Q2 company results: Key trends & developments

CHCINACTION

With all Top 6 CHC marketers and several important mid-tier companies having now reported their Q2 results, it’s a good time to analyse some of the key consumer health trends that have emerged in the second quarter of this turbulent year. Most notable is the downturn in Europe’s CHC market in Q2 2020, after an especially strong Q1, while North America’s CHC market has proven to be more robust so far. Also of note is the strong rise in e-Commerce sales for several CHC marketers.

Europe: Medicine cupboards already stocked

Marketers with well-developed CHC portfolios in Europe reported how “destocking” of medicine stores built up in Q1 had impacted regional OTC sales in Q2. GSK reported low single-digit decline for its pain portfolio in Q2, largely the result of this pantry unloading trend and the weak performance of Voltaren in Europe. Likewise, Sanofi reported a 13% decline in CHC sales in Europe in Q2, citing “consumer destocking” and low pharmacy traffic as key contributors to the regional fall.

Bayer, reporting on the wider EMEA geography, said regional sales fell 8.2% in Q2 after strong consumer stockpiling in Q1, with Allergy & Cold and Digestive Health the two categories most affected. Likewise, Mylan reported a 6% fall in its sales in Europe in Q2, as did several smaller CHC marketers, including Boiron, which recorded a 21% quarterly decline in sales in France owing to fewer doctors’ appointments and pharmacy visits.

Looking at meds.jpg

North America: J&J and P&G benefit from geographic mix

Bayer and GSK both reported dynamic VMS growth in the region in Q2, while Sanofi cited the “strong spring allergy season”, which boosted its Xyzal brand, as a factor in better Q2 sales in North America compared to Europe. Marketers with CHC portfolios more focused on the US market performed well, notably J&J, which reported a 10.7% rise in OTC sales in Q2 thanks to strong growth of Tylenol and Zarbee’s Naturals.

Like J&J, P&G benefits from a clear geographic focus on North America, and reported strong growth in the region in Q2 as a factor behind the double-digit rise in sales of its Personal Health Care portfolio, with Vicks and several other brands gaining share. Other CHC marketers with a particular focus on the region, including Perrigo and Church & Dwight, also reported stronger quarterly results in Q2 compared to competitors.

e-Commerce: RB and Nestlé report high growth

Another factor in rising organic CHC sales for Perrigo in North America in Q2 was continued robust growth in e-Commerce, more than offsetting category declines owing to lower brick & mortar foot traffic. Two other marketers that cited the impact of e-Commerce in their Q2 results were RB and Nestlé. For RB, e-Commerce sales rose by 50%+ and now represent 15% of total Health net revenue, while for Nestlé e-Commerce sales grew by 48.9%, reaching 12.4% of total sales.

Are the leading CHC marketers investing in e-Commerce? Do they have online platforms for their brands? Find out in our report Digital Marketing & e-Commerce: Tapping the Potential of Online Sales and Digital Promotion in Consumer Healthcare.  To order your copy, or to find out more, please contact melissa.lee@NicholasHall.com.

Market Movers Q1: CCA, VMS brands among fastest movers

CHCINACTION

In this week’s blog, we take a closer look at our newly published Market Movers data for MAT Q1 2020, which highlights the brands that performed best and worst in terms of value sales growth or decline in that period. Certain marketers like RB, which last week reported a 12% rise in its OTC portfolio in Q2 2020, have found success from having a well-positioned portfolio of power brands in fast-growing, Covid-driven CHC categories, such as cough & cold remedies (Mucinex), immunity supplements (Airborne) and antiseptics & disinfectants (Dettol).

P&G also reported double-digit organic growth of its Personal Health Care portfolio in Q2 (fiscal Q4), powered by Vicks, which continues to gain share. Vicks NyQuil / DayQuil combo packs were among the six fastest-growing brands in MAT Q1 2020, along with one of China’s leading systemic cold & flu remedies, 999 Gan Mao Ling. VMS products also featured strongly among the Top 6 fastest-growing brands, with Olly and Emergen-C performing well in the US market thanks to their stress / immunity positioning, and Double Whale Vitamin D Drops achieving high growth in China. J&J’s Tylenol, the No.1 analgesic brand globally, also continues to produce dynamic Covid-driven growth.

Screen Shot 2020-08-03 at 12.22.04.png

Asia-Pacific was the region that underperformed most in MAT Q1 2020 – achieving just 3.4% growth vs 6.3% for North America and Europe – so it is no surprise that five of the Top 6 worst-performing brands are from China or Japan. Tonics & cure alls was the subcategory most responsible for Asia-Pacific’s relatively low growth, with category sales down 25% in China, owing to issues with donkey breeding that have resulted in rising raw material costs and subsequent price rises, affecting two brands in particular – Dong-e E-jiao and Fu Fang E Jiao Jiang – while Hong Mao Medicated Wine was affected by negative claims.

OTC tonic drinks is another VMS subcategory hit by declining sales, with a continued downturn in Japan where the old, male consumer base is retiring and brands face competition from energy drinks. Takeda’s Alinamin EX was among the brands that declined fastest in MAT Q1 2020. Another CHC subcategory affected by weaker sales in Q1 was antacids, as a result of the withdrawal of ranitidine-based antacids from the market owing to concerns around NDMA in the formulation. Sanofi’s Zantac was among the key brands impacted, with Zantac 150 in sharp decline in the US market.

