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

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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.

Apple Watch Series 4 “first ECG product offered OTC”

At its autumn keynote event last week, Apple announced upgrades to several of its products, including the Apple Watch Series 4. The smartwatch’s potential as an essential healthcare device is now being more fully realised, with Apple receiving Class II “de novo” FDA clearance for the Apple Watch’s innovative ECG and atrial fibrillation (AFib) features. COO Jeff Williams called Apple Watch Series 4 “the first ECG product offered over-the-counter directly to consumers”, though AliveCor has contested this claim.

One of the announcements that drew the greatest applause at the event was the unveiling of the new ECG app, which can take a reading and provide results in around 30 seconds. Results are derived not just from the second-generation electrical heart sensor in the back crystal of the watch, but also electrodes in the Digital Crown, which must be pressed down by fingertip during the reading. Users are then given a heart rhythm classification, with a normal rhythm classified as “Sinus Rhythm”.

A new operating system (watchOS 5) also ensures that the new electrical heart sensor intermittently works in the background, notifying users if their heart rate appears to be too high or low, or if there are signs of an irregular heart rhythm, such as those suggestive of AFib. If detected, the new Apple Watch prompts users to “talk to your doctor”, while also ensuring that all recordings, along with associated classifications and any noted symptoms, are stored in the Health app in a PDF that can be shared with health professionals.

Another innovative healthcare feature is Apple Watch Series 4’s ability to detect falls, thanks to it new gyroscope and accelerometer. This hardware allows for analysis of wrist trajectory and impact acceleration – after a fall, an alert is sent to the user, which can be dismissed or used to initiate a call to emergency services. If no movement is sensed for 60 seconds after the alert, the new Apple Watch will automatically call emergency services and send a message along with location to emergency contacts. Such features are likely to broaden the appeal of the Apple Watch among an older demographic, and more importantly have the potential to save lives.

Nicholas Hall will visit the stunning city of Vienna on 2-4 April 2019 to lead our 30th European CHC Conference & Action Workshop! Focusing on the central theme of Keeping Up with the Digital Consumer, this meeting will also feature a workshop from The CHC Training Academy, enabling you to Embrace Digital Transformation. To find out more about this pivotal meeting, early bird booking rates, and sponsorship opportunities, please contact Elizabeth.Bernos@nicholashall.com

 

Medical cannabis products legal in UK

Three hot topics we focus on at OTC DASHBOARD, in our blogs and infographics, are OTC adjacencies, e-commerce and new technology. Medical cannabis falls within the sphere of OTC adjacencies, and here at Nicholas Hall & Company we believe that this category will progressively become part of the consumer healthcare market.

Recent legislative moves show that government attitudes to cannabis use are becoming more and more liberal. Just last week, the UK Home Secretary made the decision to allow the legal prescription of cannabis-derived medicinal products by specialist doctors. The UK’s regulatory agency, MHRA, is now working on a clear definition of what constitutes a cannabis-derived medicinal product.

The UK has also been one of several markets that have seen the launch of innovative cannabidiol (CBD) products, such as CannaQIX (Precision Healthcare / Creso). Launched in April 2018, CannaQIX is formulated with CBD organic hemp extract, as well as vitamins and minerals. Available as lozenges, the product is positioned as a cognitive booster that maintains mental and nervous function, reduces fatigue and releases energy. The product is also available in Switzerland and being rolled out across Europe.

Other key countries for CBD products include Germany, Israel, Australia and the USA, with 45 products in the latter market already listed in our OTC New Products Tracker archive, in a variety of innovative formats including pens, vaporisers and gummy bears.

Canada is another country becoming more liberal in its approach to cannabis. In June 2018, legislation permitting Canadians to consume cannabis for recreational purposes was finalised, the final step that will pave the way for official legalisation in October 2018. The regulatory package is 390 pages long and provides details about how cannabis may be grown, harvested, processed and sold.

Looking ahead, Europe and North America are likely to be at the forefront of market development. According to a report from Prohibition Partners, the European cannabis market will be worth €115.7bn (US$135bn) by 2028, with the majority of European states expected to pass legislation to legalise medical cannabis programmes and recreational cannabis in that time.

Nicholas Hall’s upcoming OTC.NewDirections Executive Conference will reflect rising interest in the fast-developing cannabis market worldwide with two presentations on this key topic, from Canada and Israel. Being held on 12 September in London, this one-day meeting will explore Where Innovation Meets Regulation. For details of the full agenda or to reserve your place contact lianne.hill@NicholasHall.com

Q1 2018: Focus on Middle East & Africa

Our blog this week takes a closer look at some of the trends & developments that emerged from the Q1 2018 OTC update on the Middle East & Africa. With growth of 6.7% in the year to end-March 2018, the region now generates nearly US$9.0bn in sales (a 6.5% share of the global OTC market) and outperformed all regions except Latin America.

