Rogaine brings new customers, profits into hair care

Drug Store News,  August 5, 1996  by Lisa I. Fried

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Ask hair care buyers what's hot, and the first thing you'll hear is Rogaine. Available over the counter since April, the hair regrowth treatment is bringing new users and solid profits into the hair care category. The response to Rogaine has been so strong that several generic and private label alternatives are quickly popping up on retailers' shelves. Competing national brands are also on the way.

"Rx to OTC switches are expected to double sales, and based on what we are selling every week, we are on target to meeting that goal," said Richard Spangler, director of marketing for Rogaine.

To gain initial support of buyers not familiar with OTC switches, Pharmacia & Upjohn created sales kits with information on Rogaine and education about OTC switches. "We showed [the buyers] how sales had more than doubled for other switches," Spangler said. "This was important because the shampoo category has shown little growth in the last few years. Rogaine helps them grow the [hair care] category and bring new people into the store."

Taking an educated approach

Given their inexperience with OTC switches, many hair care buyers asked the pharmacy and OTC buyers at their chains for advice on ordering and promotion.

"They worked closely with the OTC buyer and pharmaceutical buyer to understand the history and make it a success," Spangler said. "There was a lot of coordination and cooperation to make it work."

Many hair care buyers announced Rogaine's arrival on shelf talkers, in circulars and in letters to prescription users weeks before it hit the shelves. And many chains continue to promote the brand with special offers on a regular basis.

That, combined with the $80 million Upjohn & Pharmacia is spending to advertise the brand, should keep awareness high for some time.

Eight weeks after the OTC release, one regional drug chain was selling five times more units of Rogaine each week, according to the chain's merchandise manager.

One month after carrying the OTC version, Happy Harry's Discount Drugs more than tripled its unit volume of the product, according to Barbara Kuhn, assistant vice president for merchandising for Happy Harry's.

Rogaine' s initial trial was so strong that many chains sold out quickly immediately after the launch and had to wait several weeks for Pharmacia & Upjohn to replenish the stocks. "After the first three weeks, we ran out of the blue box [Rogaine for Men] and told our clerks to sell the pink box [Rogaine for Women] to the men," said Kuhn. That seemed to work for the chain because despite the different names, Rogaine for Men and Rogaine for Women are exactly the same.

Some buyers said that Upjohn & Pharmacia, which rolled out its own generic and private label versions of Rogaine, bit off more than it could chew at one time. All of this activity competed for manufacturing time, said one buyer, who was out of stock of the larger sizes of Rogaine for about a month.

Spangler defended his company's moves, asserting that response to the brand by retailers and consumers was greater than the company anticipated. He also maintains that out-of-stock problems have been solved.

"Manufacturing capacity has never been along term issues," he said. "We can definitely meet the needs of the trade. There is a lot of history about how fast switches get up to their expected velocity. The trade did such a great job getting it into the stores that the start up curve was faster than we thought."

Despite the product's early success, some buyers wonder if the brand can maintain consistent sales in the long term. "Without a doctor recommending it, I'm worried some people will try it, it won't work and they'll be upset," said Steve Hewes III, Genovese merchandise manager. "People are investing big money to see if it will work," said Kuhn, who is concerned the strong sales momentum will slow down.

Willing to pay the price for hair?

Buyers also wonder if consumers will continuously shell out for the high-priced Rogaine. The product is currently retailing for about $29 for a 30-day supply, between $50 and $55 for a two-month supply and between $70 and $75 for a three-month supply.

Though those prices are much lower than the former prescription prices, they are much higher than the prices on anything else in the hair care department.

Given the quick entries of generic and private label versions, buyers think Pharmacia & Upjohn will be pushed to lower Rogaine's retail price. "The high prices will come down," said a hair care buyer at a national chain. "There is a limited number of customers who will spend over $20 on a product that may not work or will take three to four months to work." The manufacturer, however, dismisses such talk. "Everything we see says that consumers see Rogaine as a good value," Spangler said.

Given Rogaine's uniqueness and high price tag, buyers are experimenting with placement. Some chains are giving it prominent placement in the shampoo section near therapeutic/dandruff shampoos. Other chains that are concerned about theft are offering it near or behind the pharmacy counter.

COPYRIGHT 1996 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
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