Market remains largely untapped
Even though many cutting-edge marketers have for years successfully infused a Hispanic flavor into their overall marketing mix, the overall marketplace has yet to maximize the reach into this community relative to the overall buying power they wield.
(Click here to view the full OTC Megatrend Report 2016.)
The potential return on investment in engaging the Latino consumer still yields greater dividends than that of the crowded general market. “Whomever comes into these categories from a marketing standpoint has an opportunity to establish first-mover advantage,” Jorge Daboub, VP of business development at Univision, told Drug Store News. “If it’s not first-mover advantage, there are fewer players, less clutter. [Marketers] have an opportunity to develop a franchise against a consumer segment that can drive some significant growth.”
As a group, the Hispanic demographic represents $5.9 billion in the sale of nonprescription medicines alone (12% of the total U.S. spend), and sales of OTC products among Hispanic consumers is up more than 8% versus more than 5% among non-Hispanic companies.
Hispanic consumers are brand loyal — branded products capture 79% of Hispanic OTC sales versus only 75% of non-Hispanics. “They also tend to buy less on promotion than non-Hispanics,” Daboub said. “So they’re not gravitating to the private-label brands.”
They also represent more frequent shoppers who carry larger marketbaskets to the checkstand. Hispanic consumers buy 2.8 items per health and beauty trip versus 2.5 for non-Hispanics; they make 29 trips per buyer per year versus 27.8 trips per non-Hispanic buyer per year; and they spend $14.60 per trip versus $14 for non-Hispanic shoppers.
Some of the bigger growth opportunities within OTC include cough-cold and flu, a category that saw a 14% lift in sales among Hispanic consumers for the 52 weeks ended Aug. 8, 2015, according to Nielsen, versus a 9% lift in sales among non-Hispanic consumers. Similarly, allergy remedies saw a 13% lift in sales among Hispanics versus 9% among non-Hispanics, and family planning realized 9% growth among Hispanics versus 3% among non-Hispanics.
Q&A: Disruptive brands with CHPA’s Scott Melville
This year’s Consumer Healthcare Products Association 2016 Annual Executive Conference is focused on disruption, exploring how disruption across every facet of the marketplace is impacting the business of nonprescription medicines and how CHPA members can not only survive in a marketplace where disruption is commonplace, but thrive. Drug Store News sat down with Scott Melville, CHPA president and CEO, to identify the disruption impacting the industry and how members can succeed in this environment.
(Click here to view the full OTC Megatrend Report 2016.)
DSN: What are the disruptors in the OTC industry today, and how is CHPA reacting to those disrupters?
Scott Melville: One [disruptor] in particular that has garnered our attention in the past year is the evolution of regulation to the state and local level. We need to be aware not only of what’s going on on Capitol Hill, but we have to be aware of what’s going on at the state capitals and city hall, and that’s something that we’ve not really had to deal with much in the past. It’s being driven around product stewardship. … And the interaction is not just with regula tors, it’s with our retail partners.
DSN: How is CHPA helping to position the OTC industry to capitalize on disruptive technology?
Melville: The major disruptive technology in our industry right now is access to healthcare information by consumers. They’re more informed than ever, [and] they have more resources available [to them]. … They’re taking control of their own health care, and technology is empowering them. That’s a tremendous opportunity for our industry to provide more information to them. … The challenge is to make sure that the information sources they’re going to are legitimate sources that provide good information.
DSN: What is the value CHPA brings to the overall healthcare paradigm in this information age where consumers are better informed?
Melville: We’re working on several initiatives right now that will further quantify the contribution of OTC medicines to the healthcare system. We’re going to look at categories that have switched from prescription to OTC to put numbers on what that saves patients, what that saves the healthcare system. They’re pretty compelling numbers. … We’re also looking at the safety profile of OTC switches that many times [are] almost universally much safer than ever anticipated. We’ll have data to share, if not this year, then next year.
View from the top: Leading OTC vendors discuss the state of the business
In the weeks leading up to the Consumer Healthcare Products Association Annual Executive Conference, March 14 to 16, in Aventura, Fla., Drug Store News assembled a virtual panel of leading over-the-counter company executives, to discuss the many opportunities to drive growth, build the market basket and drive more shoppers to the OTC aisle. Find out why top OTC marketers are so bullish on the business in 2016 and beyond.
(Click here to view the full OTC Megatrend Report 2016.)
