Front end helps industry through tough times – Editorial – drug store industry

Front end helps industry through tough times – Editorial – drug store industry – Brief Article

Rob Eder

Maybe I’m just cracking up from a couple of weeks of staring at Excel charts–hundreds of Excel charts. But I have to say that all the hours spent crunching the numbers that appear in this issue of Drug S tore News (see coverage beginning on page 35) leave me feeling pretty optimistic about the business at the front end of the store, certainly more optimistic than I felt 12 months ago.

One year ago, the country was staring down both barrels of a recession that no one wanted to talk about–no national economists, at least. Companies consolidated operations. Some shut down altogether. Either way, many consumers found themselves without a job. Money got tight. You had to believe that the American consumers were going to have to cut back. And they did. Consumers cut back on a lot of things. Ask department store executives and toy retailers what kind of year it was.

Drug chains got to find out just how recession-proof they were in 2001 and, looking back, it would seem that most weathered the storm rather favorably. The argument goes that there are some products the consumer just can’t live without, even when the economy goes south. Drug has a natural advantage, they say, because people always need toothpaste and aspirin; maintenance prescription customers still need their meds.

If that wasn’t enough insurance for them, the big chains all got more promotional last year. And if it put a hit on gross margins it seemed that was just the price you had to pay to do business in that kind of environment, because everybody did it. And it seems to have worked. The growth in the major departments of the store bears that out. Drug chains grew the business in HBC, GM and consumables at a rate almost double the average pace set across food, drug and mass outlets combined.

But if you look very carefully at the numbers for 2001, some very positive trends emerged last year and appear to be continuing through 2002–positive signs that suggest the future looks a lot brighter today than it did one year ago.

Perhaps most important, it has become clear that even when consumers might be a little short of cash, not only do they still find ways to buy the things they need, but they also find ways to buy the things they do not need but want, nonetheless. They will still pay extra for innovation.

Women spent more than $30 million to upgrade to Gillette’s Venus last year. You have to believe they had a razor to shave with before that.

Consumers spent more than $18 million on Listerine PocketPaks product’s first six months on the shelf. For fresh breath, they could have bought a pack of gum for as little as 25 cents.

The numbers also substantiate Max Factor’s lipstick index theory. When the economy was down, women still found a way to buy a new shade of lipstick as a lower cost alternative- to, say, buying a new outfit–for keeping up with the fashion world. Lipstick sales grew 6 percent last year in drug chains, far exceeding growth in every other segment of color cosmetics. And they bought the newer, higher ticket offerings like Lipfinity (Max Factor) and Outlast (L’Oreal), both of which finished among the top 10 highest growth categories in the store.

And both segments of diet/weight loss were up, led by products such as Metabolife 356–the single-highest growth brand in 2001 in terms of incremental dollars–and he Hollywood Celebrity Diet, suggesting that consumers are once again willing to spend money for the “magic bullet” solution. Certainly, they could have saved a lot of money just cutting out the extra bread and the sweets and taking a jog around the block.

Again these are all trends that continue in 2002. And that makes me pretty optimistic about the future of the front end.

COPYRIGHT 2002 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2002 Gale Group