Myth Busters
The more the battery category changes, the more it stays the same — at least for retailers.
The number of portable electronic devices powered by batteries is proliferating. Many of these are proprietary rechargeables for cell phones and digital music players, and manufacturers are out in force with new types of batteries for the high-drain devices that take the basic AA and AAA sizes. Meanwhile, the hearing-aid battery segment will continue to grow along with the country’s aging demographics.
At the supermarket retail shelf, there may be a few SKUs of lithium batteries and rechargeables, and a rack of hearing-aid batteries, yet the big picture is the same as it has been for many decades: alkaline batteries rule the alphabet segment.
“Alkaline is still the best spend of the battery dollar,” says Dan Spears, director of HBC and GM at Ingles Markets, based in Asheville, N.C. “Until someone can come up with technology that is better than alkaline at not such a premium price, then people are still going to go back to alkaline.”
And, for all the talk of high-performance batteries, the inexpensive heavy-duty batteries, based on an old zinc chloride chemistry that alkalines succeeded, remain a presence for many retailers, particularly dollar stores and retailers appealing to a lower-income clientele. In addition, pilferage remains a concern for many stores, and those retailers prefer to openly display the low-priced heavy-duty batteries.
Sales Declines
Along with sales of many other general merchandise products, the battery category slipped 6.3 percent in the 52 weeks ending June 13, 2010, in supermarkets, drug stores and mass merchandisers (excluding Walmart), according to Nielsen figures. Units dropped 7 percent. Alkaline sales for the same period fell 7.3 percent, with units declining 6.5 percent. The overall battery category was worth $1.5 billion, with alkalines tallying $1.1 billion.
The big two national alkaline brands, Energizer, from Energizer Holdings in St. Louis, and Duracell, from Cincinnati-based Procter — Gamble, saw similar declines. Sales of private label alkaline batteries decreased 9.3 percent in dollar sales and 9.6 percent in units.
A battery study from the Cleveland, Ohio-based Freedonia Group reported, however, that sales of primary batteries — those that can only be used once — will rise 3 percent annually to an industry total of $5.8 billion in 2012. Alkalines will remain dominant, although other battery chemistries, such as lithium and zinc air, will grow faster.
While new battery types will develop, alkalines can only be hindered by the increase in devices (such as iPods) that don’t use replacement AA and AAA batteries, says Freedonia analyst Dave Petina. “Alkalines are, and are going to remain, the bread and butter for the supermarkets as far as the battery space goes. But to the extent that more devices are powered by other types of batteries, it’s going to hurt the alkaline battery market as a whole.”
Educating the Consumer
The growth of new batteries has been slow so far in supermarkets. “Education for the consumer, as well as acceptance, is necessary to facilitate the conversion from alkaline to the specialty battery products,” says Bill Mansfield, president and CEO at VIP International in Garland, Texas, and a former supermarket nonfoods executive. “If the performance difference is not well recognized by the consumer, then change may be slower in coming.”
At Energizer, Lou Martire, VP, trade development, says there’s a need to “simplify the point-of-purchase decision by providing clear communication to help shoppers understand which power options best complement their devices.” Energizer’s “Shopper Based Solutions” initiative seeks to address this, while increasing retailers’ sales and margins.
For example, a dollar store retailer recently shifted from offering only alkaline batteries to a mix of performance and alkalines, and saw an increase in its average ring. “Presenting customers with multiple choices, and educating them about which batteries offer the best performance for their specific devices, often leads to purchasing multiple packs,” says Martire.
“While alkaline battery sales accounted for the majority of the total category volume in 2009, a quarter of the remaining volume is being driven by the rapidly growing performance segment,” he adds. “Between 2003 and 2009, lithium batteries have experienced a 400 percent growth, while alkaline growth has remained flat.”