15 states still reporting highest levels of ILI activity
At least 15 states are still reporting the highest levels of influenza-like activity even as the percentage of patient visits attributed to ILI dropped to 3.7%. Judging from the second consecutive sharp week-to-week drop in ILI rates nationwide, the season may officially end in the next week or two even as pockets of the nation still contend with a virulent flu season.
Current data indicate that the 2017-2018 flu season peaked at 7.5% in early February (during week 5) and is now on the decline. However 34 states plus Puerto Rico continue to report widespread flu activity and 21 states plus New York City continue to experience high influenza-like illness activity.
“This flu season has been particularly hard,” FDA Commissioner Scott Gottlieb testified before the U.S. House Committee on Energy and Commerce on Thursday during a review of national response efforts to this past season. “This year is not the first time we’ve seen vaccines be less effective against H3N2. Recent flu vaccines have proven on average only about 33% effective against H3N2 viruses. Given this, we’re looking at several factors to better understand why effectiveness tends to be lower against this strain.”
While H3N2 viruses remain predominant overall this season, the proportion of B viruses versus A viruses is now about even. In recent weeks, B viruses have been increasing while H3N2 viruses have been decreasing. Early vaccine effectiveness estimates show that flu vaccine has reduced the risk of having to go to the doctor due to flu by 36% overall through Feb. 3, 2018. Effectiveness against H3N2 viruses this season was 25%. Effectiveness against H1N1 was 67% and against B viruses it was 42%.
The FDA is presently exploring the development of a universal vaccine, though a marketable univeral vaccine is still years off, Gottlieb suggested. The FDA is also investigating efficacy studies between cell-based vaccines and egg-based vaccines.
For the current season, the overall hospitalization rate and all age-specific hospitalization rates are now higher than the end-of-season hospitalization rates for 2014-2015; a high severity, H3N2-predominant season. CDC also reported an additional 5 flu-related pediatric deaths during week 9, bringing the total number of flu-related pediatric deaths reported this season to 119.
According to the CDC, flu activity is likely to remain elevated for several more weeks.
Homeopathic and natural solutions claim their shelf space
Natural is now the name of the game. A lot of center store buyers have been seeing this trend play out across the food aisles, but it’s a consumer trend that’s impacting the over-the-counter medicine space, as well.
That’s why officials at companies offering homeopathic remedies and other natural solutions have said their products continue to resonate with consumers — they represent an alternative to traditional medicines.
But rather than creating a natural remedy destination set, suppliers said that retailers looking to best capitalize on that natural trend should merchandise these homeopathic solutions within their respective categories. “The wellness industry is exploding across categories,” John Ende, general manager, Americas, at natural remedy manufacturer Nelsons, said. “[But] consumers want what they want where they shop, regardless of drug class or category.”
Similasan director of marketing Yann Pigeaire echoed Ende, noting that the time has come for homeopathic products to get a share of shelf space alongside traditional OTCs.
“Homeopathy is a category that continues to grow, which means there is more and more consumer demand for it,” Pigeaire said. “I would recommend for retailers to look for those [homeopathic] solutions and give them proper place inside the planogram. Try to avoid merchandising it in its own natural section outside [of the category]. That’s not how people shop.”
But shop they do — for the calendar year 2017, homeopathic remedies generated $400.9 million in sales on growth of 1.2% across total food, drug and mass multi-outlet centers, SPINS reported. The lion’s share of that growth is coming out of cough-cold solutions. The cough-cold category represented 36.4% of the total homeopathic market and was growing at a double-digit rate even before this past season’s virulent flu season created a run on all cough-cold products. However, homeopathic and other natural solutions cut across many categories, including sleep, eye care and pain relief.
Nelsons, for example, has developed a strong natural solution set across stress relief and sleep. “We work closely with our retail partners to select the best products for each of their retail sets. That may mean we have full distribution of limited SKUs, and limited distribution of others. When the product assortment and distribution plan is co-created with our retail partners, both sides win,” Ende said, adding that it’s important to get merchandising right. “We work with key retail partners to develop merchandising units and materials that work for the product assortment, the consumer and the retailer.”
