OTC e-commerce: China

The rise of e-commerce, especially in key markets like the USA and China, as well as certain European countries such as Germany and the UK, continues to alter the dynamics of the consumer healthcare market and this is a trend we plan to monitor ever more closely here at OTC DASHBOARD over the coming years.

In addition, regulators across the world are still getting to grips with the issue. The China Food & Drug Administration has said that it is welcoming comments until 12th March 2018 on a draft regulation entitled Provisions for Supervision & Administration of Online Drug Sales. This stipulates that online sellers of medicines must be licensed pharmaceutical manufacturers, wholesalers or retailers. Manufacturers and wholesalers must not sell medicines to individual consumers and retailers must not sell Rx or controlled medicines online (legalising the online sale of Rx drugs has previously been considered in China).

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The platforms through which online medicines are sold must also adhere to and assist with product recalls where there are safety or quality issues. The regulation also stipulates that the CFDA will develop a national online medicine surveillance system and supply details of violations to provincial authorities, which will investigate and enforce any follow-up action.

Given the popularity of smartphones in China, and the rise of mobile payments and online shopping sites like Tmall (Alibaba) and Taobao and social media platforms like WeChat, it has become ever more difficult for regulators to monitor the online sale of medicines. This also presents a challenge for those trying to gauge the true size of the OTC e-commerce sector in China, but all indications point to this being a fast-growing channel that can no longer be ignored.

Embark on The Evolving Consumer Journey at our 5th Asia-Pacific OTC Conference & OTC Academy Training Workshop! Held in Singapore on 17-18 October 2018, this meeting aims to help guide you through this complex and ever-changing landscape. The half-day workshop will take a look at Inspiring Self-Care. Book before 15 August to take advantage of our early bird rates! Please contact maricar.montero@NicholasHall.com to book your place today or for more information. 

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Asia OTC investment in Middle East & Africa

In last week’s blog, we looked at rising Chinese investment in Africa, specifically in the area of pharmaceuticals, and this week our focus is on Indian & SE Asian OTC marketers expanding their operations across the Middle East & Africa. Here we summarise some of the key developments that form this growing trend over the past 6-9 months.

In July 2017, it was reported that a number of Indian pharma companies, including Dr Reddy’s and Lupin, were planing to expand operations in Africa. While Lupin is focused on opportunities in South Africa, following the establishment of a new regulatory authority (SAPHRA) in the country in mid-2017, Dr Reddy’s is targeting an expanded presence in French-speaking countries in Africa, which are markets where Indian generic companies have traditionally been underrepresented.

OTC development by Indian marketers in Africa will not be limited to generics, however. In summer 2017, Emami announced that it is evaluating setting up manufacturing units in international markets to meet growing demand for its brands. The marketer also revealed that it is expanding into Nigeria and Ghana via product launches.

More recently, in January 2018, Strides Arcolab agreed – via its wholly-owned subsidiary Strides Shasun – to acquire a 55% stake in South African-based Trinity Pharma for R55mn (US$4.5mn). Strides Shasun MD, Shashank Sinha, said: “This … provides further impetus to our ‘In Africa for Africa’ strategy as it fast tracks Strides’ presence in the lucrative and high entry barrier market of South Africa. With this acquisition, we are now present in East, West and South Africa, covering all the key markets in Sub-Saharan Africa.”

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Strides Arcolab’s wide presence in Africa

As for Southeast Asian marketers, Indonesian OTC company Dexa Medica launched a brand called Stimuno in Nigeria in November 2017. Formulated with Phyllanthus niruri extract 50mg, Stimuno is a herbal & natural immune stimulant available in packs of 10 capsules. Dexa Medica is already one of Nigeria’s Top 5 OTC marketers, thanks to the success of its systemic analgesic brand Boska, and the company decided to leverage this brand equity by launching Stimuno at an event in Lagos called Pain-Free Day. Boska Brand Executive, Tunde Ojedokun, said that Stimuno is recommended for everyone, both healthy and unhealthy, for the total maintenance of the body system.

