Assessing the Health of the HBC Category

The convenience channel can build upon the recent success this category has enjoyed

By Kathleen Furore

LOOKING FOR A PRESCRIPTION for boosting business in your convenience store?

Consider expanding your health and beauty care (HBC) category to add a healthy dose of sales to your store’s bottom line. In 2021, the HBC category experienced its largest c-store industry sales growth in five years; unit volume also increased, reversing four years of declines, according to the latest Convenience Store News Industry Report.

The first half of 2022 brought continued HBC sales growth, too. And while unit volume retreated back into negative territory in the first half, there were bright spots in several areas, including vitamins/supplements, cosmetics and internal over-the-counter medications, as noted in the recently released 2022 CSNews Midyear Report Card study.

Just what has been driving such a strong performance in a category that had remained somewhat stagnant for several years? Convenience channel retailers and the vendors that serve them agree that the COVID-19 pandemic is the denominator that changed the market’s trajectory.

“I believe the majority of the growth can be attributed to three main factors, all of which link back to the pandemic: COVID rebound, COVID-induced demand, and shopper behavior change due to working from home,” said Ron Mauro, sales team leader for the convenience

channel at Haleon, the standalone company created when GSK spun off its consumer healthcare division in July 2022.

Michelle Ridder, director of category management at Lil’ Drug Store Products (LDSP) in Cedar Rapids, Iowa, cites increased awareness of HBC products in c-stores during the pandemic and the subsequent boost in foot traffic as COVID subsided as contributing factors.

“Pre-pandemic research found that the No. 1 reason that c-store consumers gave for not purchasing HBC in this channel was they simply did not know HBC was available there,” Ridder explained. “When c-stores were deemed as essential businesses at the onset of COVID, consumers turned to convenience to meet more of their essential needs, helping to create awareness to other center-store categories like HBC.”

Foot traffic suffered during the pandemic’s shelter-in-place restrictions, with most retailers reporting that units and foot traffic were down double digits in 2020 vs. 2019, but then, as the country came out of shutdown in 2021, sales and unit trends naturally went up. “With that being said, most are not quite to benchmark sales of 2019,” Ridder noted.

Category Standouts

According to experts on the front lines of HBC, there are several products that are faring well.

“One thing COVID did was make people really start to think about products that could help their bodies,” said Michael Tirey, marketing manager, U.S. franchise, for Circle K Stores. “People are looking for products geared toward more health and wellness, along with immunity support products.”

Interestingly, the way consumers have approached their health over the course of the pandemic has impacted HBC sales in the convenience channel, according to Ridder.

“Because consumers were taking extreme precautions to stay healthy in 2020, upper respiratory (UR) and cough drop sales dropped significantly. Conversely, in 2021 and 2022, consumers went back to work and social activities, attended larger gatherings, were less mindful of social distancing and sanitizing, and removed masks. [Now], in general, consumers are taking fewer precautions to stay well and

“I believe the majority of the growth can be attributed to three main factors, all of which link back to the pandemic: COVID rebound, COVID-induced demand, and shopper behavior change due to working from home.”

— Ron Mauro, Haleon

therefore are getting sick again, benefiting UR and cough drop sales,” she reported.

Consumers, however, are being more proactive in treating any symptoms they might have because, as Ridder observes, they want to avoid appearing sick to evade the COVID stigma. That, she says, is helping allergy, UR and cough drop sales, too.

“COVID raised consumers’ awareness about their health in general — more awareness of symptoms presenting early and the need to treat them ASAP,” echoed Joseph Bortner, senior category manager at Rutter’s, a York, Pa.-based convenience store operator. “Cough/cold and analgesics were the leading performers, contributing to about 75 percent of total category growth.”

Haleon’s Mauro, too, reports that immunity support and cough/ cold products saw “significant and sustained increased demand from the pandemic that continues today.”

He also cited lip care as a product that has experienced a sales bump thanks to COVID rebound. “Lip care had a sharp decline in 2020 as a result of masking, but had a strong recovery, especially in the second half of 2021,” Mauro said.

