Touching All The Bases
Therapeutic shave gel with natural colloidal oatmeal is part of the new wave of store brands at CVS.
Chain drug stores can’t afford to limit their front-end private label merchandise to only OTC and HBC any more. Foods, housewares and sundries get as much attention as premium beauty care.
Food? Clothing? Housewares? More and more of these seem to be finding their way into private label programs at drug chains. Prescriptions may still dominate sales, but front-end sales may be doing more for the bottom line, and those front end sales aren’t just OTC and HBC any more.
Walgreens, Deerfield, IL; CVS, Woonsocket, RI; and Shoppers Drug Mart, Willowdale, ON, have all expanded their front end private label programs far beyond traditional drug store products, although prescriptions still dominate sales. But drug chains face increasing competition for the Rx market from supermarkets and even discount stores, and are also being challenged by specialty retailers in the HBC and vitamin-food supplement categories.
“‘Front-end sales have continued to grow due to new store openings and strengthening core categories, such as over-the-counter non-prescription drugs, household items, convenience foods and personal care products,”’ the top drug chain observed in a 10Q report last June 30. “‘Walgreens’ strong name recognition continues to drive private brand sales, which are included in these core categories.”’
Since then, Walgreens has acquired Duane Reade, a New York City area drug chain with an impressive track record in private label, most recently with the Dr. Delish food brand (See Cover Story). “They’ve done a heck of a job in New York City with that private brand,” Walgreen president and CEO Gregory D. Wasson said recently.
Walgreens is said to be eager to apply Duane Reade’s tactics where it already has a strong foothold, in cities such as Chicago and San Francisco. “Even though Walgreens is obviously no stranger to private label, I think Duane Reade has a talent in that area, an expertise if you will, that will deepen Walgreens’ expertise, especially in urban markets,” said Matthew Kaufler, portfolio manager of the Federated Clover Value Fund, which has a major stake in Walgreens.
W Brand & More
Walgreens has been pursuing several private label strategies at once. The most obvious has been the conversion of a lot of Walgreens brand products, mainly in the HBC area, to the plain W brand. W brand conversions include items like shampoo, toothpaste, lip balm and soap, eye care and feminine hygiene; but also facial tissue, cleaning pads and other household products, even shoe cream. A variation, Café W, is used for breakfast items like doughnuts, and even for frozen foods like chicken tenders.
Studio 35, once a brand for cameras and film, has been recycled as a brand for personal care items and implements like nail polish remover, makeup brush kits, tweezers, styling irons, and cosmetic puffs and wedges, plus hair styling accessories like barrettes and ponytailers. But it also covers beauty products like spray-on skin shimmer for women’s legs, plus summer footwear and fashion accessories – sandals and flip-flops, and a wide range of designer sunglasses merchandised from their own display racks.
CVS is on top of new HBC and OTC trends under its store brand, as with pore strips, sterile wipes and hair, skin & nails supplement. But it has also gotten into categories as diverse as canned goods under the Gold Emblem brand and office supplies under the Caliber brand.
Details, a line of bath and body products introduced a couple of years ago, is being promoted with test bottles of body mists like those for branded fragrances; varieties include Country Meadow, Slice of Life, Sweet Surrender, Tropical Garden Coconut Coast, Paradise Bay, Summer Shower, Island Cottage. There are also gift sets of hand and body lotion, body wash and anti-bacterial hand gel. Like Bioinfusion, a brand used in hair care products like styling mousse – including an sub-brand for African Americans – Details is credited to Riviera Brands in the distribution clause on packaging, but Riviera Brands is part of Walgreens.
East West Distributors is another Walgreens unit used in some distribution clauses, but different sources are sometimes listed for different products under the same brands. Tuf, a brand long used for paper towels and kitchen and trash bags, has been extended in recent years to household tools – but some of these are credited to East West and others to Faucet Queen, which doesn’t seem to be part of Walgreens.
Living Solutions, a brand for housewares, credits East West on some products and ADJ of St. Petersburg, FL, on others. Other East West brands for houseswares and knick-knacks include Home Elements, Kitchen Gourmet, Signature Select and Seasonal Faire. Casual Gear and Ravinia, meanwhile, are category brands for women’s socks (cozy, athletic and slipper) and pantyhose.
Even before Café W, Walgreens had begun offering food and beverage items under the Deerfield Farms brand. Dried fruits and some packaged nuts come under that brand, others under Walgreens Select. A recent variation is Deerfield Trading Co. for soft drinks in glass bottles that seem to be positioned a quality cut above soft drinks under the Walgreens brand.
The Walgreens brand is still used for OTC drugs and some vitamins, but there is also a Finest Natural line for the latter, and a Walgreen Apothecary line for wets and dries. Ice cream, which the chain has offered for a number of years, is also under the Walgreens brand. Another new brand is European Collection for imported candies.
Gold Emblem at CVS
Walgreens appeals to environmentally-conscious males with Men’s Zone Go Green deodorant body spray.
Adding categories like canned goods and even baking soda to the Gold Emblem line, which began with candy, cookies and snacks and was later extended to include juices and spices, is a notable development at CVS. According to CFO Dave Denton, it is also trying out the idea of convenience foods – including ready meals – at some urban outlets.
The number two drug chain has also launched a line of school and office supplies under the Caliber brand, similar to what Walgreens has done with Corner Office and Penway. But the main thrust of CVS is still in HBC. Even under the plain CVS brand, there have been introductions like luminous anti-wrinkle night cream and daily eye cream with soy complex.