In February 2018, Indonesian drugmaker Kalbe Farma announced it is eyeing expansion across the Middle East, as well as Sri Lanka. Following a positive response to test-marketing of its packaged coconut water in the Middle East, Kalbe is now considering launching a range of nutritional products across the region. With local sales still sluggish, Kalbe’s new President Director Vidjongtius is focusing on new markets to broaden the company’s reach beyond Southeast Asia. 

OTC DASHBOARD remains your best port of call for the latest consumer healthcare trends in the Middle East & Africa. In the coming months, we will be updating our reports on 11 countries across the region, including Nigeria and South Africa. 

Chinese investment in Africa

One business book from my Christmas list that I’ve just finished reading is The Next Factory of the World: How Chinese Investment Is Reshaping Africa, by McKinsey consultant Irene Yuan Sun. This book highlights in great detail a trend that is noticeable across several industries, including pharmaceuticals – fast-growing investment in Africa by Asia-Pacific marketers. China is leading the way, especially in terms of expanding Africa’s manufacturing base, but there is a wider trend (encompassing OTCs) of companies across Asia-Pacific looking for growth opportunities in Africa.

Irene Yuan Sun’s book highlights two important economic fundamentals:

1) Over the past quarter century, China has gone from generating 2% of global GDP output to 25%
2) Over the next decade, 8 out of the 10 fastest-growing economies are projected to be on the African continent

The author makes the case that, from the start of the Industrial Revolution in Britain in the 18th century, economic prosperity has always followed where new factories are built. Citing the theory of the flying geese paradigm (see video below), the book examines how manufacturing shifts across countries and continents, as labour costs rise and competitiveness falls. Today, it is China that has reached this inflection point and it is Chinese entrepreneurs that are driving business investment in Africa.

Focusing on four countries (Nigeria, Lesotho, Kenya and Ethiopia), the book is structured in two main parts: the first about the reality of these factories being built, and the second about the economic, political and social possibilities. The author points to the irony that, despite high demand across the continent for certain drugs, notably antiretrovirals, Africa’s pharmaceutical firms are small and in some cases on the verge of collapse.

In Ethiopia (population: 100mn), there are just 9 pharmaceutical manufacturers, while Germany (population: 81mn) has nearly a 1,000 pharma manufacturers. With the exception of South Africa, Kenya and Nigeria, most African countries have no more than a handful of manufacturers. Kenya is the standard bearer in East Africa (40 factories, but generally of low quality), while Nigeria has about 40 too, the leading number in West Africa, but again few meet GMP standards.

There are reasons to be positive, however. South Africa, Kenya (national plan to encourage domestic production) and Ethiopia (similar plan) are all taking steps to revive pharma manufacturing in their countries. A few years ago, GSK showed showed interest in building a local manufacturing plant in Ethiopia, but after two years of deliberation the company decided not to go ahead. This is leaving a space that Chinese pharma companies appear more willing to fill. For example, in 2016 Humanwell decided to invest US$80mn in a manufacturing facility near Ethiopia’s capital, Addis Ababa.

Having seen rapid economic transformation in their own country with their own eyes, Chinese entrepreneurs are perhaps better placed to recognise the potential for similar change in Africa.

Next week on the blog, we’ll take a closer look at how several Asia-Pacific OTC marketers are looking to expand their operations across the African continent.

OTC DASHBOARD remains your best port of call for the latest consumer healthcare trends in the Middle East & Africa. In the coming months, we will be updating our reports on 11 countries across the region, including Nigeria and South Africa. 

Flu Trends: USA, UK seeing 2018 spike

Though it’s difficult to build a comprehensive picture of flu trends across the globe, reports suggest that January 2018 has seen a spike in flu activity in North America and Europe. In its full-year 2017 results, J&J also cited growth for its upper respiratory category as one of the trends underpinning a 3.7% rise (+2.6% organically) for its OTC division in 2017. This included strong Q4 growth for its CCA brands in the Asia-Pacific region, suggesting that cold & flu activity is robust across the northern hemisphere.

