E-commerce shake-up in India

India has been one of the major drivers of global OTC growth, with sales up 8.8% in the MAT Q3 2018 period, but there is now uncertainty over the country’s e-commerce sector after the government moved ahead with new rules that took effect last Friday (1st February 2019). The rules prohibit online retailers from selling products via companies or distributors in which they have an equity stake, so e-commerce giants like Amazon and Flipkart (owned by Walmart) have been most affected.

Amazon has now pulled various products from its Indian website, including some of its Amazon Basics line, while Walmart said it was “disappointed” at the government’s haste in implementing the new rules, which will create “significant work” for the company in overhauling its supply chains and systems. Political commentators see Prime Minister Narendra Modi’s decision to stand firm as a move intended to appease smaller Indian retailers ahead of a general election expected in May.

Amazon saw its shares dip 4% on the day the rules were implemented and it has lowered its sales guidance for India in Q1 2019. Walmart shares also fell, down 2.4%. In the short-term, there will be huge disruption to supply chains and increasing compliance costs, which will inevitably affect the availability and price of products online, while also giving a boost to bricks & mortar retailers. Long-term, however, Amazon and Flipkart have invested huge sums in India’s e-commerce market and will no doubt recover share.

In the meantime, more disruption to the e-commerce sector might be on its way. India issued draft regulations on the sale of medicines by e-pharmacies in September 2018, including a requirement to register for a licence with the country’s pharma regulator, CDSCO, which should be renewed every 3 years. However, the move has drawn protests and petitions from pharmacists, and opposing views in different regions of India, making the future implementation of these regulations highly uncertain.

The latest edition of our bestselling annual OTC Yearbook 2019 is available to pre-order! Scheduled for publication this April, this report will include reviews of major OTC categories, leading companies and brands, Medical Devices, Switch and much more. Pre-order your copy before 31 March to take advantage of our pre-publication rate! To find out more, or to reserve your copy, please contact Melissa.Lee@NicholasHall.com.

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Novartis’ OTC future comes into focus

Still ranked No.10 globally among OTC marketers, Novartis has nevertheless been gradually disinvesting from the consumer healthcare market in recent years, as it pursues its plan to “become a more focused innovative medicines company”, according to CEO, Vas Narasimhan. Deciding on the future of Sandoz and Alcon is key to this plan, and two developments over the past week have made Novartis’ objectives clearer.

First, Alcon filed an initial Form 20-F registration statement with the US Securities & Exchange Commission in relation to Novartis’ intention to spin off its eye care division Alcon as an independent, publicly-traded company. The deal is expected to complete in H1 2019 – subject to general market conditions, tax rulings and opinions, final endorsement from the Board of Directors and shareholder approval at the 2019 AGM – and “for Alcon, it means more strategic focus and flexibility to pursue compelling growth opportunities in eye care devices, where it has the strongest portfolio and unmatched ability to serve patients worldwide,” says Narasimhan.

Secondly, despite further spin-off rumours, a Novartis spokesman told Reuters that the company was “completely committed” to Sandoz and “looking at transforming it and making it as strong as it can be in the global generics business.” Novartis recently agreed to sell its Sandoz US dermatology business and generic US oral solids portfolio to Indian-based Aurobindo Pharma. Novartis spokesman Sreejit Mohan said: “The whole goal is to try to make Sandoz as agile as possible … to give it the autonomy to be as agile as possible. That’s essentially been the message that we’ve been delivering, so I have no idea how that led to saying ‘split off.’”

Both developments make the future of the Novartis consumer healthcare business a little clearer, with sales likely to be fairly evenly split between a new standalone Alcon division – including key brands such as Systane, Tears Naturale and Vitalux – and the legacy Novartis OTC business, largely made up of Sandoz. Both these subsidiaries, Sandoz and Alcon, were excluded from the consumer healthcare j-v with GSK, and together have helped establish a Top 10 OTC company – however, split apart, it looks unlikely either will rank in the Top 20 by the second half of 2019.

To keep track of the latest innovations to hit the CHC market, OTC New Products Tracker is the ideal competitive intelligence tool. Last week it also unveiled a major update, with eye-catching new graphs and powerful search filters that help you visualise and explore the vast archive according to your exact requirements. To trial the updated database or for a demo, contact waisan.lee-gabell@NicholasHall.com

Sleep disorders on the rise globally

According to a new in-depth analysis of the global sleep aids market by Nicholas Hall’s Reports, sleeplessness and sleep disorders are on the rise, with approximately one third of the world’s population affected. Many consumers are happy to self-medicate, increasingly opting for a variety of herbal & natural, homeopathic and medical device brands, driving OTC growth in key markets like Brazil and Spain (see sample pages).

In terms of sales, sleep aids & sedatives generate an OTC total of over US$2.3bn globally, but have been characterised by low growth in recent years, and are in need of rejuvenation via new product development, adjacencies or connected health solutions. The self-medication sleep aids market (registered OTCs and a variety of supplements) also suffers from regulatory diversity across markets for common sleep aid ingredients.

