|Title:||United Kingdom battery retail sales by type in pounds sterling, units, and percent change for the year ended June 12, 2011|
Start of full article - but without data
Batteries: XXw/eXX June 2011
[pounds y-o-y% kilos y-o-y% sterling]m
Alkaline XXX.X X.X XXX,XXX -X.X Zinc carbon XX.X -X.X XX,XXX -XX.X Button cells/special X.X -XX.X X,XXX -XX.X lithium
TOTAL XXX.X -X.X XXX,XXX -X.X
They're the Coca-Cola and Pepsi of batteries. Duracell and Energizer have that much of a stranglehold on the big four's batteries aisles, says Sandy Chadha, managing director of battery retailer and distributor Supreme Imports. "And I can't see another brand coming in and challenging that," he adds.
That's not to say the market leaders are having everything their own way, though. While Duracell brands are in strong value growth, Energizer's are sharply down, according to the latest SymphonyIRI data (see right).
The latter's predicament, in combination with what many suppliers believe is overly aggressive promotional activity, has contributed to a -X.X% fall in value and a X.X% slump in volume sales in the category as a whole [Kantar Worldpanel, XXw/e XX June 2011].
So why is Energizer struggling so badly and what can be done to boost not just its energy levels, but those of the wider batteries category?
Total Energizer sales have tumbled XX.X% year-on-year to [pounds sterling]XX.Xm in the multiple grocers, while total value sales of Duracell have risen XX.X% to [pounds sterling]XXX.Xm and own label is virtually static at [pounds sterling]XX.Xm [SymphonyIRI XXw/e XX May 2011].
The company blames the poor performance of the market as a whole on the high level of promotional activity, particularly bogofs. It claims XX% of battery sales are on deal, and that the average saving offered has risen four percentage points to XX%.
There are so many deep-cut promotions and bogofs that, in some cases, stock is effectively "walking out the door", claims Nick Powell, Energizer managing director for the UK and Nordic regions, citing Nielsen data showing that the most common price promotions in the battery category have offered a XX% discount [Nielsen/Gfk December 2010]. "The promotional activity we have seen in the past few years means about XX% to XX% of batteries are being given away by retailers."
THE PROMOTIONAL TRAP
Such levels are not sustainable, Powell argues - and the company is prepared to sacrifice listings to avoid getting caught in the promotional trap. "We have seen distribution losses as we refuse to invest in activity that will reduce value in the category," he declares.
For the past year, Energizer has focused instead on 'two-for' offers in order to reduce the depth of promotions offered on the brand to about XX%. "There is a role for promotional activity in batteries, but the depth does not need to be XX%," he says. "Energizer is committed to growing the power category in the long term."
Unfortunately for Energizer, in the short term this has played directly into Duracell's hands. The SymphonylRl data suggests Duracell has picked up almost all the sales lost by Energizer and that this is the single most important factor driving its growth over the past year.
Despite Duracell's success, Powell maintains that batteries is a prime example of a category in which promotions are more likely to erode value and encourage consumers to switch brands than they are to promote growth. Other categories can tolerate high promotional levels much more easily.
"Obviously, some categories can be grown by promotions - people will eat more Jaffa Cakes if they are in the cupboard - but they won't use the remote control more if batteries are being offered
It's a view echoed by Vince Armitage, divisional vice-president of Varta brand owner Spectrum Brands. "Promotions such as 'buy four, get four free' are unsustainable," he says. "They may be selling X more batteries, but they are driving value down and pushing people away."
This is borne out by the sales figures - even at the cheaper end of the spectrum. The 'pile them high, sell them cheap' approach of selling XX-packs of AA zinc carbon cells for as little as [pounds sterling]X hasn't been enough to stop X.X% value and XX% volume growth in 2009 turning into a X.X% value and XX.X% volume slump this year
A few supermarkets continue to carry zinc carbon cells, but the market is shifting back to alkaline products, which are seen as more effective, if more expensive. "These days, putting zinc products on supermarket fixtures is a bit like putting a Betamax video tape on the shelf," says Armitage.
Part of the problem is that they are so cheap, says Robert Baruch, sales director of distributor and online retailer Baruch. "The price has gone down so much there is no longer real value in carrying them," he explains. "In a few years, they will vanish."
Higher-priced alkaline cells, which make up XX% of the battery market, are faring better than their cheaper counterparts - but sales are still looking decidedly flat. Volumes sales have fallen X.X% year-on-year, while value is static.
