W Marks the Spot
By John J. Pierce

Silky Smooth Body Wash is part of the new generation of HBC from Rite Aid.

Walgreens wants shoppers to remember a letter. CVS puts focus on beauty care brands. Shoppers Drug Mart gets into groceries.

It’s not just another store brand, it’s the W brand.” You hear that message right in the store, and in radio commercials. You see it in ad circulars.

There can’t be too many retailers that could turn a letter into a store brand, but that’s just what the world’s largest drug chain, Deerfield, IL-based Walgreens, has been doing. The big red W has been appearing on more and more products over the past year, and not just in the health and beauty care area.

Walgreens reported the 34th consecutive year of record sales and earnings for fiscal 2008, with revenues up 9.8% to $59 billion. For the 52 weeks ended Feb. 28 of this year, the total was $61.034 billion. That was despite a slowdown in new store openings, after a net gain of 561 (including acquisitions) in fiscal 2008. Acquisitions since then include the 32-store Drug Fair chain and a dozen Rite Aid outlets out West.

As of mid-April, the list of W brand products included liquid soap, skin lotions, dental floss, moist wipes, foot and shoe care products, dandruff shampoo, feminine hygiene products, diapers, paper plates and more. In-store radio frequently promotes W brand products, “as good as or better than the name brand, without the name brand price.”

Walgreens is using its store brands to boost margins while the drug chain moves to a more promotional merchandising program. Greg Wasson, chief executive officer, told analysts that greater price promotions are needed because of recession-wary shoppers, adding “there is tremendous upside getting on private label” as a way to offset pressure on profits. “I think one of the things you will see us do is really aggressively promote our private brand.”

As reported in the April issue of the Private Label Manufacturers Association’s PLMA Scanner, Walgreens executives also told the analysts that store brands now account for about 20% of front-end sales and are still showing healthy growth. The chain is looking at private label penetration levels in European countries. “Those at the very high-end can approach 40ish percent over time, but really I think it depends by category,” one executive said.

Besides the new plain W and traditional Walgreens brands, the chain may have more category private labels than any other retailer – except, presumably, Wal-Mart.

These range from Bioinfusion for hair care to Studio 35 for nail care, Tuf for paper goods and plastic bags, Café W for breakfast pastries, Pure American for bottled water, Deerfield Farms for snacks and frozen food, Corner Office for office supplies, Home Elements for kitchen tools and Signature Classics for small appliances. There are also variations on the primary store brand like Walgreens Select for cookies and snacks, and Walgreens Apothecary for basics like hydrogen peroxide.

There are special sectional display signs for the Bioinfusion lines of premium and organic hair care products, which are grouped together rather than cut in. Black hair care products under the Bioinfusion brand are also grouped together. Studio 35, once used for cameras and film, now appears on nail polish removers like mango mandarin–but also on sandals for summer beach wear.

Men’s Zone is used for men’s hair coloring (There don’t seem to be any private label women’s hair colorings.), sports deodorants, razors and shaving creams. Home Elements, Signature Classics and Living Solutions share space in mass displays of kitchen gadgets, steam irons and even small vacuum cleaners.

CVS Store Brands

CVS works 24-7 to market cutting-edge products like 24.7 Minerals anti-aging cosmetic highlighting palettes.

No private label vacuum cleaners at CVS, Woonsocket, RI, although the chain–now part of CVS Caremark–does have private and exclusively licensed brands that go beyond OTC and HBC, most notably Gold Emblem for snack foods, beverages and spices; and Playskool for economy diapers.

Latest private label entry is Petcentral, a line of pet accessories introduced without any fanfare. Marked by POS signs carrying a “care, groom, play ...,” message, the new brand is gradually appearing in the chain’s pet care aisle. It currently consists of pet beds and all-natural cat litter, but will expand by the end of the summer, according to a CVS spokesperson.

There has been a great deal of new product activity recently in the CVS Pharmacy brand. Just a few examples are Advanced Face & Neck Dual Formula, with minerals and pro-retinol encapsulated Vitamin A (comparable to L’Oreal Advanced RevitaLift Double Lifting, but at 1.2 oz, “20% more than the national brand”); and 13.5 oz Enriched Daily Lotion for very dry, very rough skin, with Vitamin E, almond oil & sea minerals (comparable) to Nivea Body Essentially Enriched).

Vickery & Clarke is the latest HBC specialty brand at CVS, but hasn’t reached all stores yet. “Inspired by Alice Vickery and Isabella Clarke, who broke new ground for women as pharmacists in the 1800s, Vickery & Clarke Natural Apothecary products are simple, effective remedies made with over 94% natural ingredients,” declares a promo at the chain’s website. The line, said to be free of parabens, sodium lauryl-laureth sulfate, phthalate and petrolatum, includes Detox Face Mask, Body Scrub, Mega Rich Eye Cream, Cucumber Face Tonic and more.

Next youngest beauty product brand at CVS is 24.7 skin care, with items like Daily Purifying Facial Scrub. Cristophe Beverly Hills offers hair care products like Color Extending Shampoo (“makes color treated hair vibrant & healthy”). Skin Effects by Dr. Jeffrey Dover includes seasonal items like Sun Effects SPF 35 active continuous spray sunscreen with Dermaplex Technology. Essence of Beauty, a CVS brand that has been around a lot longer but has often been revamped, offers relatively basic items like Pure Amber shower gel.