Here are 4 key learnings from the latest Q1 update:

1. South Africa’s OTC market broke through the US$1bn barrier in Q1. Now established as a Top 20 OTC market globally, South Africa generates sales of just over US$1.0bn following 8.6% growth in the MAT Q1 2018 period. OTC sales are forecast to total US$1.8bn by 2027, powered by demographic change (rising middle-class of consumers) and growing investment. Indian companies are showing strong interest, with Cipla now the No.7 OTC marketer in South Africa, while Dr Reddy’s and Lupin have announced plans to expand operations in the country.
2. Turkey remains the powerhouse of regional OTC growth. Up 14% in the MAT Q1 2018 period, Turkey is fundamental to the rapid OTC progress of the region. Compared to South Africa, multinationals have a more prominent share of Turkey’s OTC market, with Abdi Ibrahim the only local company in the Top 5 – Bayer, Sanofi, GSK and RB are all Top 5 OTC marketers enjoying double-digit growth. The prospect of an official OTC classification in Turkey is encouraging MNCs to invest for future growth.  
3. Scope for VMS development in Middle East & Africa. One noticeable fact about OTC sales in the region is how heavily reliant the market is on the analgesics and CCA categories. The same is true for the No.1 OTC marketer GSK,  which generates almost 80% of its portfolio turnover in the region from analgesics and CCA. Whereas VMS takes a 30.2% share of the global OTC market, it takes just a 26% share of the Middle East & Africa market, highlighting the need for more VMS product development and investment in education about lifestyle & wellness.
4. Scope for Lifestyle OTCs development too. Compared to a global share of nearly 10% for Lifestyle OTCs, the category only takes an 8.6% share of Middle East & Africa’s OTC market. Eye care, sedatives & sleep aids and systemic cardiovasculars (low-dose aspirin) currently dominate in the region, while smoking control and EHC only have a small share compared to the global average. As the regulatory landscape evolves and becomes more favourable to OTC, we would expect to see more products making the transition from Rx to OTC status in the region.

Join us in Dubai on 5th November for our CHC Training Academy Workshop, which will empower you and your team with the tools, tips and techniques you need to maximise your potential, with the ultimate goal of achieving sustainable growth for your Consumer Healthcare business.

E-commerce: Amazon picks up PillPack

Amazon’s latest foray into the healthcare sector – a definitive agreement to acquire US online pharmacy, PillPack – has huge disruptive potential for the traditional drugstore pharmacy sector. A start-up founded in 2013, PillPack is licensed in 49 US states to offer pre-sorted doses of medications, coordinate refills and renewals, and ensure timely home delivery to customers. Financial terms of the deal were not revealed, but the transaction is expected to close during Q2 2018, subject to regulatory approvals and other customary closing conditions.

Walmart was rumoured to be interested in acquiring PillPack earlier this year, and the company lost US$3bn in market capitalisation after the Amazon deal was announced on Thursday 28th June. The two companies are now locked in an intense global rivalry, with Walmart coming out on top in India after acquiring a 77% stake in Flipkart in May 2018. Such huge M&A investments will advance e-commerce’s share of the pharmaceuticals market in key markets like India and the US, with the potential to revolutionise the consumer healthcare sector too.

PillPack is currently a small operation, expected to post revenue of US$100mn this year, but Amazon’s existing customer base and shipping infrastructure could allow it to quickly scale up. Brick & mortar pharmacy chains are already seeing the consequences of the deal; as the news broke, shares in Rite Aid fell 11%, Walgreens Boots Alliance 9.9% and CVS Health 6.1%, a collective US$11bn in market value.

Though consumers in many markets remain hugely reliant on pharmacist advice when making OTC purchases, there’s no doubt that price is a very sensitive area that makes traditional brick & mortar retailers vulnerable in this evolving retail landscape. Certain OTC categories where there is a strong wellness or personal care element, such as VMS and dermatologicals, are most likely to see a significant rise in e-commerce sales.

E-commerce, as well as OTC adjacencies and digital health, are three of the hot topic areas that OTC DASHBOARD will be focusing on this year, in its weekly briefings, infographics and blogs. For a free trial of the service, please contact hannah.burke@nicholashall.com