In eye care, Similasan has created a natural solution set that cuts across age-related conditions, as well as allergy. “The factor that’s unique about eye care generally is it tends to get worse with age,” Pigeaire said. “But conditions like allergy continue to impact consumers at a younger age.”
And the homeopathic pain-relieving ingredient arnica has developed a strong following in mass markets, judging by the success of Boiron’s Arnicare, a perennial top-10 external analgesic best seller across food, drug and mass channels.
“Retailers should increase their offerings in [all of these] categories,” Gary Wittenberg, vice president of national sales at Newtown Square, Pa.-based Boiron USA, said. “Clearly, the consumer has spoken in looking for these types of products. A retailer would be wise to beef up their entire natural offering.”
Industry executives take the pulse of the consumer healthcare market
How can retailers best optimize health and wellness in their stores? Where are the consumer healthcare opportunities and where are potential headwinds? In the weeks leading up to the 2018 Consumer Healthcare Products Association Annual Executive Conference, March 11 to 14, in Aventura, Fla., Drug Store News assembled a virtual panel that included leading consumer healthcare company executives and thought leaders from CHPA and Kantar Consulting to give a frank assessment on what’s happening in the health-and-wellness aisles across America.
Drug Store News: What’s the outlook for the consumer healthcare business in 2018?
Jeff Vernimb, vice president of global consumer health, Moberg Pharma North America: The outlook for OTC is not much different from prior years — low single-digit growth, steady but not particularly inspiring. Declining trends in brick-and-mortar traffic is concerning and adds new challenges.
That said, we are now in the strongest cough, cold and flu season in nearly a decade. This is when OTC shines. Retail convenience and strong brand selection deliver for the consumer; the shopper is motivated to be in store. In the short term, everyone wins — but will this lead to longer term traffic gains or just a short-term spike, and a future volume gap, should next year’s season return to normal levels?
Scott Melville, president and CEO, CHPA: The outlook for the OTC business in 2018 is quite good. While the overall rate of growth for the category has been in the low single digits for the past few years, I’m optimistic about both the near and the long terms. Longer-term, there has been progress in 2017 and this year to update and modernize the OTC monograph system, which is the regulatory framework overseeing most OTC medicines for the past 46 years. A modernized regulatory structure will be one of the greatest instigators of growth for OTC medicines. A big reason is that both the House and Senate bills include, for the first time, an incentive for OTC innovation under the monograph system — a period of market exclusivity to reward companies that assume the risk and invest the dollars to develop new treatments.
Also, Rx-to-OTC switch remains a very important factor for growth. Under the leadership of FDA Commissioner Scott Gottlieb, there is renewed momentum to move forward on the agency’s long-awaited Nonprescription Drug Safe Use Regulatory Expansion, or NSURE, guidance or proposed regulation. Manufacturers are excited to see it published, and how it might enable the switch of products using new technologies to assure safe use by consumers without a prescription. Publication is on the FDA’s agenda for 2018, and we hope to see it shortly.
Gary Downing, CEO, Clarion Brands: The outlook for the OTC business is good — but it’s essential to always look toward the future. Generation Z is here — understanding them, their needs and the way they want to consume information about their health and well-being are key. But you cannot ignore the millennials, Gen Xers or boomers. They are all still important. You need to know your audience, where they are in in their journey, what they care about and how to reach each one of them in the appropriate way.
Brian Owens, vice president, Kantar Consulting: According to our Kantar Consulting chief economist Doug Hermanson, we forecast consumer spending on OTC drugs will grow 4.4% in 2018 (+3.8% unit volume). According to Kantar Consulting Shopperscape, almost 50% of shoppers are extremely worried about healthcare expenses. I expect in 2018 this will translate into roughly 1-out-of-5 shoppers using more OTC product to be more proactive in their health care for themselves and family members. By 2020, every American household will spend $2 on services for every $1 on goods, and 2018 will be reflective of this shift in demand. Shoppers will be looking for more Ulta-like salon services experiences across retail, so OTC drug and other consumer goods companies should find ways to partner better with retailer assets, since shoppers are increasingly looking for more stress-free shopping experiences that reward both time and energy back to them.
