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Recalls, competition strain HBC, butenergy, allergy offer possible remedy
BY ANGEL ABCEDE
Though cough medicine is a sta- margin dollars rose 14%, he says. To Johnson & Johnson earlier this year
from 33.1% to 41.7%,” Audet says. “We
ᮣ Recal s.
A massive Johnson & John-
son recall earlier this year affected numer-
Benadryl (see sidebar, p. 116), causing a
“It’s vital the set has the right mix of
supply crisis that sent retailers scrambling.
items to capture all potential consumerpurchases,” says Cassandra Matos, cat-egory manager for McLane Co., Tem-
What have you done with shelf space
for HBC recently?
We’ve kept it the same
We’ve cut back
Idaho-based Stinker Stores, led to thedesired result of higher gross-margin
Johnson & Johnson recal ed specific lots of
over-the-counter (OTC) products—includ-
ᮣ Energy shots.
What started out as a beverage option has
now shaken up HBC in the form of concentrated shots.
products—fol owing an investigation al eg-
ᮣ Allergy alternatives.
High margins and new-product
ing an “unusually moldy, musty or mildew-like odor,” according to com-
developments have ignited overall sales in cold-allergy-sinus.
pany statements, which led to a small number of cases of “temporary
ᮣ Family planning.
Sexual-enhancement products such
and non-serious … nausea, stomach pain, vomiting or diarrhea.”
as Extenze are pushing this subcategory beyond condoms.
McNeil Consumer Healthcare, a division of McNeil-PPC, Inc., a Johnson
To weather turbulent trends and maximize profitability,
& Johnson company based in Ft. Washington, Pa., subsequently shutdown its plant and just this past summer announced that it would not
retailers must continue to assess subcategories within HBC,
have sources of supply before the end of 2010 for most of the items pro-
says Vince Licari, convenience-business analyst for category
management for Johnson & Johnson Sales and Logistics Co.
Operations at the Ft. Washington plant were suspended in connection
“[Retailers] turn over every stone in coffee, beverages, ready-
with the recall of infants’ and children’s liquid over-the-counter (OTC)
made food, tea and snacks, but HBC doesn’t receive the
products. The suspension of manufacturing also affected adult OTC products
same scrutiny or due diligence,” he says.
made at that facility, the company said, but the majority of McNeil’s U.S.
Audet of Stinker Stores agrees. “We continue to evaluate
OTC business is not affected by the ongoing suspension of production at
retail [items] and increase them wherever we can,” he says.
“Unfortunately HBC does 0.55% of our inside sales and
Among the brands recalled: Children’s Motrin, Children’s Tylenol,
contributes 0.84% of the profit. We don’t spend a whole lot
Benadryl, Extra Strength Tylenol, Motrin IB, Regular Strength Tylenol, Rolaids,
St. Joseph Aspirin, Tylenol 8 Hour, Tylenol PM and Tylenol Arthritis.
Johnson & Johnson, which did not respond to CSP calls by press
time, said the company is “conducting a comprehensive quality assess-ment across its manufacturing operations, and has identified corrective
One subcategory within HBC that stands out this year is
actions that will be implemented before manufacturing resumes at the
allergy medications, according to Licari. The products are
Ft. Washington plant.” McNeil has not yet finalized plans for resumption
maturing in the market, in some cases moving from pre-
of production at the facility, where the average annual sales of the prod-
scription to OTC and in others coming out in more eco-
ucts manufactured there have been about $650 million over the past
nomical, single- and multi-dose options.
The packaging and pricing trends overlay a greater under-
lying scenario of what people with allergies need. Someonewith a cold may have symptoms that last three weeks,whereas someone with an allergy may suffer for months.
The average shopper with allergies typically has 76 days ofsymptoms, with the “heavy” symptom shopper having asmany as 195 days, Licari says.
Though cough-and-cold products saw a 10% decline
over the past year, according to Licari; he describes allergy,sinus and nasal—the whole area of upper-respiratory prod-ucts—as “still accelerating.”