STORES "COULD DO MORE"
Some industry observers suggest the supermarkets aren't helping themselves or the category by encouraging customers to do their grocery shopping online, eliminating the opportunity for impulse sales.
"By giving consumers the opportunity to shop online and have goods delivered to their doors, the big supermarkets are not encouraging consumers to shop the store," says Armitage. "If you don't shop the store, you won't pass the battery fixture."
When it comes to long-term growth, many in the industry agree that it is important not to restrict batteries to single locations in-store. "There are still opportunities for growth through all channels by maximising display," says Duracell business leader Leigh Tomlinson. "Siting batteries in multiple locations has been proven to drive incremental growth."
According to research by Energizer, almost half of all battery purchases are made away from the main fixture. Suppliers are, therefore, encouraging retailers to site batteries in multiple locations around the store - including at checkouts and in the electronic goods and toy aisles.
But stores could be doing even more, says Energizer. It cites a study that found XX% of shoppers at a leading grocery chain in the US - where batteries may be stocked in eight or even XX different locations within a store - bought batteries from its shops at least once a year.
"In this country, grocers are lucky to get more than XX% of their shoppers doing this," says Powell. "We've got a long way to go."
Growth is not purely down to selling more cells - it is also essential to encourage shoppers to trade up to the correct type of cell. "Growth can come through grocery sales, but it will also come through encouraging consumers to trade up for the right reasons," says Powell.
To do so, it is vital to educate consumers, through PoS material and packaging, about the correct type of battery to use. To encourage this, most suppliers regularly revamp pack designs to better highlight the suitability of cells for particular types of product.
Education also has a big role to play in the growth of rechargeable batteries. "All the reasons people had for not buying rechargeables years ago have gone away," claims Armitage. "They have become more efficient, retain their charge longer and are ready to use from the packet."
Sales of rechargeable cells through the supermarkets have grown X.X% year-on-year to [pounds sterling]XX.Xm [Kantar], driven by a XX.X% increase in sales of Duracell rechargeables, to X.Xm [SymphonyIRI XXw/e XX May 2011]. But industry observers insist rechargeables are performing even more strongly than the grocery sales figures suggest. Online retailer Chadha claims they are the fastest-growing part of his business. "We take X,XXX online orders a day - primarily on rechargeables," he adds. "About XX% of our online sales to consumers are rechargeable products."
Argos and Amazon are doing a better trade in rechargeables than the supermarkets, according to Armitage. "If people are going to invest the best part of [pounds sterling]XX in a charger and some batteries, they will go online and investigate the subject first," he says, adding that the supermarkets would have significantly better results if they were willing to take a cut in margin. "A lot of retailers' margin expectations are too high," he contends.
But the industry hasn't seen the pick-up of rechargeables it had hoped for, Armitage admits. And the problem isn't exclusive to the UK. "Pick-up is similar right across Europe," he says, "even in countries that might be seen as particularly green".
Part of the problem is that the green message has not been sufficiently exploited, he argues. "With using rechargeables, it's not just saving the use of XXX batteries - it's also XXX bits of packaging."
Many in the industry had also expected rechargeables to be more readily adopted by young consumers who have grown up recharging devices such as mobile phones on a daily basis.
The fact that some consumers are forced to recharge gadgets such as smartphones and games consoles more than once a day has, however, prompted the development of a potentially significant new market - mobile power units for recharging devices on the move.
Most battery brands now sell power packs that can be plugged into a device to give it an extra burst of power. And new and improved products are hitting the market all the time - Duracell is revamping its range for this autumn (see pXX), for instance - and many expect this to be a growth area as devices become even more power-hungry.
CHOOSING A CHANNEL
Suppliers are likely to seek listings primarily in the big box multiples for such products. When it comes to alkaline and rechargeable batteries, however, the convenience channel is the prime target for many smaller suppliers, because it offers much better margins than the big four -albeit on far smaller volumes.
"There is still a lot of business outside the supermarkets - and small operators can be much more profitable," says Armitage.
It's good to have the best of both worlds, though, and supply both the convenience and multiples channels, says Baruch.
"You get smaller margins dealing with the multiples than with the c-stores," he says. "Life can be easier if you get into one of the multiples, however, and they are a major source of revenue for us."
Many retailers are keen to stock a secondary, budget brand alongside a Duracell or Energizer offering, he says, claiming that Baruch's Ultra Max range offers similar performance to the market leaders, but at a fraction of the price. "Retailers may make less margin on a cheaper product, but they will sell more of it," he adds.