According to reports, the US is in the grip of its strongest cough, cold & flu season for almost a decade. In mid-January, Brenda Fitzgerald, Director of the Centers for Disease Control & Prevention, said: “We are currently in the midst of a very active flu season. With much of the country experiencing widespread and intense flu activity … so far this season, influenza A, H3N2, has been the most common form of influenza. These viruses are often linked to more severe illness, especially among children and people age 65 and older. When H3 viruses are predominant, we tend to have a worse flu season with more hospitalizations and more deaths. While our surveillance systems show that nationally the flu season may be peaking now, we know from past experience that it will take many more weeks for flu activity to truly slow down.”

As the chart above shows, the percentage of US patients visiting their doctor with ILI (influenza-like illness) has peaked sharply in late 2017 / early 2018, reaching levels not seen since the 2009-10 flu season. Similarly, in the UK, reports suggest this has been the worst flu season for seven years – since the 2010-11 swine flu epidemic – with doctors visits for suspected flu rising sharply in certain parts of the country (in Wales, they recorded a fourfold increase to 64.9 cases per 100,000).

As we make our way through Q4 2017 results season, we’ll keep a close eye on how this spike in flu activity is reflected in the CCA performance of various OTC marketers, though it may be that we have to wait until the Q1 2018 results come in to see the full effect of this trend.

Avon enters VMS category

As this week’s OTC DASHBOARD infographic shows, the percentage of Americans that consume dietary supplements continues to grow, hitting an all-time high of 76% in 2017. This has helped create a vast US vitamins, minerals & supplements category, which in turn continues to attract the interest of companies not traditionally associated with the OTC market. For example, Amazon launched several supplements as part of its Amazon Elements line in spring 2017, including vitamin D, turmeric and calcium products, all of which have a strong emphasis on ingredient traceability.

Another new entrant in 2018 is Avon, a company that is undergoing a rapid transformation to become the “leading social selling company in North America”, according to CEO Scott White. Part of the company’s strategy is a return to the health & wellness market, including the launch of a new Espira line of 11 dietary supplements.

Launched in January 2018, and available at a retail price of US$12-35 through Avon Representatives or http://www.avon.com, Espira for Avon is categorised into three principles of wellness:

  • Restore contains 2 sedatives & sleep aids and 2 multivitamins, with ingredients that help to reduce occasional stress and enhance restful sleep, including Sensoril, L-theanine, vitamin B, magnesium, fish oil + antioxidants from fruits & vegetables
  • Boost is subdivided into Metabolism Boost and Natural Energy products, with ingredients such as protein, probiotic, fibre, green tea, cacao + whole coffee fruit to help maintain a healthy metabolism, clear out the system and control hunger
  • Glow contains 3 health & beauty supplements formulated with antioxidants, biotin, vitamin C + collagen peptides to help hair, skin and nails look their best by protecting from daily damage and restoring cells while you sleep

As with the Amazon Elements range, Avon’s new products will be sold via the e-commerce channel, while the company will also be looking to steal share from multilevel and direct marketers such as Herbalife and Amway.

2018 Trends: Medical Cannabis

One trend to watch in 2018 is the growing number of medical cannabis consumer healthcare products, with launch activity focused on North America. A recent development was the licensing deal between Level Brands, a marketing and licensing company that provides branding for businesses, and Canadian-based company Isodiol, which commercialises 99%+ pure, bioactive pharmaceutical grade cannabinoids, with products including body balm, tincture, skin care, nano-mist and functional beverages.

Isodiol will work with Level Brands to develop consumer products for kathy ireland Health & Wellness, a licensor to Level Brands, and for Level Brands subsidiary I’M1, a lifestyle brand for men. During the 5-year term of the agreement, Level Brands will receive an initial US$2mn in the form of Isodiol shares, then US$750,000 per quarter (also in the form of Isodiol shares) and a 3% royalty on gross sales. The new Isodiol kathy ireland Health & Wellness and I’M1 products are expected to debut in mid-to-late spring 2018 online and in select retail stores.

