General Merchandise/HBC

Placing Value on Value Brands

Growth in private label an opportunity for c-stores

OAKBROOK TERRACE, Ill. – Convenience-store shoppers are looking for more variety and value when it comes to over-the-counter medicines, which means convenience-store retailers have a growing opportunity to boost their private-label, or value brand, health-and-beauty-care (HBC) sales.

a woman shops for health and beauty care products

Value is critical for c-store shoppers, according to Chicago-based research firm Technomic. The vast majority of c-store foodservice users (89%) say it’s important that the convenience stores they visit offer a good value through low prices, making this attribute one of the most important for c-store shoppers, on par with convenience and speed.

And lower-income consumers are not the only ones driving value sales during c-store visits. Monthly c-store shoppers skew slightly to those earning between $75,000 and $150,000 annually, according to Technomic. “While these consumers have more discretionary income, they prioritize value and low prices to the same extent as lower-income shoppers,” said Colleen Rothman, senior manager of consumer insights for Technomic.

Opportunities for value-brand sales

The opportunity for emphasizing value exists across all categories, and for convenience retailers, it’s especially relevant for HBC. A majority of consumers (over 60%) prefer value-brand (private-label) over-the-counter medicines (OTC), according to an independent study conducted by Harris Interactive.

This can be attributed in part to consumers’ increasing acceptance of value brands as they increasingly know these products typically contain the same active ingredients as traditional branded OTC products. In fact, 75% of North American shoppers believe private label is a good alternative to name brands, according to research from AC Nielsen.

What’s more, a study conducted by Frank N. Magid & Associates found that 32% of c-store shoppers consider themselves regular value-brand buyers.

Despite the fact that many consumers prefer value brands, sales of these products account for just 3% of HBC sales in the convenience sector, lagging way behind overall sales in other retail channels at 17%.

As a result, there is opportunity to boost sales in this area, and many c-stores appear to be doing just that. According to Nielsen, sales in the HBC category have continued to increase year-over-year among all outlets, including convenience. HBC sales increased 5.6% to roughly $40.65 billion in June since the same period last year, according to Nielsen.

Variety remains key

Convenience stores that offer a wider variety of branded and value-brand products can take advantage of new sales opportunities. This helps position them as a one-stop-shop for consumers, especially value-seeking ones.

“From a retailer’s perspective, offering a wider variety of value-brand products can help c-stores compete with larger chains,” said Doug Marquardt, marketing director for Lil' Drug Store Products Inc., the leading supplier of HBC products to the convenience channel. “Stocking value-brand products helps retailers capture valuable private-label sales and profits.”

Lil' Drug Store Products recently launched a value line of 19 SKUs to help convenience retailers gain a larger share of value shoppers’ dollars. The expanded product selection includes everything from pain relievers to allergy meds, cold and flu aids, sleep aids and even bandages and children’s medicines.

Offering a wider range of OTC products can also help simplify the distribution process for retailers, because they can look to one company to source multiple SKUs.

Dressed-up Displays

Offering a wider variety not only enhances incremental sales and profit from value-oriented consumer segments, but it also creates stronger merchandising on the shelf. “One of the benefits of the Lil' Drug Store line are the larger pack sizes that provide multiple doses at a competitive price,” said Marquardt.

In addition, Lil’ Drug products have c-store-specific packaging, which means that these products can either be shelved alongside branded items or pegged depending on the store layout. “This offers versatility as far as display options,” Marquardt said.

Many of the company’s value brands also feature colorful graphics resembling major national brands that helps add interest and fullness to a display.

By taking advantage of the various benefits these value-branded products offer, c-stores will be able to compete, not only in a growing OTC category, but in the larger HBC segment overall.

This post is sponsored by Associated Distributors

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