Two tailwinds that will help propel OTC include technology and Amazon. As voice technology matures and artificial intelligent response becomes less generic, there will be more opportunities for OTC suppliers to provide outcome-based solutions. And as Amazon makes a bigger move into health care, both retailers and suppliers will need to become outcome-focused, which should help OTC brands as health regimens become part of the Amazon holistic health solution.
DSN: What are some of the headwinds facing purveyors of consumer healthcare medicines?
Scott Emerson, president, Emerson Group: For brick-and-mortar, e-commerce is not hurting us for that one Advil they buy on Amazon or Walmart.com. But they are hurting us with the second or third item shoppers buy on that trip. At what point is brick-and-mortar willing to give up business to e-commerce and Walmart for the 70% of the brick-and-mortar industry that is not Walmart? When a heritage item is below the benchmark — meaning it has highly loyal shoppers — and brick-and-mortar retailers discontinue it, 57% of them will go to Walmart or e-commerce to get that brand. At what level of sales to loyalty is a retailer willing to give up the business? The sales they don’t mind giving up, but they lose the shopper, too. This year, we have to do everything we can to get it above the bar and make the retailer aware they’re just giving that business away.
Tim Toll, chief customer officer and general manager international, Pharmavite: Deep discounting within the VMS category mitigates the growth potential of the overall category. This keeps the average price per unit paid in the category from realizing its full potential; and it’s currently only at about plus 2% in the United States. Introducing more meaningful and transformative product innovation to the VMS category is one way of combating this challenge. Continuing to launch “me too” products contributes in fragmenting the sales and reducing overall productivity of the segment. There is an opportunity for manufacturers to identify white space or latent needs within the category. Enhanced innovation can help drive retail full-margin sales and reduce the heavy dependency on promotions to drive growth in the VMS category.
M’lou Walker, CEO, Matrixx Initiatives: Competition for OTC medicines comes from all the places we never would have considered 20 years ago. We are facing channel shifting, shifts in the path-to-purchase and seismic shifts in how the consumer thinks of wellness. Any brand that is not considering all of these shifts when formulating strategic plans will be left behind. We need to rethink how our consumer takes in information, creates her new consideration set and then acts upon that knowledge. The immediate demand for products that treat acute healthcare needs will be satisfied in ways we may not yet understand. Consumer research will help us to understand these shifts, but it won’t be sufficiently forward-looking. If we really want to position our brands to take advantage of the sea change, we should look to how consumer behavior has changed in other FMCG categories, and in wellness behaviors writ large.
Vernimb: From the perspective of a branded manufacturer, we are encountering more asks from the retailer as they struggle with the negative impacts of declining traffic. We also are getting less value from trade promotions and, of course, private-label competition always is a factor. All of this impacts our ability to invest in the brands and the segments. Brand owners and retailers should take every opportunity to collaborate in search of new solutions. The just- completed NACDS Regional meeting led to great discussions on new opportunities with several retailers, and the April NACDS Annual Meeting is always a terrific session to learn and talk new ideas.
DSN: As work continues to dismantle the Affordable Care Act against the backdrop of rising health premiums, what role can or do consumer healthcare medicines play?
Melville: Consumer healthcare products — OTC medicines, dietary supplements and consumer medical devices — offer consumers access, affordability and trust, and they empower consumers to take more control of their health. Our members’ products are often the first line of treatment for millions of consumers, and they are valued by healthcare providers too, since they are safe and effective treatments to recommend to patients. Overall, OTC medicines help serve patient needs and contribute to reducing the overall burden and cost to the healthcare system by preventing more serious health problems, and helping to keep people out of emergency rooms and clinics.
