Getting niche brands on the shelf
For niche brands, getting a foot in the door of mass market retail is no easy feat, and the stakes remain high as retailers have, in recent years, trimmed SKU counts and grown increasingly risk-adverse. Yet, at the same time, retailers remain on the hunt for a point of differentiation among a sea of “sameness.” Such industry trends have elevated the role that business development organizations, master brokers, regional brokers and sales and marketing consultants play in helping to bring niche brands to market, stay on shelf and garner the greatest ROI from their marketing spend. To gain greater insight into how these industry professionals are helping niche brands find success at retail, Drug Store News hosted a virtual roundtable discussion with some of today’s leading players.
DSN: What is the biggest challenge for brands in getting on the shelf these days? How can your company help?
Ron Otto, National Sales Solutions: Convincing a category manager to take the time to review a new product is a challenge. A category manager wears a lot of hats, and there is not much time left over during the week for new vendor/new item meetings. This especially is true for companies just getting started. We educate our clients about the retailers and their expectations. Only after we are convinced they have a product with unique attributes and are willing to support it with both in-store promotions and consumer advertising will we ask a retailer for an appointment. This saves time for everyone and increases the chances for success. Working with a strong local broker makes it easier for a retailer to take a chance on a new company.
Chip Carter, Morgan & Sampson: Many retailers wait until someone else has gone first. In many cases, without IRI, they won’t even consider it for review. We suggest [direct response], infomercials and, of course, social media to create product awareness.
Hank Gehrisch, Pankow Associates: There are many challenges to getting new or growing brands on the retailers’ shelves today. Two of the biggest are cost of entry and developing an affordable marketing plan that will move products off the shelf. “Pay on scan” or having the retailers “hold back” the cost of the original order could prohibit many small or new manufacturers from being able to afford the cost of entry with major retailers. The strength of a consumer marketing program will determine how we can forecast expected sales of a new item in units or dollars. The potential of a new SKU must be greater than an item currently on the retailer’s shelf. We can benefit a new manufacturer by detailing the probable cost of entry with our largest retailers, and advise what the retailer’s expectations or thresholds may be for any given category. We also provide assistance in suggesting how best to spend co-op advertising funds or perhaps using their monies to run national advertising (e.g., advertorials or ROP ads) to maximize the effect of available budget dollars.
DSN: Once a small or medium-sized brand breaks through, how does it stay relevant and top of mind with the retailer and make sure it is not churned out in the next category review?
Dan Mack, Swanson Group: Once a brand hits the shelf, there are three things it must do to stay relevant: It has to create custom experiences through custom promotional events, support its brands with social media efforts that create loyalty, or offer exclusive products that move the needle while providing competitive differentiation to the retailer. Once a brand finally gets to the shelf, the work really begins. The best [brands] create experiences that are unique to the retailer, creating stronger vendor, consumer and retailer alignment.
Frank Parise, Performance Sales and Marketing: By offering an 18-month promotional plan. This will keep category managers aware and looking down the road.
Bruce Funk, Elias Shaker & Co.: It’s a matter of making sure — up front — that solid marketing programs are in effect, not only to consumers but also with the retailer. The bottom line is making sure the product sells as well as you say it will sell and is contributing to the bottom line. Staying on top of retailer data — orders, POS, etc. — and having regular communications with the category manager and support staff also is key in staying relevant.
David Biernbaum, David Biernbaum & Associates: Effective communications with the retailer are essential. At David Biernbaum & Associates, I am a control freak when it comes to managing the communications between my client companies, [their] brands and the retail category managers. I want retailers to know what the brands are doing — at least on a monthly basis — in terms of marketing, advertising, social media development and consumer sales trends that go well beyond POS and short-term IRI data. However, retailers do not have time for reading too many emails or, heaven forbid, receiving too many phone calls or voice messages. So, I have thoughts about the types of communications and summaries that work best. I like the practice of email summations, say about once each month or so — kind of an executive summary for category managers and retail executives, and certainly my brokers, that include easy access online with links to interesting developments for the brands. Links work much better than file attachments.
DSN: What do you think has been the best new niche product to emerge in the last year or two and why? Why do you think it was able to break through, and what can other CPG companies take away from that?
Michael Quinn, Pankow Associates: Most recently it was the re-introduction of the St. Joseph Aspirin brand. They participated in as many account-specific promotions as possible to let consumers know that “St. Joseph was back.” They played on the brand’s 100-plus-year-old heritage and made it appealing to today’s customers. They shared their long-term plans with retailers and followed through on their commitments. As a result, they accounted for 63% of the growth in the low-dose segment of the aspirin category.