Genuine innovation is thin on the ground, but generics and “me-toos” launch frequently. Adjacencies focused on sleep offer alternatives, with other categories also entering the fray including nighttime analgesics, cough & cold remedies, menopause and other supplements. Connected Health is a key area of expansion. Sleep aid brands partnered with technology – passive (e.g. analysing sleep patterns / providing feedback) or active (improving sleep) – may break the low-growth cycle.

Comment from Ian Crook, Managing Editor, Nicholas Hall’s Reports: Sleep is a health area that lends itself easily to self-medication via sedating antihistamines and herbal & natural ingredients such as melatonin and valerian, while medical devices and digital health focused on sleep are seeing increased investment. With widespread concern over the “sleep loss epidemic” and significant implications for overall health from lack of sleep, it is imperative that consumers have access to tools to help them sleep. Raised levels of stress, anxiety and smartphone / tablet use ensure rising demand that can be tapped into by the right self-care solutions.

The full report, Sleep: Exploring Opportunities for Growth in Sleep Aids & Sedatives, is available now and more details can be found here. To order your copy, please contact melissa.lee@NicholasHall.com

Nicholas Hall Looks Over The Horizon

Nicholas Hall’s Postcard from a Secret Location in Asia: I’ve spent most of this year making Keynote Addresses and Management Presentations on the same theme:

1. The CHC industry is growing at an historical 4.5% CAGR by value and only half of that by volume, which is more or less in line with population growth + inflation.
2. Although there are important outliers, the core of the market is weak, including the major players if we look at organic growth; in fact the share held by the Top 15 CHC companies is slightly less than 5 years ago, defying the first rule of business, which is that the big usually get bigger.
3. Future prospects are modest, and the best we can expect using the current business models is 5.5% CAGR.
4. Widening the market definition to include some adjacent categories and e-commerce / multilevel marketing — which we should do and would do if we had reliable data — increases market size by about 50% and nudges growth rates to closer to double digits; the only problem is that most CHC players are either not playing or are weak in these adjacencies.
5. Essentially the market has the same shape as when I came into it in 1970 — pills in bottles, creams in tube, pharmacy distribution, and still partly supported by prime-time TV; most of the brands are the same, too, even if many company names have changed.

So I’ve come to a tropical island, sitting under a thatched roof by a palm tree, and I’m scoping the third edition of my New Paradigms report, which was published in 2003 and 2009 and was by our standards a blockbuster. The sub-title is Over the Horizon and this time I will spend most of the report’s 300 pages looking at what the market will be in 2025 and 2030, how we will get there, who will reach the winning post first, and how we can and must adapt strategies if we are to succeed in the intervening years. 

This book will look Over the Horizon, but won’t be Pie in the Sky. In my usual forthright manner I will tell subscribers the plain truth, what I think will work, what won’t work and (sometimes) that I don’t know. The emphasis will be on actionable strategies. And to make that realistic, every global licence will have a dedicated 2 hour Webinar to explain key learnings and how it will affect the subscriber’s business prospects, with an option for a full one-day Forensics to go into more depth. I will conduct these Webinars and Forensics in person, just as I will write every word that appears in the report, supported by a talented team of internal and external researchers.

 The Table of Contents can be accessed here, but let me identify some key topics 

1. How to Innovate (at last!)
2. The new Adjacencies — obesity, diabetes, the microbiome, sleep, brain health, sexual health, etc.
3. The Naturals trend
4. Cannabis
5. Winning in Pharmacy
6. e-Commerce
7. The new Emerging Markets — Nigeria, Iran, Bangladesh, etc.
8. Future Competition – it’s not who you think!
9. Winners & Losers

Publication date is April-May 2019, to incorporate 2018 data, and there are some juicy early-bird discounts to mop up any unspent budget this year. Please call any one of my team for more information, and I’m always available to speak to my key accounts about the scope and deliverables of this far-sighted report.

NRF forecasts strong US holiday season sales

According to a report this week by the National Retail Federation, US holiday retail sales (in November and December, and excluding automobiles, fuel and restaurants) are forecast to increase 4.3-4.8% this year vs the same period in 2017, to total US$717-721bn. This upturn compares to an average annual increase of 3.9% over the past five years.

In 2017, health and personal care store sales accounted for 17.8% of this total (US$59.3bn), a growing share compared to the year before (17.4% share in 2016, or US$56.9bn). If this trend of growing US retail sales in the holiday period – plus a growing share for healthcare sales – continues as forecast in 2018 then OTC marketers active in the US market can expect a strong finish to the year.

According to NRF Chief Economist Jack Kleinhenz: “Last year’s strong results were thanks to growing wages, stronger employment and higher confidence, complemented by anticipation of tax cuts that led consumers to spend more than expected. With this year’s forecast, we continue to see strong momentum from consumers as they do the heavy lifting in supporting our economy. The combination of increased job creation, improved wages, tamed inflation and an increase in net worth all provide the capacity and the confidence to spend.”

NRF’s holiday forecast is based on an economic model using several indicators including consumer credit, disposable personal income and previous monthly retail sales. The number includes online and other non-store sales.