DSN: The Affordable Care Act is increasing access for millions of Americans while the steady rise of high-deductible, consumer-directed health plans continues to place more of the onus for managing escalating healthcare costs on consumers. How are these two macro trends impacting the OTC business?
DENNIS CURRAN, CHIEF CUSTOMER OFFICER, GSK CONSUMER HEALTHCARE: OTCs will continue to be the first line of defense for a majority of individuals to address the healthcare ailments that disrupt everyday life.
The biggest impact the Affordable Care Act had on consumer access to OTCs was the elimination of the use of healthcare savings accounts and flexible spending accounts toward purchases of over the counter or nonprescription medicines. It is a healthcare benefit that more than 19 million Americans [had used] to offset their personal spending on health care.
Through the Consumer Healthcare Products Association, we have consistently supported efforts to reinstate the use of OTCs and nonprescription medicines toward HSAs and FSAs.
CLARK BROWN, SVP/CHIEF CUSTOMER OFFICER, ADVANTAGE CONSUMER HEALTHCARE: Clearly, more consumers have access to health care due to this initiative, but I believe another significant trend we are seeing is the overall education of consumers about their healthcare choices. The ACA really requires consumers to be more involved in their healthcare choices. One trend we have seen is the move to finding more of your wellness solutions at retail. Healthcare companies, both retailers and manufacturers, need to work together to create and then make readily available the new, unique solutions that consumers are looking for today.
DSN: OTC remedies drive a lot of traffic to retail pharmacy. At the same time, many OTC categories historically have been tough for customers to navigate and self-select the right product for their needs. How can retailers partner with vendors to make the OTC category easier to shop?
TODD HUTSKO, VP SALES, FLEET LABORATORIES: The easiest things for retailers to do are to simplify category layouts and provide navigational and educational information. In feminine hygiene, as an example, we’re seeing retailers support [the category] in premium space within the stores, testing varying degrees of navigational and educational signage that calls attention to the segment. Many retailers are currently evaluating the flow of the shop and how to best position items women want in a way that both enhances and improves her shopping experience. Specifically, moving such expandable consumption feminine hygiene products as external washes, cloths, sprays and powders to more visible shelf locations, improves the shopping experience and retailer results in the category. Research and results show that women seeking need-based products within the set will search out and find the problem/solution products.
KATHLEEN WIDMER, CO-CHAIR, JOHNSON & JOHNSON CONSUMER, NORTH AMERICA/PRESIDENT, MCNEIL CONSUMER HEALTHCARE: Over the years, we have conducted a lot of consumer research that has provided us with valuable information about how our consumers navigate and shop our categories. The OTC market is highly competitive, with many players and many categories. Our research led us to create merchandising solutions that we believe have transformed the shopping experience in OTC categories. We started with the upper respiratory category, including allergy, sinus [and] cough-cold-flu. We created a set of guiding principles for retailers to consider in order to simplify the shopping experience for the consumer, including:
- Creation of clean partitions between category segments;
- Focusing on a product assortment with the most productive and incremental SKUs;
- The addition of simple consumer friendly education that helps in the decision-making process; and
- Lastly, we recommended adding complementary products, such as humidifiers with cold and flu products, that make sense in the respective category. We have seen significant incrementality and consumer satisfaction through the addition of complementary products.
In the pain category, we have streamlined our assortment with the recognition that consumers don’t need five to six size options of a given form. Our assortment approach is rooted in offering three relevant size options, which impacts a number of factors relative to selling a product. Having fewer choices can reduce consumer confusion by not having too many options (paradox of choice). It also reduces the inventory position that a retailer must make which, in turn, allows more space to stay in-stock.
In a nutshell, paring down assortments and merchandising in a way that simplifies the shopping experience creates a winning proposition for all parties involved — the consumer, the retailer and the manufacturer alike. We have seen great results with these principles, and we plan to expand our merchandising principles to all of our categories moving forward, whether it be OTC, wound care, oral care, etc.
CURRAN, GSK CONSUMER HEALTHCARE: OTC categories are making progress in improving navigation and selection for the shopper. This improvement is largely driven by investment in shopper insights to better connect with the shopper along their purchase journey. Retailers are partnering with manufacturers to leverage their digital space as part of pre-trip planning, given many OTC category [purchases] are highly planned. Also, retailers are partnering to communicate compelling claims that are relevant and motivating to their specific shopper, and providing education to help the shopper identify their symptoms and navigate to the right solution.