Essence of Beauty, which was launched years ago with bath and beauty products, has taken a new turn by offering hand sanitizers – once strictly utilitarian items – in the same “‘flavors”’ as other products: sun blossom, citrus coconut, passion flower, etc. Eau de toilette is available in the same flavors, Meanwhile, CVS continues to pursue niche HBC categories with its 24/7 brand and licensed Lumene and Skin Effects by Dr. Jeffrey Dover brands.
One reason for this may be competition from non-pharmacy beauty care chains like Bath & Body Works, Columbus, OH, and Ulta Beauty, Bolingbrook, IL. Bath & Body Works’ Signature Collection line is constantly being augmented with new products and “‘flavors”’ such as Berry Vanilla, Coconut Vanilla and Orange Sapphire for products like shower gel, body lotion, fragrance mist, body cream, body scrub and body butter. Ulta Beauty, meanwhile, thrives on store brand cosmetics like lipstick, eye shadow and nail lacquer which drug chains seem to have mostly given up on, while also offering a wide range of bath and body items under its own brand – including oddities like a chocolate mousse body whip cream.
Drug chains also face competition in the vitamin and food supplements market from retailers like General Nutrition Centers, Pittsburgh, PA, and Vitamin Shoppe, North Bergen, NJ. Both put a lot of stress on body building products; although some are for women, most target men, as witness Mega Men Sport dietary supplement at GNC. If Bath & Body Works is a chick magnet, GNC is a guy hangout. But drug chains, too, are paying more attention to guys these days, as witness store brand products like Men’s Zone Olympus deodorant body spray at Walgreens and even Life brand prostate complex at Shoppers Drug Mart.
Third-ranked drug chain Rite Aid, Harrisburg, PA, is the only one to have suffered a sales setback over the past year, and the only one to show a declining share of front end sales. That may be why the chain has announced a restructuring of its private label program recently.
Six new brands are being introduced, said John Standley, president and CEO. These are Rite Aid pharmacy for health products, Renewa for beauty care line, Pantry for food and other consumables products, Home for household goods, Tugaboos for baby products, and Simplify as a price-fighter brand. Standley characterized the initiative as “new private brand architecture that will occur throughout this fiscal year and into next year.”
“All of our existing private brand products, with few exceptions, will be migrated over time to these new brands with new, more contemporary packaging,” he said. It’s a dramatic change from the present situation. Rite Aid has offered some food and beverage items, including meat snacks, popcorn and tea – but without any brand on them. Aside from Pharmassure for vitamins and Salon Plus for nail care, it hasn’t offered any prominent category brands.
SDM Debuts Baléa
Prostate complex under Shoppers Drug Mart Life brand targets Canadian seniors.
Store brands are getting more play north of the border, where last year Shoppers Drug Mart launched Baléa, a line of health and beauty lifestyle products billed as offering both quality and affordability. It was only the latest in a number of private label initiatives, notably Nativa for organic foods and Bio-Life for environmentally friendly products, in addition to the long-established Life brand for OTC, HBC, food and other products and Quo for cosmetics.
“Baléa invites shoppers to experience the brand ‘from head to toe,’ with a comprehensive range of products that includes hair care and skin care for the whole body, from facial wipes and lip balms to shampoos, body lotions and foot creams,” the chain said, and “makes it easy to find what you need with seven sub-brands: Baléa Kids, Baléa Hair, Baléa Face, Baléa Hand, Baléa Body, Baléa Bath and Baléa Shave.”
“Canadians are looking for trusted, go-to brands for their important everyday health and beauty needs – and Baléa answers this demand,” said Luchien Hoving, senior vice president, global sourcing, corporate brands and exclusives. “Shoppers Drug Mart has established itself as a destination for health and beauty aids, offering innovative and quality brands and products. Baléa is a welcome addition to our house of brands and will provide our customers with an elevated sensory experience in this category,” says Hoving.
Baléa is available exclusively at more than 1,160 Shoppers Drug Mart and Pharmaprix stores across Canada, a convenience that fits in with Canadians’ increasingly busy, active lifestyles. The line boasted more than 130 items at the end of 2009, with hundreds more to follow this year.
Another development at Shoppers Drug Mart, which CEO Jurgen Schreober characterized as “private label generics,” involves shelf-ready prescription drugs that would come pre-packaged in popular types and sizes to save pharmacists the time and trouble of filling bottles – and thereby cut costs and pass on the savings to consumers.
Jean Coutu’s Eco Nature
Jean Coutu, Longeuil, QC, has leveraged its first-line Personnelle brand to create a new Eco Nature line of feminine hygiene products made from 100% organic cotton that is synthetic or chemical product free. “Even the packaging is chemical agent free,” the chain boasts at its website. “‘So this is the ideal line for anyone concerned about the environment and/or having sensitive skin.”’ Jean Coutu has also tied in with a popular movie franchise by launching a co-branded Personnelle-Shrek line of diapers and training pants.
Left pretty much in the wake of drug, HBC and vitamin and food supplement chains are private label programs of drug wholesalers. Independent pharmacies vary in size and sales volume; the National Community Pharmacists Association puts average sales at $3.8 million a year, with $3.6 million of that – 95% – generated by prescriptions. Sales by wholesalers to independent pharmacies as reported to the Securities and Exchange Commission are a lot less than that, but independents may buy from more than one source.
Good Neighbor Pharmacy, a group sponsored by AmeriSource Bergen, Chesterbrook, PA, is by far the largest at 3,600 members. It seems to have gained at the expense of Health Mart, sponsored by McKesson, San Francisco, CA, with a bit more than 2,000 outlets. The Leader, a group supplied by Cardinal Health, Dublin, OH, claims 3,300 members. Cardinal owns Medicine Shoppe, a chain with about 1,400 stores in the United States and Canada.