Explore growth opportunities in the CHC industry with Nicholas Hall’s specialist M&A boutique, which works with a number of strategic and financial partners to assess potential opportunities — for buyers and sellers — and is well placed to discuss the current business climate and possible synergies. To find out more, please contact ammar.basit@NicholasHall.com

50% of global population now middle class or rich

According to research by the World Data Lab – a social enterprise based in Vienna and funded by the German government, the European Space Agency and UNICEF – 50% of the global population is now living in households considered to be middle class or rich. This widely accepted definition is based on spending power, using a “middle class” benchmark of US$11-110 spent per person per day (in 2011 purchasing power parity).

This is equivalent to 3.8bn people who are living in households with enough discretionary expenditure to be considered “middle class” or “rich”, a development that The Brookings Institution last week called a “global tipping point“. As the chart below shows, the current split between poor / vulnerable and middle class / rich households is now around 50:50 at a global level, but is projected to be a 33:67 split by 2030. Poor households are defined as those spending below US$1.90 per person per day.

What’s largely driving this trend is the rise of Asia, with nearly nine in 10 of the next billion middle-class consumers forecast to be Asian, focused on China, India and South East Asia. World Data Lab projections state that, by 2030, the spending power of the US middle class will remain dominant globally – at about US$16tn – but that China (US$14tn) and India (US$12tn) will not be too far behind.

Kristofer Hamel and Homi Kharas, who compiled the data and research, explained the significance of their findings as follows: “Why does it matter that a middle-class tipping point has been reached and that the middle class is the most rapidly growing segment of the global income distribution? Because the middle class drive demand in the global economy and because the middle class are far more demanding of their governments.”

There’s still time to join us in Sao Paulo on 28 November at the early bird discounted rate if you book today! Focusing on the central themes of Disruption, Impact and Success, Nicholas will be joined by speakers from GSK, Herbalife Nutrition, Pfizer and many more to review what’s happening in consumer healthcare across Latin America and to take a look at how players can stay ahead of the competition to create maximum impact and sustainable success. For more details, or to take advantage on this last day of the early bird offer, contact elizabeth.bernos@NicholasHall.com today.

 

 

MAT Q2 2018 update: Slight pick-up in global growth

After growth of just 4.1% in MAT Q4 2017 and MAT Q1 2018, there were signs of slight improvement for global OTC sales in the MAT Q2 2018 period, with turnover rising 4.2% to US$139.4bn, according to figures just released by Nicholas Hall’s global OTC sales database DB6. 

The gap between the world’s two largest OTC markets, USA and China, continues to close. Growth in the USA – the world’s No.1 market – remained steady at 2.5%, held back by a late-starting allergy season, while growth in China accelerated to 6.6%, vs 6.3% in the MAT Q1 2018 period, powered by an upsurge in CCA growth.

As Nicholas Hall commented: “At current rates of growth, China will overtake the USA in absolute values by 2025 and has already done so in Parity Purchasing Power. But that is at current growth rates. Despite the high incidence of e-Commerce sales in China, which will dwarf the USA, we expect the retail sector to grow by double digits, reflecting a speeding up of registration times and more switches being approved, so that China may become the new number one in even fewer than 7 years. And for that I do not believe our industry is fully prepared.”

Overall, Asia-Pacific posted 4.9% growth in the MAT June 2018 period, with China and India both steadily improving over the previous period. Meanwhile, Japan and Australia produced the poorest performances of the leading markets with growth of less than 1% each. LatAm (+12.1%) continued to exhibit high inflation-driven growth, with leading market Brazil up by double digits.

Growth in the Middle East & Africa was relatively stable at 6.6%, underpinned by the continued strong growth of Turkey (+13.3%), while the performance in Europe was consistent, with improvements in Western Europe (+2.5%) offsetting a slowdown in Central & Eastern markets. In particular, France returned to growth (+2.5%), while Russia and Poland continued to decelerate. 

Nicholas Hall Writes: “We wouldn’t presume to tell our clients how to manage their brands, they are experts; but what we believe is lacking is an appreciation of the adjacent categories and alternative distribution channels, which is where the real growth will come from in future. The US population is growing at 0.7% a year and inflation is 1.9%, so the current 2.5% value growth in the US retail CHC market is very disappointing, but not surprising as we’ve seen relatively little switch activity in the past two years. Flonase Sensimist is the most successful recent switch, but Galderma’s Differin produced only $21mn of sales in the 12 months to June 2018. Maybe that is one of the reasons why Nestle has decided to exit the skin health business.”

Join Nicholas Hall and The CHC Training Academy in Israel at a key two-day workshop in Tel Aviv on 4-5 March 2019! The first day will focus on Trends in the Industry, showing you how to shape new Business Strategies to reflect the weakening economy. The second day will follow the theme of Winning in Consumer Healthcare, helping you to develop sales opportunities and solutions in a consistent approach, to add the best competitive advantage for your brand! Book your place now to take advantage of our generous early bird discounts! To find out more, please contact elizabeth.bernos@NicholasHall.com.