Mack: Three brands that have broken through, even though they have been out for a bit longer than two years, are Muscle Milk; Evolution of Smooth lip care, lotions and shaving creams; and Think Thin protein bars. Each of these brands has created a compelling brand image, [filled] unmet needs and elegantly communicated differentiation to the consumer. Also, each of these brands has done a very nice job creating a strong attachment to [its] user base. They may not be the largest, but they have a group of zealots that love them — and love sharing the message. Each of these firms also has done an impressive job with very crisp and clear packaging and imagery. That is mission accomplished from a marketer’s perspective.
Otto: Electronic cigarettes have gained some traction during the past year. Traditional cigarettes are actually a niche product — they appeal to less than 20% of consumers. It is estimated that e-cigs appeal to 10% of smokers. E-cigs are super-niche, but they easily could represent [more than] $1 billion in retail sales within five years. We represent the GreenSmoke brand of electronic cigarettes. We feel they are the highest quality and have the best marketing support.
DSN: What advice do you have for retailers to bring more excitement to the shopping experience? How do you think suppliers can help?
William Don Cormell, Beech Haven Sales and Marketing: The wellness programs offered by several drug chains have been successful for small companies. They tie the consumer and chain together, and enhance the shopping experience. ... Suppliers and retailers can improve the shopping experience by tying the manufacturers’ national promotional plans into their in-store events. I have seen a major effort in the [past] two years to improve the preparation for meetings on both sides of the desk.
Anthony Raissen, InterQuantum: It would be great to see retailers carve out a section of the store for innovative products, even if it were to be done on a regional basis. I know this seems simple, but with the shelf space at a premium, it always comes down to ROI. Not just the ROI on shelf space, but the costs associated with inventory and logistics as well. Some progress definitely has been made in this area with “As Seen on TV” sections in some stores, but this is limited. Suppliers would need to limit the downside for retailers by promoting their products to consumers, as well as by providing an easy way for retailers to handle returns.
Parise: Create a new item endcap to test out niche [and] new items. Set criteria then use that to determine if the item goes into [the planogram].
DSN: What do you think will be the biggest opportunity in the front end of the store over the next 12 to 18 months?
John Malmborg, KKM: The biggest opportunity in the front end over the next 18 months will be to appeal to shoppers in a relevant way. This means having the right offers for the shoppers that the retailer wants to attract and have in their stores. Not all customers are equal. The retailers that are able to identify the shoppers that they want and provide them with the right incentives are the ones that are going to have the most business and the most profitable business. The advent of mobile marketing and digital marketing will play a big role in this area as retailers use their data to understand the shopper and give them reasons to buy more and more in their stores.
Mack: I feel like most retailers are smothered in a world of “sameness.” So, I still believe the challenge for most retailers is to uncover, unlock, license or create brands that are truly unique and only offered within their four walls. That has been the magic of Target’s private-brand offering, Costco’s treasure hunt, the prestige lines at Ulta and Sephora, and the Look Boutique experience with Duane Reade and Walgreens. Distinctiveness is attractive and brand ubiquity is boring from a consumer’s perspective.
DSN: In terms of reaching the consumer and driving trial and awareness for the brand, where do you think small and mid-sized companies are getting the most ROI from their marketing spend these days? Where would you tell a niche company to allocate those dollars?
Raissen: We have been very successful using a direct-response approach to create awareness and drive trial. The model works well because it provides for affordable advertising that generates some immediate sales and helps companies with their cash flow requirements. Most products do not make money in direct response these days; however, a solid campaign can create large-scale awareness that, in turn, drives consumers to look for the product. With most direct response campaigns, even with the proliferation of Internet shopping, only about 8% to 12% of the sales come directly to the company; the remaining +/- 90% is done at retail. If a company can sustain the investment spending at the beginning of a campaign, then once they get to retail they will be able to capitalize on the 90% of consumers who are retail shoppers.
Funk: That’s kind of a complex question, depending on the type of product, the category and the competition. I think it’s important that the vendor invest with the retailer in [its] account-specific programs, as they typically can drive good business. Beyond that, I feel there is a big upside to social media marketing, as well as specifically targeted traditional marketing (e.g., TV, print and radio). For example, we recently were at a seminar where the U.S. Postal Service made a presentation for [its] “Every Door Direct Mail” offering. A program like that, I think, would especially be good for items that have limited or regional distribution in a chain.
Biernbaum: Unfortunately, chain drug stores and supermarkets still are putting pressure on small and medium-sized brands to spend most of their money on retail promotions right off the menu driven by in-store discounts. What works better is for retailers to resist the usual mode of draining the small brand’s funding on programs that don’t particularly work well for specialty and niche brands but, instead, to allow the brand to invest more in non-DVR-oriented cable TV, viral social media, targeted Internet advertising, consumer sampling, pharmacy and doctor sampling, and effective publicity and public relations. Depending on the product, the category and the brand, a certain mix of the dynamics of these approaches will drive more sales and profits to retail than many of the usual “spends” inside the drug store itself. What I do push for is retail tagging and creative driving programs that send consumers direct to any given retail chain.
For the complete "Behind the Brands: 2012 Annual Report," click here.