Toll: Currently, vitamins and supplements help consumers balance their nutritional gaps. As health costs rise against an uncertain landscape, we expect to see vitamins and supplements play a more vital role as more people have a vested interest in becoming and staying well. With recent partnerships, such as CVS Health’s acquisition of Aetna, retailers are beginning to provide more healthcare information and services to consumers, particularly those who are underinsured or uninsured. Retail healthcare practitioners will have more influence with consumers. Therefore, improving product education is a key opportunity for manufacturers.
DSN: How can retailers partner with vendors to make the consumer healthcare category easier to shop?
John Incledon, president and CEO, Hisamitsu America: This is a great question and one that has been asked many times over a long period of time, suggesting all the good work to date has not optimized the opportunity yet. On the surface, this strikes me as a bit of a tense battle between keeping a large assortment in an attempt to appeal to every shopper’s brand need versus reducing assortment and simplifying things on the shelf, but perhaps risking the loss of a fiercely brand-loyal shopper. There is a lot of needless redundancy in many OTC sections, and the question is ‘Does it drive more sales?’ From my international experience, I recall some European retailers who took an approach of carrying only the top three brands or so in a category. It seemed demand for OTCs was still robust despite a reduction in choice. Many retailers are very sophisticated today with data analytics, and I imagine they are using that data to judge transferability of shoppers as they look to provide the right assortment. If I delete a SKU, will I retain that shopper in the category with a different size of the deleted SKU? With a competitive product? Or will they leave the store?
Greg Bradley, president and CEO, Foundation Consumer Healthcare: For those of us who have been in this industry a long time, we have seen the pendulum go from the chaos of multiple floor stands competing for consumer attention to the stark efficiencies of clean-floor policies. Finding the right balance between bringing needed information to the shopper versus overwhelming that shopper and risking a negative impression is certainly the goal of manufacturers and retailers alike. We believe that some of the trends in organizing products around consumer mind-sets/indications, as opposed to all like products lined up side by side, will result in a better shopping experience for all involved.
Vernimb: The recent CHPA Immersion with Walgreens was excellent. The Walgreens team shared the focused work they are doing to improve the shopping experience. Simplification is a theme that makes sense, as is expanding facings for better sellers, improving signage, more open floors, added in-store assistance and omnichan-
Melville: It really may come down to one word: online. That’s not to say that it’s the only word, but it will be a major force for consumer education, sales and more in the years ahead. Today, less than 4% of OTC medicines are sold online. That is bound to change. Just look at every other consumer goods category and you’ll agree, it’s only a matter of time. But I think the role of the drug store — brick-and-mortar and online — will both grow.
DSN: What consumer healthcare insights uncovered in the past year really resonated with your retail partners?
Vernimb: Our best consumer insights have come when we overlay retailer loyalty card data with our own consumer research. The Emerson Group account teams dig into the customer card data, and we now think more about brand affinities and opportunities to increase both traffic and size of market basket. As an example, in foot care, shoppers have multiple needs, and we can leverage one item to drive trial in another need area. Looking ahead, we will work more with Emerson to present our brands as part of their larger portfolio. It’s about being less item-focused and thinking more holistically against a segment strategy, such as cross-segment trial, margin enhancement, basket building or traffic generation.
Downing: We work very hard to understand the health concerns and specific conditions that our target consumers are dealing with, along with their mind set and emotions. We are able to share these insights with our retail partners, and this helps us better position and advertise our solutions. When we have been able to combine that with our retail partner’s shopper insights, that has been eye-opening and has led to the best programs and, subsequently, the best results.
DSN: What are the best segmenting strategies to employ in 2018 when marketing consumer healthcare remedies?
