Kroger Makes Strong Beauty Products Push

Posted on August 16, 2010 @ 08:34 am

Grocery chain Kroger Co. is making a big push into the beauty business by more than doubling its number of store-brand cosmetics, shampoos and other items while preparing to launch more products this fall and next year.

The move by the nation's largest traditional grocer underscores how supermarkets, buoyed by the recession's lift to store brands, are aggressively expanding beyond food and drinks. Kroger says it's had double-digit percentage increases in sales during the slow, almost-quiet rollout of the Mirra beauty line that began last October.

"This was a very big leap for Kroger," said Susan Scherer, who manages its beauty business.

Kroger, with nearly 2,500 stores in 31 states, has made store brands a high priority, saying the products build customer loyalty. Store brands also usually have bigger profit margins than national brands. Corporate brands account for 34 percent of Kroger grocery items sold and 26 percent of grocery revenue.

Most other major grocers, including retail giant Wal-Mart Stores Inc., have expanded store-brand lineups as budget-squeezed households try to save money.

The Private Label Manufacturers Association says overall, store brands last year hit new highs of 23.7 percent of items sold in U.S. supermarkets, 18.7 percent of sales and $55.5 billion total sales. Store brands accounted for 15.7 percent of health and beauty products sold in supermarkets, said the trade group, using Nielsen Co. research.

Kroger offers more than 20,000 store brand items, a 25 percent increase in the last two years. Fewer than 100 are under the Mirra brand that includes shampoos, face creams and accessories such as makeup brushes and loofahs. But that's up from 41 three months ago.

CEO David B. Dillon said Kroger identified health and beauty as an underdeveloped area among store brands.

"The kind of customer that we have comes to us for things they need on a regular basis," Dillon said in an interview. "Health and beauty items, you don't consume them like food items, but you do use them up pretty regularly; so you go back for replenishment, and those are the kind of items that are our forte."

Karen Grant, beauty senior analyst for NPD Group, said grocery customers have become more willing to try store-brand beauty products, particularly those billed as relying on natural ingredients. She cited Whole Foods Market Inc.'s beauty line along with Kroger's — Whole Foods focuses on natural and organic foods, while Kroger has made a major push in organic foods the last three years.