Treading a Path to Success
By Martin Schultz
For fitness fanatics and foot soldiers alike, the private label side of the foot care products category is thriving and aggressively challenging the national brands for market share.
It was Napoleon who said that an army marches on its stomach. Yet every infantryman will tell you that if you don’t take care of the soldiers’ feet, you won’t have to worry about making sure they are well fed.
The foot care market showed last year that it knew how to take care of itself. Sales covering the 52 weeks that ended May 20, 2007, rose by just more than 2 percent to reach a total of $596 million, according to figures released by Chicago-based Information Resources Inc. (IRI). However, unit sales of 97.9 million were essentially flat.
The overall foot care market is segmented into devices and medications, and then subdivided into various product descriptions ranging from lotions and creams to health and beauty (including moisturization, deodorization and stress relief).
|FOOT CARE PERFORMANCE |
|Category ||Dollar Sales (in millions) ||% Change Vs. Yr. Ago ||Dollar Share ||Unit Sales (in millions) ||% Change vs. Yr. Ago ||Avg. Price |
|Foot Care Products|
|Total private label||$83.9||15.0%||14.1 %||20.1||5.0%||$4.18|
|Foot Care Devices|
|Total private label||$42.0||18.1%||14.0%||12.4||4.4%||$3.37|
|Foot Care/Athletes Foot Medication|
|Source: Information Resources Inc.|
Total supermarket, drug and mass merchandiser sales for the 52 weeks ending May 20, 2007, excluding Wal-Mart.
Private label’s impact on the category is generally agreed to have left a strong impression over the past year, though not universally so. “Private label’s growth has been strong,” says Steve Corsun, president and chief executive officer of Premier Brands of America, Mt. Vernon, N.Y. “We expect it to continue to surge in most channels, including drug and mass merchandise.”
Across the state, Hawthorne, N.Y.-based Taro Pharmaceuticals’ Carlton Holmes, marketing director of over-the-counter products, takes a similar position. “I think the foot care category will continue to exhibit strong growth at retail over the next few years. It seems that much of this growth has been due to continued strong advertising and promotional support by major brands that have been reaching out to women via line extensions, specifically targeting the needs of women and the continued influx of new products.”
The concept of foot care turned beauty care has been a viable topic recently in the segment, and it’s looked upon as being a significant growth factor for the entire category, especially in private label.
“The category has grown from a preventative/reactive category where products were merchandised by the pharmacy to more of a beauty category where products are merchandised in the cosmetics sets,” says Michael Engels, vice president of sales and marketing for Plano, Texas-based Millers Forge Inc. “With the popularity of professional pedicures and foot treatments, the beauty side of the category will continue to show strong growth.”
To this, Holmes contends that private label represents a very significant part of the foot care category, accounting for between 12 to 14 percent of retail dollar sales and 15 percent of unit sales. “In the next few years,” Holmes claims, “private label has the potential to grow to 20 percent or more of the foot care category.”
But not every aspect of the foot care category is a step ahead.
The Soft Foot
While prominent on store shelves, lotion and cream products represent a relatively small portion of the overall foot care product spectrum. “In this segment,” says Charles Wachsberg, president of Apollo Health and Beauty Care Inc., Toronto, “private label has not realized the same gains. From our perspective, private label has not achieved notable penetration rates within this [segment], which is still dominated by national brands or specialty control label programs.”
In Wachsberg’s opinion, this essentially is due to the segment’s smaller size, which has resulted in lower visibility and an absence of the critical mass needed to enable private label to take advantage of its potential strengths.
The trends within personal care are focused on moisturization, deodorization and stress-relief. Foot products often are referred to as “spa-type” products because they aim to soothe, stimulate and revive tired and neglected feet. The significant sensory benefits of foot care are recognizable and beneficial for stress relief and relaxation, and many successful products are based on aroma-therapeutic and botanical ingredients, which enhance these attributes.
Yet the fact is that in the repertoire of 1,700 active SKUs that comprise the foot lotion and cream segment, there exist few private label products.
“The limited relevant SKU count and the greater profile of currently advertised brands renders this [segment] difficult for private label penetration,” Wachsberg observes.
“The days of sitting back and waiting for the national brand to introduce an item and then simply launching it in private label have long since past,” Engels adds. “Successful private label manu-facturers must be proactive in introducing new items rather than reactive.”