Emerson: My initiative this year is driven by four tenets. No. 1, at Walmart, you do whatever it takes — that’s extremely important. No. 2, put your best marketer in the building on e-commerce. No. 3: regional food. When you add up Meijer, Wakefern, Publix, H-E-B and Hy-Vee, they’re bigger than Kroger combined, and their growth rate is three times as much. They’re all privately held, one is a co-op. They want to work with you. They want to build their business. They care about their shopper, and they’re not beholden to Wall Street. Lastly, watch Lidl and Aldi. There is a reason Lidl is the No. 2 retailer in the world. There’s a reason Aldi is No. 6. Lidl wins everywhere they go.
Walker: Focus on the basket build. Consumers are seeking solutions and options. Not only do all consumers not approach the same problem the same way, but they also may want to solve their problem differently on different usage occasions. Allowing for choices and innovative solutions, and then educating the consumer with shelf and display strategies, will help to provide the consumer with a total solution that also helps to build the basket. Because consumers pre-shop online, checking features and prices, brick-and-mortar retailers need to reclaim “value” by better answering the question of what a consumer wants. Helping her create a basket of products that solves her problem in a new or better way will help improve her loyalty to the retailer and brands.
Incledon: Adults ages 50 years old and older and Hispanic Americans remain two very good opportunity segments. The 50-plus crowd in the United States is a virtual annuity for growth based on the annual increase in population. This also is a high-consumption group for certain categories, making them even more influential and important. The Hispanic population is probably the fastest-growing population segment in the country, and they are accumulating wealth, have a fierce brand loyalty and a cultural sensitivity to family, and the importance of elders in the extended family is a key source for brand influence. There is a reason the national news on the three networks continue to command the very high CPM’s — look what gets advertised on those programs nightly. Prescription drugs and OTC drugs are probably the two biggest sources of ads, and the viewing audience is chock-full of 50-plus consumers.
Melville: One segment is undeniably on everyone’s list: millennials. By last count, this consumer segment — ages 18-to-40 years old — represented more than 25% of the U.S. population and 21% of all consumer purchases. That’s more than $1 trillion in direct consumer spending. Plus, they are starting to have children of their own: 50% of millennial households already have kids, so their impact is likely going to be even stronger in the years ahead. Millennials are famously independent-minded, they look for value and savings, they rely on social networks to give and receive information and influence others, they don’t feel a need to conform to old notions of brand loyalty and they are skeptical of formal institutions and systems. But first and foremost, they are people, and people need health care. Millennials are a great opportunity for the consumer healthcare industry to reach. But millennials also are famously elusive, difficult to categorize and challenging to sell to, so I imagine that companies will be doing a lot of research and testing — and product development — over the next few years to better understand the wants and needs of this segment to serve them better.
DSN: What’s the bottom line? What’s the one thing that readers should know about the state of consumer healthcare?
Vernimb: Retailers and suppliers need to lean into the OTC space and together leverage it to increase traffic and basket size. OTC is a destination for consumers and consumers trust OTCs. Growth is there for the taking, and we should seek to collaborate with more focus to spur growth.
Melville: Consumer health care will continue to change and evolve, but the importance of consumer healthcare products in public health will only grow, and the importance of drug stores as a critical touchpoint in consumer care will grow, as well.
Downing: Partner closely with your OTC suppliers. There is a lot of knowledge out there — understand the interaction between brick-and- mortar and online, and work with your suppliers to come up with the best solution to support both.
Bradley: We think of OTC, both front of store and online, as the opportunity to deliver on an important unmet need for our mutual consumers. At the risk of being a bit trite, the most important thing is to simply be there and be accessible.
Owens: OTC health categories, outside of cold, flu and allergy, are increasingly becoming more top-of-mind to shoppers as more health care comes to retail.
Incledon: There has never been more financial and human resources thinking strategically about how to utilize data, new media options and innovation to crack the code on OTC growth. Occasionally it works.
Walker: Be the retailer who understands your consumer so that the trust equation shifts back to you. Trusted brands thrive in trusted retail environments that help the OTC consumer navigate myriad wellness solutions. Become the wellness solution and the increased share of pocketbook will follow.