Educating the shopper as they plan their trip is critical to driving conversion. Through robust shopper insights, we’ve seen improved signage and education at shelf linking symptoms and conditions with solutions, which is driving conversion and more importantly loyalty. An example of this is in the pain relief category, where clearly articulating at shelf the usage of different products for sleep, headache, heart health, general body pain, etc., has been a growth driver for the category and made significant impact in helping the shopper choose what is right for them.
In addition, we are excited to share that we will be opening a new, state-of-the art Shopper Science and Collaboration Lab in our new Warren, N.J., North America headquarters. This research facility is fundamentally focused on working with our retail partners to harness our shopper insight capability and build better plans that provide a rewarding experience for consumers when they are shopping in OTC categories.
BROWN, ADVANTAGE CONSUMER HEALTHCARE: Improving the shopping experience for the consumer is critical to keeping them engaged and looking to retail to help them manage their healthcare needs.
We know consumers are on the go and want desperately to be able to easily find their product solution. I believe it starts with insight into the path to purchase for consumers. How do consumers educate themselves prior to making a purchase all the way through the consumer standing at the shelf and selecting the brand that best meets their needs? Both retailers and their partner companies can benefit from mining these insights and then using it to develop the plan on how they educate and inform [the consumer], decide what products should be introduced and then properly merchandised at the point of purchase.
DSN: From your perspective, what are some of the best opportunities to grow sales in the OTC category?
CHRIS SLAGER, PRESIDENT, NORTH AMERICA, PFIZER CONSUMER HEALTHCARE: At Pfizer we believe there is a continued opportunity to enable consumers to take health and wellness into their own hands. It is about going beyond the pill and having a solution mindset. There also are opportunities to continue to focus on using better tools and technology.
JEFF VERNIMB, GENERAL MANAGER, MOBERG PHARMA: OTC continues to be a great complement to many Rx treatments. Yet on many occasions, the shopper picking up a prescription does not shop the front end. We see great opportunities to better link pharmacy and front end. For example, an oral terbinafine (Rx) can be an effective cure for nail fungus, but the treatment can take several months to result in improved nail appearance. Kerasal Nail, a cosmetic treatment, is clinically proven to improve the appearance of damaged nails in as little as two weeks.
BROWN, ADVANTAGE CONSUMER HEALTHCARE: Insight and education. Understanding what solutions consumers are looking for and properly educating them on what brands or services are available continue to be big opportunities. Consumers are looking for solutions that allow them to manage their wellness at home and at their own pace — they are looking for solutions to help them reclaim the lifestyle that they desire. We have a joint responsibility to educate consumers on the solutions available to help manage their healthcare needs. We then need to work hard to make those options readily available and accessible at retail or online. When new solutions emerge for managing a condition like chronic pain, how do we ensure consumers are better informed about new products [that] are available? Creating that awareness and then educating the shopper at every step in the path to purchase is a shared responsibility. Partners who work together to address these opportunities will reap the benefits.
CURRAN, GSK CONSUMER HEALTHCARE: Meaningful innovation that drives incrementality and newness to the category will drive growth. Companies that continue to deliver real innovation will win in the market.
I also believe there is an opportunity for solution selling. Shopper insights have shown that shoppers experience multiple conditions, and those retailers that are able to effectively merchandise solutions and educate the connection between items, will [be the ones to] drive an increased market basket.
Finally, improving the overall shopping experience wherever the person researches for brands is vital. Making the OTC category more shoppable through improved navigation, better education and stronger claims to connect with shoppers will help to improve the in-store experience.
WIDMER, JOHNSON & JOHNSON CONSUMER, NORTH AMERICA/MCNEIL CONSUMER HEALTHCARE: We are focused on delivering innovation that meets the needs of our consumer that goes beyond just product innovation. We have shifted our thinking from just delivering the standard four Ps (Product, Place, Price and Promotion) to focusing on offering our customers and consumers Solutions, Access, Value, and Education — the SAVE model. (For more, hbr. org/2013/01/rethinking-the-4-ps.)
With the rise of self-care, many consumers have heightened awareness of what they need and are taking more action to better understand their options. Many times, they are using a “tool-kit” of solutions, such as a saline nasal spray, antihistamine and netty pot, depending on their needs. That said, we work with our customers to provide solutions across the category that provide a comprehensive approach to a condition and simplify the shopping experience.