Price is a Private Label Advantage
In considering the foot care category overall, price competition has significantly boosted private label’s acceptance in the market. “In the mature foot care market, private label has done very well. Take corn cushions and air foam products for example,” Corsun suggests. “Private label has a better pricing policy, to the point that national brands in many instances have been discontinued.”
In fact, Corsun notes that many supermarket chains contend that in competition with their own store brands, consumer purchasing patterns indicate that national brands are not needed. “Of course, in the innovator market, there’s still a need for both national brands and private label, but not necessarily in that order,” Corsun acknowledges.
He points to Deerfield, Ill.-based Walgreens or CVS/Pharmacy, Woonsocket, R.I., as examples of chains where more evidence suggests that people are growing increasingly comfortable with purchasing a store brand foot care product rather than the more expensive national brand.
In close agreement is Taro Pharmaceuticals’ Holmes: “The biggest strength for private label products is that they offer consumers the same active ingredients as the innovator, but at a much lower price-point to enter the category,” he says. Also, as Holmes notes, private label products often come in larger sizes not offered by the major brands, thus increasing their value to the consumer.
“Private label foot care products also offer retailers an opportunity to profitably grow their foot care section,” he adds.
The Path to Quality
While price remains a private label advantage in many segments of the foot care category, it’s not the only competitive attribute. “Innovation, quality and value will continue to govern consumer purchase decisions and choices,” Wachsberg notes. “Quicker and longer-lasting results, as well as a focus on intense moisturization and skin/heel repair, are dominant factors in the foot care product decision.”
For Corsun, the issue is based on value. “When private label manufacturers supply better-value products to consumers, it makes the retail chains look better. As a result, retailers specify private label because they know they’re getting superior value at a reasonable cost.”
“Quality, price, innovation and customer service are all very important attributes for both the retailer and the consumer. And all of these factors are considered when the retailer makes a decision to stock a private label foot care item,” Holmes notes.
Interestingly, private label manufacturers in the foot care products category readily acknowledge the growing role of retail in the development of the business. “The retailer is becoming the driving force in foot care,” Corsun observes. “At one time national brands dominated the market. Decades ago, private label had to stand alongside the national brand and suffer the comparison of a better product — backed up with strong promotion and advertising — and the private label product came off worse.
“Today, things are different. More often than not, the store brand looks better. And the national brand, in a side-by-side comparison, offers a lower-quality product often inside lower-quality packaging,” he adds.
According to Engels, “Private label foot care packaging must be able to stand on its own rather than simply contain some common attributes of the national brand. In many instances, private label foot care products are the 100 percent solution for the retailer. This requires that the packaging be as good as, if not better, than the national brand.”
Corsun also adds that the store’s equity in its own brand is so strong today that supermarket and drugstore chains have developed strong national brands of their own, and it’s with these items that they compete against national brands.
The Import Factor
The one area in which foot care product manufacturers show a slight hesitation is with importing products from other countries. Some are fairly sanguine, such as Apollo Health and Beauty Care’s Wachsberg, others are neutral and a few see the import situation as an arena of opportunity.
“Imported products will be more of a factor where lower-entry price points are concerned,” Wachsberg suggests. “However, North American production will dominate where new, higher-equity and innovative performance is mandated and expected.”
Some foot care producers see imported items as upstarts that have to prove their worth before being accepted. But it must be noted that the test of quality will be conducted by consumers, not the U.S. foot care producers.
Are imports becoming a growing threat to U.S. private label manufacturers?
“No, not yet,” Holmes says. “But more private label foot care products are being offered by offshore companies. It’s up to the retailer to decide if these companies can offer products with the same high quality and the same level of customer service excellence as U.S. companies have proved they can provide.
“Price, which in many cases seems to be the only advantage offered by imports, cannot be the sole determining factor for a successful private label product. After all, these products have the retailers’ name on the front panel and must stand up to the quality and reliability standards of their store brand programs,” he adds.
“The importing of a finished foot care product is not a significant issue at the moment,” Corsun says. “On the other hand, where importing has helped the private label foot care manufacturer is in enabling us to source overseas.” Increasingly, private label producers are searching overseas for high-quality parts and ingredients at a competitive cost and then importing them to the U.S. for finishing.
While there continues to be debate on whether or not importing foot care products is the best option for the category as a whole, the category’s growth (and its potential for future growth) is something that cannot be overlooked.
Consumers today are more apt to be comfortable, manicured and healthy from head to toe (more emphasis on the toe in this particular instance), thus giving foot care products a strong “footing” in the marketplace, and helping to identify future growth opportunities in private label that go beyond the steps taken by the national brands.