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Digital cameras are among the hottest consumer products of the year. And while they may be a huge drain on power sources, they are anything but a drain when it comes to battery sales, as the category continues to benefit from the growing digital revolution.

According to the Consumer Electronics Association, battery sales for personal electronic devices last year approached $5 billion and are expected to exceed that in 2003. Research firm The Freedonia Group projects U.S. demand for batteries will climb 5.5 percent annually through 2007 to $14 billion, with growth primarily driven by the use of high-drain portable devices.

But increased demand and growing sales aren't necessarily resulting in a terribly profitable category. Consumers may be having a love affair with high-drain devices, but the economy, a downturn in travel after the Sept. 11 terrorist attack and an increased promotional environment have combined to drive down profits, producing flat or declining dollar sales.

"The story in most battery [segments] is not a pretty picture, although there are a few bright spots," said Christine Denning, spokeswoman for Panasonic Batteries. Sales of rechargeable batteries and bonus packs of alkaline products are booming.

According to ACNielsen data, sales were up 210 percent for bonus packs of AA and AAA alkaline batteries during the 52 weeks ended May 3. This trend is due largely to increased promotional activity from the leading battery manufacturers. When one announced it would be dropping prices, rather than follow suit, another began offering between two and four additional units in each pack without increasing package prices--hence the large sales increase of multipacks and the accompanying decline in overall dollar sales for alkaline batteries.

But larger packs are benefiting discount stores disproportionately, as these products appeal to value-conscious shoppers in particular, said John Daggett, director of marketing services at Rayovac.

But customers still are picking up the smaller packs on impulse in the checkout lanes, and drug stores continue to benefit from both these impulse buys, as well as their strong legacy of being a source for these items.

"Drug is a big destination for batteries as the transition to digital [photography] continues," said Lou Martire, vice president of trade relations at Energizer. And, Daggett said, "Batteries are in the top three most profitable categories in [the front end of the store]."

But the real growth in the segment is coming from rechargeable products. "With digital cameras becoming more affordable, regular high-drain alkalines aren't cutting the mustard," Denning said. "Consumers can't believe how quickly they go through batteries. Rechargeables are going to become more important in the lives of consumers."

Quick-charging batteries and a population more accustomed to recharging items, thanks to the widespread use of mobile phones and notebook computers, are causing consumers to become more attuned to the process, Daggett said.

In drug stores for the 52-week period ended May 3, the nickel-metal hydride rechargeable category significantly outperformed all other channels of retail, garnering an 18.2 percent unit increase versus the same period a year ago, compared with growth of 11.2 percent in all channels combined. Within drugstores, Panasonic Ni-MH has experienced double-digit unit growth versus one year ago, according to ACNielsen figures.

Next month, Duracell will launch a new 30-minute charger that can charge up to four AA batteries in 30 minutes. The charger will be packaged with batteries for a suggested retail price of $44.99, according to Kimberly Hull, Duracell marketing manager.

Aiming to be the "technology leader" in the rechargeable segment, Daggett told Drug Store News, Rayovac in October will launch its I-C3 charging system, which requires only 15 minutes to recharge batteries. I-C3 batteries can be recharged up to 1,000 times, according to the company. The two-battery charger retails for a suggested price of $25 and the four-battery charger retails for $35.

Battery suppliers also are devising ways to prop up alkaline sales. New products, such as Panasonic's PowerEdge batteries, are designed specifically for use with digital cameras. "There are still a lot of people with the disposable mind set," Denning said. "And for rechargeable users, we suggest they throw an extra pack of alkalines in the camera kit, just in case."