Maintaining Momentum

Past success, or course, is great. But is it possible to maintain that momentum? Category experts believe it is, and shared some plans for profiting from HBC moving forward.

Realizing that nothing is returning to “normal,” and that innovation is essential, will be key for companies looking to build upon the recent success HBC has enjoyed, they stress.

“In 2020, we frequently heard the phrase ‘return to normal’ or ‘new normal,’ but what we have experienced from 2020 to 2022 is that this environment continues to be ever-changing,” Ridder said. “Now, more than ever, we need to stay mindful that our products, offerings and services align with our consumers and retailers.”

For Haleon, that means focusing on “science-backed innovation and organic growth” to achieve the company’s goal of “repeatable growth in the convenience channel,” Mauro said.

An example of this approach is Haleon’s Advil Dual Action, which he said is the first pain medication to combine ibuprofen and acetaminophen in a single pill. The launch has exceeded expectations thus far, according to Mauro.

Offering a variety of package sizes and price points is an important HBC best practice.

Working closely with strategic customers on assortments, promotions and potentially some exclusive opportunities will drive Haleon’s organic growth, Mauro stated. “We continue to improve our display offerings and enhance our packaging on-shelf. We also get a halo effect from national brand marketing of our No. 1 brands,” he added.

Maximizing the balance between singledose and multidose products is an area Rutter’s is exploring. “Consumers’ wallets are tightening as inflation hits across all categories,” Bortner said. “This is resulting is a higher percentage of consumers transitioning from multidose to single as they look for the lowest out-ofpocket remedy.”

At Circle K, CBD is a category the c-store chain is looking to expand. “CBD falls under HBC for most products, and that is up 20-plus percent over 2021 already,” Tirey reported. “We are teaming up with a couple key companies that we have tested to help with the expansion.”

Words of Advice

There are many ways convenience store retailers can strengthen their lineup in the health and beauty care category. Having what Tirey calls “the basics everyone expects” is an obvious one; but there are also more specific, nuanced approaches to take HBC to the next level.

“The consumer expectation is that your store should have a remedy for whatever ailments they’re facing on the road. Be sure to cover all aspects of the HBC category, as it is one that creates trips,” Bortner urged. • Know the market around each store. It is important to know what customers in each locale are looking for beyond the basics.

Stores in a heavy tourist area, for example, will have a different product set than those in other locations, Tirey noted.

• Do your research. Keep apprised of what HBC customers are really looking for. A good indicator is what large retailers are selling, what facings they have and what spacing is given to specific products, said Tirey. Then, have open discussions about these things with manufacturers to see if there are possibilities to tap.

• Use visual cues to connect with shoppers. Remember that consumers “buy with their eyes,” advised Ridder, who cited 2021

NACS State of the Industry data that showed 21.6 percent of purchases are unplanned, creating an opportunity for impulse/ incremental sales.

• Up your digital marketing game. Connecting through digital marketing when your customer is not in the store is very important, as it creates more awareness around your offerings, services, promos and prices, Ridder said.

Offering a variety of package sizes and price points is another important HBC best practice.

“Some shoppers simply want a single dose to treat right away, but other shoppers notice the value of lower cost per dose in a larger [package] size,” Mauro said.

He also advocates for relying on “power brands” because the majority of HBC sales in c-stores are immediate need. “Shoppers have a headache or indigestion they need to treat right now. They want to see the brands they know and trust at the time of need,” he said.

Ridder, though, believes c-stores also should carry some private brands and lower out-of-pocket items to combat inflationary challenges and the significant rise in cost of goods.

“We have lost some momentum in trading consumers up and have seen a significant shift to trial-size HBC in 2022, as consumers choose the lowest out-of-pocket option,” she explained. “Our retailers have passed on many price increases to their consumers; therefore, many are reporting dollar sales up, but units down vs. YA [year ago].” CSN