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    Meth Legislation Shifts Hurting Food Retailers: IRI Study

    NEW ORLEANS -- An extensive study of sales trends in Oklahoma and Illinois -- states in which meth legislation has been in effect long enough to measure an impact pre- and post-legislation -- do not bode well for the supermarket industry.

    NEW ORLEANS -- An extensive study of sales trends in Oklahoma and Illinois -- states in which meth legislation has been in effect long enough to measure an impact pre- and post-legislation -- do not bode well for the supermarket industry.

    The study, conducted by Chicago-based Information Resources, Inc., and titled, Planning for the Unplanned: Understanding the Impact of New and Potential State Legislation on the Cough/Cold Category, found that the supermarkets in both states steadily lost over-the-counter sales volume to the drug channel.

    In Oklahoma, where restrictions are stronger, the impact was much more dramatic. After legislation requiring that all pill-form products containing pseudoephedrine (PSE) be placed behind pharmacy counters was enacted in the state in April 2004, the number of PSE items available to consumers was reduced by over one-third.

    Further, during the 12-month period following legislation, PSE product volume sales in Oklahoma declined 16 percent versus the prior year, while non-PSE product sales increased 24 percent across food, drug, and mass merchandise channels (excluding Wal-Mart). Many consumers are apparently choosing to switch to non-PSE products, rather than spending the extra time to request PSE products at the pharmacy.

    The legislation has not affected all sales channels equally, however. PSE product sales actually increased significantly in drug stores in the weeks following legislation, but suffered major declines in grocery stores, where item reduction was more dramatic and opportunity was more limited due to the number of stores without pharmacies. The net result has been a shifting in volume share of PSE products from grocery stores to drug stores. This is bad news for grocers, which are likely missing out on the sale of other products as well when consumers go to drug stores for their allergy/cough/cold products.

    In Illinois, less stringent legislation that only requires single-ingredient PSE products (but not combination products) to be placed behind the counter, reported compliance issues in urban areas -- but a strong post-legislation allergy season reduced the negative sales impact in Illinois. While sales growth of non-PSE products has recently outpaced PSE product growth, the PSE growth trend in Illinois is positive.

    "The allergy/cough/cold category is in a state of flux," said Robert Doyle, s.v.p. of IRI's Healthcare Solutions Group, during a presentation at NACDS Marketplace Conference here yesterday. "Both manufacturers and retailers are struggling to accurately assess demand for both PSE and non-PSE alternatives, and need to quickly implement strong consumer marketing and communication programs to ensure that they protect and grow share within this incredibly valuable consumer segment. Ongoing, state-by-state and retailer-by-retailer tracking of consumer purchase behavior and sales trends is imperative, as is strong collaboration between manufacturers and retailers."

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