effective mouth soothing experience,” Barnett adds. “Our objective is to bring something new to the category.”
According to Sobel, Tylenol seems to have hit a home run with its new Cool Burst Blue Mint and Cool Burst Citrus flavors for cough and cold liquids, the latter of which is really pulling up. It was a smart move, she says, “because American consumers are very flavor-driven.”
MERCHANDISING AND PROMOTION KEY
Most retailers today recognize the importance of giving their private labels prime shelf position, but according to Trillium’s McIntosh, there are still those who place their store brand cough and cold medicines below the national brands. But in a category that tends to be both crowded and confusing, “The two really need to be right beside each other so the consumer understands that [the private label] they’re picking up is equal to the product beside it.” The idea, she continues, is to make it easy on consumers by eliminating the need for them to compare products ingredient-by-ingredient. Another way to accomplish that goal is to call out product benefits on-package. “If retailers really want to promote their OTC lineups, they need more interaction with consumers at shelf level and in-store,” she says.
One of the best in-store tools for boosting private label sales is the pharmacist. “Consumers look at pharmacists like doctors,” Smith says, “so use them to promote your private label.”
Foley suggests retailers go a step further and reserve space behind the pharmacy counter (where OTC medicines that still contain PSE must be kept) primarily for private labels. Due to space restrictions, she explains, many retailers opt to carry mostly national brands behind the counter. “But I’d take the reverse strategy here,” keeping mostly store brands and asking pharmacists to help sell them. After all, consumers savvy enough to know that only products with PSE will work for them also are educated enough to realize that it’s the ingredient, not the brand, that really matters.
Retailers should also take better advantage of in-store cross-merchandising opportunities, especially those outside the OTC department. “Everybody’s got a cough and cold display in HBC products right now,” Smith says. “But look at secondary locations away from HBC for the impulse buy.” Think tissues, orange juice, chicken soup, sports drinks, disinfectant wipes, firewood — anything consumers with a cold might pick up. And don’t forget the check-out area.
Trial sizes are another underutilized strategy that not only spurs trial but also appeals to consumers looking to load up their purse, diaper bag or briefcase at the start of the cough and cold season. Retailers might even consider borrowing a page from CVS Pharmacy, Woonsocket, R.I., which recently offered free trial sizes of its own brand cough drops at checkout, resulting in tremendous lift.
Finally, reports Sobel, “We have a fair number of retailers, especially on the food side, that do multi-packs, especially day/night combination packs.” Because night-time formulas typically outsell day-time formulas by a fairly significant margin, she explains, combination packs are a great way to increase sales of the latter. And they’re not always utilized by the national brands because the price point would be too high for many consumers, giving private label a unique opportunity to stand out.

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