HEALTH

Industry executives take the pulse of the consumer healthcare market

BY DSN STAFF

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-
nel strategies.

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.

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HEALTH

Harmony Herbal takes two-product approach to skin care

BY Michael Johnsen

Harmony Herbal on Thursday introduced a novel two-product approach to aid those with sensitive skin or conditions that cause red, rashy, itchy skin, including dermatitis, rosacea, and eczema. The products, Skin Therapy Calm and Calm + Detox Duo, help address the conditions from the outside with a topical cream and from the inside with a dietary supplement that promotes skin health.

“When we talk about skin health we must address the whole body. Besides having powerful antioxidant and anti-inflammatory properties, traditional medicinal herbs also help support the body’s own healing mechanisms and strengthen internal detox processes, providing beneficial effects for inflammation related skin conditions,” Dongxin Ma, principle Harmony Herbal and formulator of the skin care solutions, said.

The synergistically developed products are powered with fifteen super concentrated botanical extracts that work to detox root irritants from the inside with the Calm + Detox supplement and to reduce redness and itch and increase moisture and lipids with Calm OTC topical.

“[The] Skin Therapy Calm OTC topical and Calm + Detox supplement duo is a remarkable remedy that has brought much needed relief and consistent results to many grateful clients,” Zulma Gregory, an applied clinical nutritionist at Peoples Pharmacy, said.

Each product can be used individually, but the results are quicker and more complete with dual use. And, the products meet the demands of the natural consumer as they are free of steroids, parabens, sulfates, fragrances, synthetic preservatives, petroleum, tree nuts and gluten.

Harmony Herbal is an Austin, Texas-based company that leverages Eastern and Western medicine approaches to formulate natural solutions that support healthy skin.

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RLA collective, BrandPerx dive deep on doctors’ OTC recs

BY Michael Johnsen

Recommendations of OTC medicines by healthcare professionals has always been considered a key component to brand selection at shelf, but those recommendations differ according to the practitioner’s specialty, according to a recent survey conducted by BrandPerx on behalf of RLA Collective.

For example, of the medical professionals surveyed, gastroenterologists were most likely to recommend a brand by name so the patient can easily identify that product at the shelf. Howeer, primary care physicians were least likely to recommend a brand by name, but rather would make recommendations of those brands for which they had coupons. And 79% of pediatricians reported that having printed informational materials about an OTC brand was helpful when making a recommendation to their patients.

“The survey tapped physicians in four key specialties – primary care doctors, pediatricians, gastroenterologists and OB/GYNs – and created a snapshot into the areas where OTC brands might benefit from increased HCP – and patient – communication,” Robin Russo, CEO of RLA Collective, said. “Side effects, active ingredients and cost were key reasons for OTC recommendations, as were having samples, coupons, informational material and familiarity with and trust in the brand. It’s important that companies consider these factors when planning their OTC marketing.”

While many of the learnings derived from the survey confirmed long-held assumptions, there were surprises. “We expected OB/GYNs to report higher incidence of feminine itch and yeast OTC recommendations (75%),” Shauna Garshon, president of Brandperx, said. “[But] OB/GYNs [also] were the mostly likely of the four HCP groups to recommend vitamins (83%) vs. primary care doctors (61%), and second to gastroenterologists in recommending heartburn products (44% and 63% respectively), surpassing primary care physicians (32%).”

In addition, 59% of OB/GYNs reported that they were more likely to recommend OTC products when they had coupons available and 56% of OB/GYNs reported that having product samples in their office influenced their recommendation habits.

Russo suggested these and other insights should help brands explore the HCP/OTC relationship more closely.

RLA Collective, a health and wellness marketing agency for OTC and supplement brands, partnered with BrandPerx, a specialized point-of-care patient and HCP sampling and education company, on a 1,600 practitioner survey. The survey looked at what categories of over-the-counter products doctors are most often recommending to patients and what drives these recommendations.

 

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