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‘Downturn Generation’ adopts frugal OTC shopping habits

BY Michael Johnsen

Over-the-counter medicines may be somewhat recession proof—especially as more consumers continue to take a detour from their doctors’ offices to the self care aisles in an effort to save—but the economy is still negatively impacting the category.

With the recession has come a greater emphasis on the need for sharper promotional pricing in light of marketshare erosion to store brands, and higher performance hurdles at a time when retailers are optimizing their planograms. OTC manufacturers need to drive more sales across fewer consumers—a challenge especially among branded OTC suppliers.

“The overall domestic OTC consumer market was down 3.1% in the quarter [ended March 28] versus last year,” noted Perrigo chairman and CEO Joe Papa in a conference call last month. “National brands fell 7.3%, while store brands gained 11.7%. The data is showing that consumers are making the value judgment as store-brand share continues to grow,” he added, to the benefit of such private-label manufacturers as Perrigo.

The recessionary economy is placing greater pressure on performance across branded products, consumer shopping behaviors are changing, and many say those changes may be permanent—carrying through any future economic recovery.

Information Resources Inc. released a report in April identifying this new consumer as the “Downturn Generation,” which is a new generation of Americans who are adopting practices similar to Depression-era shoppers. “[Consumers] have made obvious behavioral and attitudinal changes, and many admit they intend to prolong the use of their new methods,” stated IRI consulting and innovation president Thom Blischok.

Nearly 64% of shoppers characterized their financial condition as a little or a lot worse than last year; and as few as 30% believed their finances will be a little or a lot better one year from now. More than 69% said they are more likely to look through retailer ads for deals, nearly 82% were more likely to look for sale prices once in the store and just under two-thirds of consumers say price is becoming more important than convenience in brand purchases.

“Financial pressures are causing shoppers to give up favorite brands, buy smaller quantities of preferred items or postpone nonessential purchases for entertainment in order to save money for their most important needs,” Blischok said.

Newly identified approaches include consumers turning to the plethora of information available on the Internet to help prepare for purchases; clipping online coupons; and researching reviews, commentaries and opinions on products and services before making purchases.

More than 44% of shoppers are using online resources to find coupons today, and 55% of them plan to continue this practice into the future. Approximately 59% visit multiple stores for the lowest prices, and 42% of those will continue to do so. Almost one-third of consumers are making bulk purchases with others not in their households to secure low unit prices, and 35% of those shoppers intend to continue doing so.

It’s not all bad news, however. Consumers also are cutting back on their healthcare costs, opting to treat themselves at home versus visiting a doctor, and increasing their use of OTC medications. Nearly 44% of surveyed consumers are trading their doctor for information on the Internet, and half of those will use this strategy in the future. Just more than 51% are trying the OTC-in-place-of-a-doctor-visit approach today, while just under 43% of those shoppers report they will continue this approach into the future.

That focus on promotional buying coupled with the increase in private-label sales, while certainly a plus for retailer margins, is beginning to take its toll among branded manufacturers, even among some of the larger companies. “Sales of our OTC products were nearly 4% below the first quarter of 2008,” acknowledged Werner Wenning, Bayer CEO and chairman, in an April conference call with analysts. “For the first time, we felt the effects of the economic crisis more strongly, especially in North America. For that reason, sales of Aleve were down by 18% and aspirin by 16%,” he said, reporting on the Bayer quarter ended March 31.

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Kroger declares quarterly dividend

BY Michael Johnsen

CINCINNATI The Kroger Co. announced that its board of directors declared a quarterly dividend of 9 cents per share to be paid on Sept. 1 to shareholders of record at of the close of business on Aug. 14.

Kroger, one of the nation’s largest retail grocery chains, employs more than 326,000 associates, who serve customers in 2,475 supermarkets and multi-department stores in 31 states.

On Thursday, the company announced that its president and COO Don McGeorge was retiring. McGeorge has been replaced by W. Rodney McMullen.

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Walgreens to test diabetes care model

BY DSN STAFF

NEW YORK Walgreens continues to flesh out its revamped strategy to be the nation’s most convenient and accessible provider of pharmacy and health-and-wellness services.

 

The latest plank in that platform is its plan to test a pharmacy-driven outreach and support program for patients with diabetes.

 

Diabetic-care services and product presentations are nothing new in the nation’s chain and independent drug stores; every pharmacy leader knows that diabetes is a major, (often undiagnosed) health challenge and a “gateway” disease that usually subjects its sufferers to a slew of other related conditions involving the circulatory system, the skin and other organs. It’s also no secret that diabetics generate far more in annual drug store sales to treat these related conditions.

 

What makes Walgreens’ pilot program worthy of notice are two things.

 

 

First, with some 6,800 retail pharmacies, 350 in-store and worksite clinics and a network of specialty pharmacies across the United States, the company wields enormous potential power in the healthcare marketplace. If it expands its fledgling diabetes pilot beyond the test stage, it has thousands of “points of care” through which it could offer diabetes support programs and other disease management offerings. It’s a huge potential resource to offer diabetic patients and their employer-based or government-sponsored health plans, not to mention those patients’ overburdened, time-constrained primary care doctors.

 

 

Second, Walgreens is very deliberately positioning its diabetes care offering as a part of a much broader, integrated healthcare platform that links patients in the program to all the company’s health-and-wellness capabilities, said Walgreens CEO Greg Wasson. And it dovetails neatly with the Obama administration’s call for “more preventive care and better access,” in the words of Walgreens’ top manager.

 

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