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Health product price war looms

This lucrative sector of the retail market has, until now, been dominated by specialist stores such as Boots and Superdrug.

In its report, Verdict predicts there could now be a major price war. It says the share of the health and beauty sector held by grocers and supermarkets has risen by 2% since last year to 42%.

This is worth some £4.6bn and is £20m more than the share of all the health and beauty specialist retailers.

Last year specialists had 46% of the market.

Changing attitudes

Verdict says the change shows how consumer attitudes to buying health and beauty products has changed. They now view supermarkets as credible places to shop for such products.

People have become more concerned about their well-being and appearance, resulting in a doubling in the value of the sector in the last decade.

Verdict's report says the sector is on the brink of "significant change", with price and location becoming the two key issues.

Wal-Mart effect

It believes the catalyst for changes in price will be the entrance of the world's largest retailer Wal-Mart into the UK market following its takeover of the Asda supermarket chain.

"Asda has already been leading the price war on the toiletries/commodity end of the market and this can only become more intense," the report says.

"Wal-Mart will want to grab more of this market sector and will drive volumes with low prices," it adds.

In its US shops, health and beauty sales make up some 10% of Wal-Mart's turnover.

Verdict says Boots will continue to prosper in the short-term, but it will find it hard to maintain loyalty among customers as supermarkets gain more credibility.

Verdict believes Boots must continue to diversify into new product and service areas such as insurance but adds: "Still it will not be easy for Boots in a polarising market."

Superdrug is viewed positively by Verdict as it builds up its brand and authority, but the Body Shop is described as needing to increase its product range and start selling online to maximise its potential.

Relevant Stories

Q&A: Supermarket price wars (04 Oct 99 | Your Money)
Fresh stores war erupts (01 Oct 99 | The Company File)
Asda steps up price war (26 Sep 99 | The Company File)
On the price war's front line (22 Sep 99 | Your Money)

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