Additionally, our team has built digital tools that are helpful to consumers. For example, our AllergyCast app is the first app that tells you how the pollen count may actually make you feel and can help you track your allergy triggers.
We also know that mom and dad need help in managing their child’s health in a way that’s accessible and convenient. We developed the Kids Wellness Tracker, which is an all-in-one solution that makes it easy for parents to track their children’s symptoms, find the right dose and keep track of their [children’s] height, weight and progress as they grow. These are just a few of the tools that better help us deliver on how today’s consumer thinks about, consumes and shops for OTC products.
HUTSKO, FLEET LABORATORIES: For low household penetration categories like feminine hygiene, we first recommend that retailers execute the home category location with excellence. Specifically, make certain there are proper presentation minimums that match the store level opportunity to maximize in-stock levels and to make certain the section is clean and inviting to shop with good navigational and directional signage.
Secondly, capitalize on getting more awareness for the category with off-shelf displays, secondary locations, and create partnerships with other manufacturers pairing complimentary offerings in order to generate awareness and multiple purchases. We are keen to share our new insights about how women want to learn about feminine hygiene in-store and in the aisle, and work with our partners to create a win for all parties leveraging these learnings.
DSN: There is a lot of focus on the millennial consumer these days. Is there anything unique about how generations Y and Z are shopping for OTCs, and how can retailers and suppliers do a better job of converting these younger customers?
HUTSKO, FLEET LABORATORIES: The Summer’s Eve brand is investing more heavily in a digital advertising strategy to engage this demographic, in search where women are seeking information in social media, and working with leading digital partners so we can target our messaging appropriately and contextually. Television advertising and professional outreach is still key to our strategy, but we believe our message needs to be where millennial women can receive it during the times when they are most open to hearing about these products.
BROWN, ADVANTAGE CONSUMER HEALTHCARE: Millennials are the most tech-savvy consumers in the marketplace today. They expect a personalized connection to their chosen brands and retailers. Because they integrate technology into everything they do, conducting research before shopping and comparing products in the store, millennials are very educated shoppers [who are] conscious about their product choice and the price they pay. Converting millennials can be influenced by personalized pre-store communications via loyalty coupon mailers, email newsletters and ads, mobile ads and apps, and digital coupons that play into their fiscally-conscious shopping habits.
WIDMER, JOHNSON & JOHNSON CONSUMER, NORTH AMERICA/MCNEIL CONSUMER HEALTHCARE: The benefits of OTC products are seen across generations. People of all ages need to be able to manage common conditions, such as pain and allergy, so they can engage with their families, friends, at school or at work. In that sense, regardless of generation, OTC stays the same.
For this younger and relatively healthier generation, engagement with OTCs is somewhat low. They continue using what has worked in the past, until something changes. That is where we need to be ready to meet their needs in more places, in more formats than any generation before them.
For millennial women, the first change can be becoming a parent. For any millennial parent, it is their child’s first fever. The stakes are high, and the information sources are far greater than they were for past generations. Word of mouth still plays a key role for how moms and dads receive information; however, digital — mobile, in particular —provides a vast array of tools and technology that deliver health content at their fingertips. With our heritage with families through our infant’s and children’s Tylenol and Motrin products, we have a responsibility to support them at this time. Our role is to provide information that focuses on the health and safety for their family.
We take pride in understanding our consumers not just by their ailments, but for the lives they lead and the challenges they face. Not only will this help us develop better product solutions, it helps us provide information to our retail partners to better serve their shoppers, whether they be brick-and-mortar or e-commerce outlets. Currently, we are conducting market research on heads of households making minimum wage, on tight budgets or stretching their income across large households to understand how to better serve these consumers. In many cases, these are millennials juggling student loans or starting a family, stretching the same dollars across more people. With this important research, we can better serve these consumers and also help our retail partners meet their needs as well, even if it isn’t through our products.
DSN: Consumer insights are the lifeblood of the business. Has your company uncovered any new insights on the OTC customer that you think retailers should be aware of?
WIDMER, JOHNSON & JOHNSON CONSUMER, NORTH AMERICA/MCNEIL CONSUMER HEALTHCARE: People today have an aspirational and proactive approach to how they take care of themselves. They think about their health differently in that it is an important asset that allows them to enjoy moments that matter and be there for those they care about. Retailers and manufacturers have an elevated role in partnering with consumers to make informed choices as they move more toward self-care.
