Other retail channels—your competitors—have private-label HBC all figured out. Trust? Check. Price-value perception? Indeed. Availability? Of course.
Boasting buying power, positive consumer opinion and robust shelf space, these retail channels have proved a real triple threat in taking on private-brand names.
For convenience stores, private-label HBC opportunities exist around analgesics, skin care/lotions, throat lozenges, shampoo, toothpastes and tissue/toilet paper. But people familiar with c-store merchandising dynamics say it’ll take retailers time to cultivate this kind of selling opportunity.
“Lots of c-store companies have successful private-label products, but most are in the foodservice area,” says Steve Montgomery, president of Lake Forest, Ill.-based consulting firm b2b Solutions LLC. “By limiting their private label to items that have less brand requirements in the purchase process—such as paper goods—there’s an opportunity to provide quality.”
Private-label offers are operating at an all-time high across many categories and channels, and they will only get stronger, according to Paul Weitzel, vice president of retailer management consulting firm Willard Bishop, Long Grove, Ill.
For c-stores, private label has expanded from the fuel island to foodservice, bottled water and even snacks and tobacco. To that end, the New York-based Private Label Manufacturers Association reported store brands in supermarkets, drug chains and mass merchandisers accounted for nearly $3 billion in incremental sales overall, an increase of 2.5% over 2014 performance and more than twice the gain recorded by national brands.
“Look at what Aldi has done to convince consumers about the efficacy of store brands,” says Weitzel. “In the c-store, bottled water is an example of private-label success. Retailers kept price points within reason and still have made their margin in a small-format environment.”
C-stores with a generic presence can offer a well-rounded category-management plan by blending name-brand items with private labels within a tiered pricing structure.
A Matter of Economics
Often the cost-benefit proposition undermines the best-laid plans for generic HBC merchandising in c-stores. Larger retailers with scale and buying power have the luxury of owning their own HBC store brand—or controlling a broker or supplier-sponsored brand. “It helps if the retailer does self-distribution or, like Circle K, is big enough to ‘demand’ their distributors warehouse their private label,” says Montgomery.
For instance, 7-Eleven in one Chicago-area store stocks its own 7 Select brand of assorted HBC alongside brand names. 7 Select Day Time Relief Cold & Flu (SRP of $6.49) sits adjacent to a Vicks DayQuil Cold & Flu that costs about $2 more and is the same size.
Most c-stores have only about five to six categories “that do all their volume in a one to two-unit (average) market basket, and an average of only 2,300 SKUs per store—so they have to do it right,” says Weitzel.
Retailers have to pick their spots—and keep in mind a built-in advantage. HBC is an emergency purchase, an inflection point where customers are less concerned about price points. That said, “if you need a cold/flu med, you need it now,” says Weitzel. “But if there’s a bad buying experience, you as a retailer might not get a repeat purchase.”
In fact, c-stores should play to their emergency, small-pack strengths. That’s their sweet spot. Be it in private label or name brands, some consumers actually prefer smaller-count formats over multicount varieties because they don’t want to be bogged down with meds they might have to discard when they expire.
“There’s a lot of people who won’t buy Tylenol from a gas station because they see it as price gouging,” says Sam Odeh, CEO of Elmhurst, Ill.-based Power Mart Inc. “Some would be more willing to buy a two-count Tylenol for 99 cents because it holds them over for that one day they have a headache, rather than buy a larger six- or 10-count size for $9.99.”
Retailer broker partners are a big piece of the puzzle. Some offer dynamic HBC solutions—with an emphasis on brand varieties—as part of a well-rounded multiunit display. “Lil’ Drug Store Products does a nice job with an HBC spin rack,” says Weitzel. “I think c-stores could bundle products across HBC, like ‘Pick 5 at this price,’ and blend brand names with private label.”
Putting a drag on a private-label commitment is the approach. “When a large chain implements a private-label program, it’s part of a total store brand strategy for HBC sections larger than 4 feet,” the amount of space too many c-stores allot for HBC, says Tom LaManna, vice president for merchandising services for Melrose Park, Ill.-based Convenience Valet. “In 6- to 8-foot [sections], you normally fi nd that only analgesic and UR private label make sense, and then only if you have the right pricing strategy and understand the consumer decision-tree process.”
LaManna says data indicates that single- and double-dose name-brand OTC medications outperform generics by two to five times, as measured by dollar sales per point of distribution.
Retailer Rx
Because HBC encapsulates so many segments, operators should look to pinpoint private-label opportunities based on demographics, market-basket opportunities and one that reinforces a retail image of trust and quality. And analgesics are so trusted at this point that c-stores can view the investment as a potentially prudent one than in the past.
Touting an advantage “where quality and value meet convenience,” Cedar Rapids, Iowa-based Lil’ Drug has seen strong performance across its pain relief portfolio. For feminine pain relief, it saw (behind Bayer Healthcare) 18.8% dollar sales growth and 17.0% unit growth for a 52-week period ending Feb. 21, 2016, according to Chicago-based IRI. Convenience Valet’s share across the same portfolio saw dollar sales jump 4.3%.
“This is counterintuitive, but customers are more willing to buy a private-label analgesic than a skin care lotion in a c-store,”
says Montgomery. “They’ve been exposed to them and other OTC meds in supermarkets and chain drugs. They trust the ingredient quality and safety. They know these items have to meet certain government-required formulations.”
People have become accustomed to buying generic prescriptions and OTC drugs, a habit that provides a halo effect for potential c-store sets, Weitzel says. That said, “retailers have to take a long view when offering private labels because you want customers to come back, so providing quality is a must.”
Power Mart went with the flow of generic HBC adoption when it integrated a private-label tissue paper into its mix last fall as part of an agreement with Carmen USA. Merchandised in an eye-catching endcap display bin, Power Mart stores offer two small tissue packs for 99 cents and one large pack for 99 cents.
“It has high-quality cotton, which was a selling point. We love the fact that it’s a private-label product in the United States but overseas it’s considered a strong brand name,” says Odeh.
“Over five months’ time, we sold 500 units per store and increased the sales of tissue and paper towels by $150 a month (per store) from the previous year using a different brand.”
Analgesic Tablets
C-store sales, 52 weeks ending Feb. 21, 2016
The overall analgesic-tablet segment grew 6.29% in dollar sales and 0.68% in units, according to IRI.
| Brand | Dollar Sales PCYA* | Unit Sales PCYA* |
| Pfizer | 12.8% | 13.4% |
| Prestige Brands | 10.1% | 3.6% |
| Convenience Valet | 7.5% | 3.8% |
| Bayer Healthcare | 5.3% | 5.6% |
| Lil’ Drug Store Products | 0.8% | -3.3% |
Analgesic Liquids
C-store sales, 52 weeks ending Feb. 21, 2016
Analgesic liquids grew 4.13% in dollar sales and 3.4% in units, IRI data shows.
| Brand | Dollar Sales PCYA* | Unit Sales PCYA* |
| First Aid Shot Therapy | 237.0% | 233.5% |
| McNeil, Consumer Healthcare | 14.9% | 13.2% |
| Prestige Brands Holdings | 14.7% | -10.3% |
| Private label | 7.8% | 7.7% |
| Pfizer Inc. | -14.0% | -13.8% |
* Percent change from a year ago | Source: IRI
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