A couple of up-and-coming products Licari mentions
are Mucinex and Zyrtec. For Mucinex, manufacturers havestarted producing single-serve and six-count packaging,allowing for a lower price point than larger sizes. In addi-tion, brand recognition through national advertising andsales via the food-drug-mass merchandisers have vaultedits visibility.
Zyrtec became an OTC drug about two years ago and,
like its competitor Claritin, gained popularity via pre-
Top 10 HBC Categories
Movement in the nutrition and vitamin categories is evident in theHBC numbers provided by Chicago-based SymphonyIRI Group. Thefollowing numbers came from the firm’s Infoscan Reviews of data
rose Park, Ill. His company has seen success with a vitamin
pulled from c-store point-of-sale (POS) registers.
C program and the product Emergen-C. It has also seenpromising movement with Vitapak Multi-pack vitamins in
single daily doses for men and women.
Size, brand and quantity are also trends in motion, says
Beth Noteman, director of convenience category manage-
ment for Lil’ Drug Store Products Inc., Cedar Rapids, Iowa.
In the past, two-thirds of shelved items had been full-serve
vs. single-dose, she says. “I don’t believe that going all sin-
gle-use is the answer, because we want to trade up [cus-
tomers] as much as we can,” she says. “But I do think retailers
are continuing to question us about what’s the right mix.”
Beyond these product trends is the larger consideration
of value. “Consumers have become more value-minded
over the last year … and are at times looking at a smallercount or private-label items,” Matos says.
Source: Infoscan Reviews, SymphonyIRI GroupFor the 52 weeks ending May 16, 2010Note: Energy shots not included in this data
Looking ahead, the challenge for the category is going to be
scription use and availability in food-drug-mass. Licari
finishing out the year strong despite numerous recalled items
says that in choosing brands to stock, retailers need to
and product allocations, Matos says.
examine share. If there are two major brands with dou-
“Stores should aggressively work with their wholesaler
ble-digit share, “Both brands resonate, and you need to
to fill the gap with items that are comparable in nature
and still c-store-friendly,” she says. “The message we wantto convey is for retailers to ensure their HBC set satisfies
all potential consumer needs, ranging from immediate,
Still, despite advances from allergy medications and recalls,
one-time needs to longer-term emergency needs such as
cough-and-cold segments hold a significant 19% of the HBC
big bottle OTC, grooming … to value offerings with pri-
category, says Matos of McLane. Internal data says items
showing the largest total unit pulls (from January to May
Licari says HBC represents 2% of the c-stores’ business
2010) include 5-Hour Energy shots, Goody’s and BC
but has 40% to 45% gross margins vs. other c-store cat-
headache powders and Chapstick and Halls stick items. Items
egories, which typically hover around 28%. “Can you
showing the largest unit growth year to date over the prior
really afford not to right-size every square foot?” he says.
year are 5-Hour Orange, 5-Hour Extra Strength, Lil Essential
“When you walk into a c-store, what do you see? A beau-
tiful coffee bar with signage. With HBC, is it in front and
The area of family planning is increasing in importance,
center? Probably not; that’s because of velocity. But does
she says. While Trojan still leads the condom portion of this
segment, products such as Extenze male enhancement have
“Make me aware,” he says. “As long as you’re priced
within 5% to 10% of the drug-store channel, we’ll accept a
In addition, she suggests considering products at the other
premium because it saves us another trip.”
end of the energy spectrum, meaning relaxation shots such
“We believe that a managed HBC section of retail [take-
home] sizes and a double dose is needed to keep customers
With health-care costs and prescriptions skyrocketing,
coming back,” says Blosser. “C-stores will never be able to
people are taking their health more seriously, says Jim Blosser,
compete on price with the big-box stores, but having a poor
executive vice president of sales for Convenience Valet, Mel-
selection will certainly drive away purchases.”
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