Isodiol

Outside North America, Q4 2017 saw a number of significant developments in the medical cannabis category, which will likely translate into increased launch activity in 2018. In October 2017, biotech start-up CIITECH announced the availability of Herbalica’s non-psychoactive, cannabidiol supplements to UK consumers via www.essentialcannabinoids.co.uk. The range of 5 supplements includes products for anxiety, ovulation pain and insomnia. The CBD compound is considered a powerful anti-inflammatory and anti-anxiety agent, with researchers suggesting it could ease chronic pain. Israeli-based Herbalica’s parent company HerbalTune has developed and supplied a range of therapeutic, botanical products to the local market for the past three years.

In Asia-Pacific, the New Zealand Government introduced a bill earlier this month to legalise medicinal cannabis in the country. The bill seeks to amend the Misuse of Drugs Act to make a specific exemption for any person with a qualifying medical condition to grow, process or use cannabis plants and products for therapeutic purposes, provided they have support from a registered medical practitioner. The move, which follows Australia’s legalisation of medicinal cannabis in 2016, aims to make the ingredient more readily available for those suffering with chronic pain or terminal illness. At the same time, Australia announced that it aims to become the fourth country after Uruguay, Canada and the Netherlands to legalise exports of medicinal cannabis.

NHC’s 40th Anniversary in 2018

New Year’s message from our Chairman & CEO Nicholas Hall:nh

The start of a new year, and already there is a big ripple of activity in the global CHC market. MM&M NewsBrief ran a story on Tuesday headlined: “CPG companies Nestle and Kellogg court OTC”. It is an interesting notion that Kellogg could buy into the mainstream CHC market as their previous forays have focused on functional foods. But it seems a stretch to me, although there would be a certain neatness if Steve Cahillane, the new CEO of Kellogg and formerly Nature’s Bounty President & CEO would bid for Pfizer Consumer, where Paul Sturman was President. And where is Paul now? — Steve’s replacement at Natures Bounty.

So, it’s possible but unlikely that Steve will become a New Friend (or more properly a Friend Reunited), but our New Friend at FDA, Scott Gottlieb, is making interesting noises that could potentially liberalise the rather static US market. Could this include a new 3rd Class, about which I have been a lone voice in the wilderness for almost all of my time in the CHC industry (more on that later)? CHPA and other stakeholders (apart from retail pharmacy) say “No” as this is illiberal. Mmm, I think the other way. Switching more Rx products under the personal supervision of a pharmacist is very liberal, and will certainly lower costs, which is empowering for consumers — a key test of liberalism. And rounding up the last of our New Friends in this New Year issue, let’s welcome Amazon as a CHC brand marketer, not just an online platform. Some would say, who needs friends like Amazon? Well, I would rather have Amazon as a Friend than an Enemy!

Two prominent association leaders are leaving the industry, the Departing Doctors Gerald Dziekan and Hubertus Cranz. They have done amazing work, as my Good Friend Birgit Schuhbauer relates below, and will be very much missed. I hope the NHC Group will have good or possibly even better relations with their successors. Another Departing Friend who will be particularly missed is Senator Orrin Hatch, who did so much to override FDA when we had no friends there at all. Former presidential candidate Mitt Romney will probably succeed to the Utah seat of Senator Hatch. I hope that the man who made millions at Bain will be as — or even more — sympathetic to CHC.

What about Remaining Friends? Well, that’s us. I almost can’t believe it, but we set up NHC in January 1978. Indeed, a few minutes ago one of my Very Best Friends sent congratulations on our 30th Anniversary. Obviously we were having too much fun to count! I still have clients and colleagues from that era, including the redoubtable Gilbert (Sans Frontieres) Mertens, who still comes to our conferences and last year was our guest in Singapore. 40 years is an amazing length of time, but we at NHC are all about the Future.

So after many years of some change and a lot that’s still the same, good or bad, it is with very great pleasure that all of us at NHC Group wish our contacts a Happy New Year for the 40th time. May it be one of good health, great happiness, peace, success and prosperity. We will be here for another 40 years (at least corporately) and we hope you will be too!!