Exclusives leave beauty mark on CVS
BY RT STAFF
While beauty may be in the eye of the beholder, consumers’ eyes are focused on CVS. As one of the nation’s leading drug store chains, CVS has been engaged in an effort to bolster the beauty basket and compete in an industry increasingly concerned with differentiation. The retailer has added upscale beauty brands, many of which are imported, and in-store skin consultants to help it get a leg up on the beauty competition.
Over the years, CVS has continued to spice up its merchandise mix through an assortment of exclusive and private label brands—a strategy that sets it apart from other retailers and drives profits with higher margins. To better position itself as a destination for beauty, in 2003, CVS inked a deal with upscale Finnish brand Lumene. The company reported that Lumene has sold very well since its introduction and, at least initially, 40% of Lumene customers were new to the skin care category at CVS.
CVS/CAREMARK CORP.| HEADQUARTERS | Woonsocket, Rhode Island |
| 2006 SALES1 | $13.32e billion |
| 2006 EARNINGS2 | $2.44 billion |
| STORE COUNT | 6,202 |
In 2005, CVS further bolstered its beauty offering by adding NeoStrata’s NeoCeuticals skin care line to its exclusive lineup. Soon after, CVS made headlines by teaming up with dermatologist Dr. Jeffrey Dover to create the first dermatologist-developed anti-aging skin care line, Skin Effects, for the mass market. Another new CVS offering is a line of Life Fitness vitamins.
“Proprietary brands are an important part of our strategy to give consumers unique products and a reason to come back to CVS,” said Helena Foulkes, vp of advertising and marketing, at the Skin Effects launch event.
Last October, CVS upped its game yet again by inking a partnership with Hasbro to stock more than 6,000 drug stores with an exclusive brand of baby care products under the Playskool label. The deal was touted as a first-of-its-kind, direct-to-market licensing relationship. Hasbro introduced the Playskool line with more than 50 products, ranging from diapers to rattles, which debuted at CVS stores on the West Coast, but has since rolled out to all locations.
Currently, private and exclusive brands make up about 13% of the retailer’s front-end sales. The goal is to increase that penetration to between 18% and 20% over the next few years.
In today’s competitive marketplace, it is increasingly vital that retailers take such steps, something that CVS recognized long ago. Over the years, it has inked many deals in an effort to expand its exclusive on the-shelf offerings. The chain’s most aggressive approach to building its proprietary brand business came in 2002 when it acquired Nuprin—once a highly popular national pain relief brand—from Bristol-Myers Squibb.
Citigroup analyst Deborah Weinswig noted that CVS “leveraged Nuprin’s high level of brand awareness as a pain relief medication and expanded the Nuprin product offering to a wider selection of pain relief products that are exclusive to CVS.” Such efforts have also been rolled out to Sav-on and Jewel/Osco locations acquired in the breakup of Albertson’s Inc. at the beginning of 2006.
Industry sources are confident that CVS will continue to take a creative approach to differentiate its product mix—a strategy that will become increasingly important as industry consolidation continues and pharmacy margins grow slim. “These [imported] products benefit CVS in at least two ways: by building customer loyalty and by boostingmargins,” stated Deutsche Bank analyst William Dreher in a research note.
And CVS is keeping the ball rolling with the mobile Healthy Skin Check-Up Centers hosted by French skin care brand Vichy Laboratories, which will be taking place in CVS store parking lots (as well as those of retail partners Brooks and Ulta) through November. The goal of the campaign is to educate consumers nationwide on the importance of skin health. At the centers, dermatologists and a team of skin care specialists are on board to offer free, personalized skin checkups using skin analysis tools. Visitors also receive educational information about how to best care for their skin, as well as personalized skin care product recommendations, product samples and coupons to use at their local drug store.
“By bringing the Vichy mobile HealthySkin Check-Up Center to local communities, we’re able to provide education and free skin checkups on a more grassroots level,” stated Maeve Coburn, general manager of Vichy Laboratories.
CVS’s determination to bolster its exclusive offerings is what differentiates the retailer in the beauty and skin care aisle. Its continued level of commitment to providing consumers with top-notch brands and the education with which to use them—and use them well—should ensure the retailer has the distinction of being one of the fairest in all the land.