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Drugstores Battle for Beauty Sales with Premium Products

LITTLE FALLS, NJ, January 10, 2007 –

Over the past two years, national drugstore chains have added upscale brands and in-store skin care consultants in an effort to attract customers to the local drugstore for cosmetics and skin care purchases. A new study recently launched by Kline & Company aims to find out if these tactics are working.

BEAUTY RETAILING USA 2006 will examine the overall retail landscape for the U.S. cosmetics and toiletries industry and determine whether the drugstore purchase channel has been able to gain ground in the $35 billion market.

“The cosmetics and toiletries market overall is showing signs of growth at around 4% in 2006, which is the largest increase in the past five years,” says Carrie Mellage, industry manager for the Consumer Products practice of Kline’s Research division. “And while department stores and food stores continue to lose share, the battle between drug outlets and mass merchandisers is heating up.”

According to the latest edition of Kline’s study, drugstores and department stores each claimed just less than 17% of the U.S. retail market for cosmetics and toiletries––significantly less than the 27% share enjoyed by mass merchandisers like Target and Wal-Mart.

National giant CVS/pharmacy is leading the push for a larger share by offering high-end cosmetic products through its Healthy Skincare Centers, which are now located in hundreds of its 6,200 stores throughout the U.S. Complete with a trained beauty advisor to provide tips and help customers choose products, the centers also highlight the retailer’s growing line of exclusive brands and European formulas, including more clinically oriented offerings like L’Oreal’s La Roche-Posay brand and NeoStrata’s NeoCeuticals skin care line.

“Companies like CVS and Brooks Pharmacy are pairing boutique-style service with the convenience of the local drugstore as a way to compete with big box retailers,” says Susan Babinsky, senior vice president and head of Kline’s Consumer Products consulting practice. “They’re hoping that this draws women back to the drugstore, especially those looking for premium products that before you could only find in spas and specialty shops.”

By adding these high-end––and often pricy––brands, the drugstore chains are hoping to gain a piece of the booming professional skin care product segment. According to PROFESSIONAL SKIN CARE 2006, another market study soon to be released by Kline, sales for this product segment are approaching $1 billion and have been growing at double-digit rates over the past five years.

PROFESSIONAL SKIN CARE 2006 is the fourth edition of Kline’s comprehensive report on professional brands sold through spas, salons, beauty institutes, medical offices, pharmacies, and retail stores. Three separate volumes––one each for the U.S., Europe, and China––analyze the trends, opportunities, and challenges in this highly profitable but hard-to-track market sector.

BEAUTY RETAILING USA 2006, Kline’s seventh edition of this title, provides a detailed assessment of all major purchase channels for cosmetics and toiletries, including manufacturers’ sales and retail sales by product category, as well as five-year forecasts. It covers fragrances, skin care, hair care, color cosmetics, oral care, and other toiletries and features in-depth profiles of 10 key retailers in the market.

For more information on these and other studies from Kline’s Consumer Products practice, go to www.klinegroup.com/market-research/research_consumer.asp or contact Carrie Mellage at +1-973-435-3412. In Europe, contact Erin Durham at +39-0331-976969.

To learn more about Kline’s customized consulting capabilities for the consumer products industry, contact Susan Babinsky at +1-973-435-3365.

Established in 1959, Kline & Company (www.klinegroup.com) is an international business consulting and market research firm serving the consumer products, life sciences, specialty chemicals, and energy industries. For more information on this study, go to www.klinegroup.com/reports/y357h.asp or contact Deirdre McNulty at +32-2-776-0736. To subscribe, contact Erin Durham at +39-0331-976969.

To learn more about Kline’s customized consulting capabilities for the consumer products industry, contact Susan Babinsky at +1-973-435-3365.

Established in 1959, Kline & Company (www.klinegroup.com) is an international management consulting and market research firm serving the consumer products, life sciences, specialty chemicals, and energy industries.

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