VERNIMB, MOBERG PHARMA: Specific to foot care, if the consumer doesn’t see the product working, in his or her mind it’s not. The consumer is very impatient, so you have to be very clear about what you do and don’t do. Moberg’s approach is to set clear expectations and to be honest in delivering against those consumer expectations.
HUTSKO, FLEET LABORATORIES: We have made a significant strategy and structural commitment to insights at Fleet. We have brought in a new leader for our newly created customer strategy and insights role to provide a step change to our insights competencies as a company. One of the key pillars of our retailer partnerships is that we provide actionable insights to help lead our categories to new growth levels and into an exciting future.
We’ve consistently invested in consumer insights over the years, and most recently, we have seen a significant shift in attitude [in terms of shoppers] being more open to using feminine hygiene products proactively as part of [their] daily freshness routines. Not only are women less embarrassed to be seen shopping these items, but they are far more likely to have a conversation about their vaginal health — and they state that they use these products more for themselves and not for others. Attitudinal trends continue to turn more positive for feminine hygiene as, notably, 93% of women express agreement that it is worth their time to use products specifically made for their vaginal area.
In addition, we have gathered form and fragrance insights. Our research indicates this category is a range business, and retailers should stock products by form and fragrance to satisfy demand of those that seek different fragrances and those that prefer multiple products in the same fragrance.
Lastly, another new insight is that 66% of women indicate they expect to learn about feminine hygiene products at the shelf. These insights suggest there is opportunity to increase education and navigation at the point of sale.
CURRAN, GSK CONSUMER HEALTHCARE: GSK Consumer Healthcare has been aggressive in driving [its] insight capability over the last three-plus years. GSK has embarked on shopper research across the key categories we compete in — pain, cough-cold and digestive health — which has resulted in strategic selling category platforms. A key finding that has been consistent across these platforms is the unique insight into how the shopper is different channel by channel and retailer by retailer, which better informs channel/retailer-specific, go-to-market planning. Brands cannot have a one-size-fits-all strategy; the insights drive channel-specific strategies to create differentiation and inform retailers how to best leverage their assets to connect better with their shopper. As GSK continues to develop its insight capabilities, we’ll be working toward launching strategic selling category platforms in the oral health and smoker’s health categories.
DSN: If you could sum up the state of the OTC business today in one word, what would it be?
SLAGER, PFIZER CONSUMER HEALTHCARE: Exciting. This is a very dynamic time — new science, new news, new technology. I see opportunities to really help inform the pre-shop in new and interesting ways and to partner with our retail customers to drive growth.
CURRAN, GSK CONSUMER HEALTHCARE: Exciting.
VERNIMB, MOBERG PHARMA: Stable.
TODD HUTSKO, FLEET LABORATORIES: Opportunity. It is up to the collective industry to make the OTC business as meaningful as we want. Yes, it is often hard work, but I have always felt that if you lead with your heart and go for the big wins, the business results will follow.
WIDMER, JOHNSON & JOHNSON CONSUMER, NORTH AMERICA/MCNEIL CONSUMER HEALTHCARE: Dynamic. Not only is it an environment of rapidly changing innovation with Rx-to-OTC switches and technological advancements, but the business is dramatically shifting from being focused on efficacy, function and one-size-fits-all to an environment of personalization, emotion and customization. As a result, we must continue to look ahead and focus on key trends, such as intelligent care, the rise of the digital shelf and the needs of today’s family.
DSN: What’s your outlook for 2016 — are you an optimist, a pessimist or undecided?
CURRAN, GSK CONSUMER HEALTHCARE: Optimistic. GSK Consumer Healthcare is coming off a successful 2015, with significant growth on many of our brands and an incredibly successful Rx-to-OTC launch of Flonase allergy relief. We look forward to a successful 2016 and beyond.
SLAGER, PFIZER CONSUMER HEALTHCARE: Optimistic. I’ll remain optimistic because of the team we have at Pfizer — the power of our brands — and the partnerships we have with our customers.
HUTSKO, FLEET LABORATORIES: I am very much an optimist. The trends are in our favor, and more consumers continue to put their trust into OTC products than ever before. I do not see that trend changing.
VERNIMB, MOBERG PHARMA: Very optimistic. Moberg invested significant dollars in consumer research in 2015 to hit the ground running with the relaunches of Kerasal and Balmex in early 2016. We are already underway and seeing very promising early results.