CVS remains well behind Walgreens in sales despite last year’s acquisition of Longs Drug, Walnut Creek, CA. As with previous acquisitions over the past two decades, CVS is converting Longs outlets to the CVS banner and introducing CVS brands. Longs brands are being kept only to burn through inventory.

Number three drug chain Rite Aid, Harrisburg, PA, plans to expand its store brand range and upgrade its packaging this year, according to the PLMA Scanner. “We’re going to add probably 250 additional items in this fiscal year,” John Standley, president, told analysts. “We are working on our package design which we think is important just from an appearance. We are looking at the merchandising of it. We’re supporting private label right now pretty well with promotion, we’re going to continue to do that.”

Standley also noted that increased private label penetration is helping drive up front end margins. Besides the Rite Aid brand, the chain offers Salon Plus nail care products and implements, and Pure Spring bath and body products. That last brand, relaunched several times over the past few years, now includes bath and body products like shower gel, body mist and body lotion in Vanilla Cream, Juicy Apple, Cherry Blossom and Jasmine Tuberose “flavors.” An exclusive skin care line called c. booth derma was introduced last year.

Rite Aid also has an arrangement with General Nutrition Centers, Pittsburgh, PA, for in-store mini-stores Even in stores without them, Rite Aid offers GNC’s Pharmassure vitamins and food supplements. General Nutrition Centers specializes in vitamins and food supplements, and isn’t in the pharmacy business at all.

Canada’s Drugstore Powerhouse

Matrix-3 razors are new in private label from Duane Reade.

Would you believe 1,878 new private label products introduced in a single year? That’s the record claimed by Canada’s largest drug chain, Shoppers Drug Mart, Willowdale, ON, where private brands are said to account for 16.9% of annual front-end sales.

“Private label brands have always been an integral part of the Shoppers Drug Mart-Pharmaprix merchandise offering,” the company said in last year’s annual report. “Over the years, Canadians have come to trust LifeBrand as a smart alternative to national brand products. Building on our success with LifeBrand, we have consistently exceeded our customers’ expectations by introducing innovative new private label and exclusive brand products designed to meet their needs and budgets.

“In the face of tougher economic times, Canadians are expected to become more price and value conscious. They want affordable products that deliver on the promise of quality and efficacy.

“The introduction of new private label and exclusive products differentiates us from the competition, allows us to provide better value to our customers, thereby increasing loyalty, while at the same time, presents the Company with opportunities to increase margins and profitability.”

Quo, a private label offering featuring affordable colour cosmetics, brushes and accessories, remains a very strong performer and will celebrate its tenth anniversary this year. Shoppers Drug Mart is continuing to differentiate its product assortment with other introduction of exclusive brands such as Yes to Carrots, Organic Surge, Soap & Glory, and Clean Planet, to name but a few. And that’s not counting Nativa Organics, the first private label organic food line at any drug chain in North America.

Shoppers Drug Mart is also experimenting with new formats. One is Murale, a standalone beauty store with an emphasis on advanced dermatological skin care and luxury beauty, an elevated level of expertise, personal and unbiased service and an assortment of name brands, At the other end of the spectrum is Simply Pharmacy, a 1,000-square foot format for prescription drugs only, and usually located in clinics or medical buildings.

Jean Coutu, Longueil, QC, which expanded into the U.S. market three years ago with the acquisition of half the former Eckerd chain but got in over its head and had to beat a hasty retreat a year later, isn’t retrenching when it comes to private label, as its 2008 Annual Report makes clear:

As a leading drugstore retailer, we continuously innovate and introduce new products, always emphasizing health, beauty and cosmetics, an area with promising potential. In fiscal 2008, we introduced a variety of private label and exclusive lines available only at a PJC Jean Coutu drugstore.

Last year, we successfully introduced the Selection PJC line during the Back-to-School season and our fiscal 2009 selection will be even more extensive. Customers have also been very positive towards the new food and convenience products offered under the PJC Délices brand.

Jean Coutu was the first retailer in its market to remove all automatic dishwasher detergents containing phosphates from our product selection in advance of 2010 government norms and our customers have strongly endorsed the retailer’s position, the Annual Report further stated.

Wholesalers Sharpen Programs

Independent pharmacies are under increasing pressure from chain stores in the current recession, and the leading wholesalers are strengthening their retail support programs. “In two years Health Mart has grown from 350 to nearly 2,000 member pharmacies. And the resulting benefits for franchisees are manifold, said Tim Canning, president of the Health Mart operation at San Francisco-based McKesson, in an interview last summer. And it goes beyond supplying a store name and a store brand (in this case, Sunmark, with more than 1,000 SKUs).

“Independent pharmacists know that they can continue to do what they do well while having the infrastructure and the support that we provide to give them national recognition,” said Canning. The Health Mart program includes a managed care network delivered through McKesson’s AccessHealth division and the McKesson Reimbursement Advantage solution, which empowers franchisees to maximize reimbursement dollars. Franchisees also benefit from national television, print and Web advertising, and matching funds are available for local and regional advertising. Health Mart provides in-store programs, including FrontEdge Merchandiser–which provides franchisees with monthly execution of new product launches and merchandising concepts– and the Health Mart Diabetes Life Center.