Niche brands: Going mainstream

Low channel growth and product withdrawals have contributed to a revived interest in niche brands. According to Racher Press research, cosmetics sales in mass channel grew 1.6 percent in 2001 but a mere 0.6 percent in chain drug stores. With Procter & Gamble's Olay cosmetics line being phased out and the Neutrogena line receiving lukewarm responses, retailers are turning their hopes to niche brands to fill the gap. Many retailers such as Duane Reade, May's Drug Stores, Rite Aid and Walgreens have expanded shelf-space for niche brands or market-tested multiple new niche brands. Brands such as Caboodles, Physician's Formula and Prestige are therefore enjoying greater resources. Retailers also leverage niche brands as a tool for differentiation, realizing that the majority of these brands embody a specific product philosophy and thus attract particular consumer groups.