Today is the last chance to pre-order our upcoming Analgesics 2020: Assessing the Current & Future Self-Care Market for Pain Relief at the discounted rate and save up to GB£1,800! Contact melissa.lee@NicholasHall.com to order or find out about special discounts available on purchases of more than one report title!

Innovation powers Genomma OTC growth in LatAm, USA

CHCINACTION

Ranking among the Top 50 globally and the No.5 CHC marketer in Latin America, Genomma continues to produce double-digit OTC growth. In its recently published Q2 2020 results, Genomma announced a 10.9% rise in net revenue in Q2 to Ps3.6bn (US$160mn). Adjusted EBITDA grew by 13.1% to Ps754.9mn (US$34mn; 20.8% margin). Mexican sales reached Ps1.5bn (US$67mn; +5.0%), while revenue from LatAm markets was up 8.8% to Ps1.6bn (US$71mn). Reversing the downward trend of recent quarters, sales from Genomma’s US operation grew by 47.8% to Ps478.4mn (US$21mn), attributed to a renewed focus on innovation, POS (point-of-sale) presence and A+P.

Overall, Genomma generates 54% of its revenue from OTC products, with personal care accounting for the remainder. Genomma now has a presence in 18 markets, and international expansion has fuelled the fast quarterly growth in its OTC portfolio (+32.2% in Q2 2020 vs Q2 2019), which offset a 6.5% decline its personal care sales. Mexico accounted for 38% of Genomma’s OTC turnover in Q2 2020, and quarterly sales in its home market fell 2.7%, however this was more than offset by 49.8% growth in LatAm sales (excluding Mexico), which accounted for 42% of its OTC portfolio in Q2, and 128.5% growth in USA sales, which now claim a 20% OTC share.

Screen Shot 2020-07-27 at 10.03.10.png

Source: Genomma’s Q2 2020 Earnings Release

CHC Insight Latin America Assistant Editor, Jen Jones, commented: “Innovation was the buzzword in Genomma’s Q2 statement to investors. In Mexico, new categories include infant nutrition, sanitisers and shaving products, while in Brazil Genomma recently introduced the region’s first at-home HIV test kit. CCA was central to NPD in LatAm, including launches under the Next banner in Brazil, Argentina and Colombia, as well as the rollout of Tukol cough remedy to new regional markets.”

According to our CHC New Products Tracker service, after a quiet year in 2017, Genomma significantly ramped up NPD activity in 2018 and 2019, and this investment is now being reflected in strong organic OTC growth. While Brazil and Argentina were the main sources of launch activity in that period, the US market has also been a growing focus, with line extensions to skin care brands Lagicam (antifungal), Asepxia (acne remedy) and Cicatricure (aesthetic treatment), as well as additions to the Next systemic cold & flu range (Daytime Relief and Nighttime Relief).

Thousands of innovations are launched every year in the global consumer healthcare market, but relatively few offer notable new benefits for consumers in terms of delivery format or formulation. Which new products are breaking through and offering a unique proposition? Where will new product development take the CHC market in future? Contact Melissa Lee (melissa.lee@nicholashall.com) today to pick up your copy of the Innovation in CHC report.

Top 2 brands powering global CHC growth

CHCINACTION

Our blog this week looks at the performance of the Top 10 global consumer healthcare brands, in the context of the 5.6% upturn for the global CHC market in the year to end-March 2020. Inevitably, analgesics and cough, cold & allergy brands have enjoyed the highest rates of growth thanks to Covid-driven demand, with the Top 2 global brands, Vicks (+15.4%) and Tylenol (+18.3%), performing particularly well.

P&G’s CCA range Vicks now generates global sales of nearly US$1.5bn, and its double-digit growth in the MAT Q1 2020 period was powered by dynamic performances in Latin America and North America. In fact, high growth in the US market was behind the double-digit global upturns for both Vicks and J&J’s Tylenol, the latter generating sales of close to US$1bn in its home market.

Top 10 brands Q1 2020.jpg

GSK markets four of the other Top 10 brands, including its powerful triumvirate of painkillers – Advil, Voltaren and Panadol. Growth for Advil and Panadol improved markedly in Q1, thanks to accelerated purchases as a result of Covid-19, while Voltaren experienced flat sales in the quarter. That said, the recent US Rx-to-OTC switch of Voltaren Arthritis Pain is expected to provide a significant boost to brand sales in Q2.

Halls also saw growth accelerate in Q1, although not to the same extent as other CCA brands like Mucinex, which rediscovered growth during the first quarter of 2020 to leap ahead of J&J’s Nicorette to reclaim the global No.9 spot. VMS brands Centrum and Nature Made missed out on the overall surge in demand for CHC products in Q1 – in general, growth in the VMS market has been focused primarily on immune supplements and vitamin C products.

Pre-order our upcoming Analgesics 2020: Assessing the Current & Future Self-Care Market for Pain Relief report before 31 July to save up to GB£1,800! Please contact melissa.lee@NicholasHall.com to order or to find out about special discounts available on purchases of more than one report title!

Immunity sales & NPD activity on the rise

CHCINACTION

One of the newer CHC subcategories that appeared in the Top 10 biggest contributors to global consumer healthcare growth in the MAT Q1 2010 period was immune supplements, with the subcategory producing a 28.5% global upturn in the year to end-March 2020. Along with vitamin C products, probiotics and multivitamins, immune supplements were among several major VMS contributors to growth in the first quarter.

For 2019, our CHC New Products Tracker service recorded 95 new product developments in the herbal & natural immune stimulants subcategory, making it the 14th most active subcategory overall in the consumer healthcare market. So far in 2020, immune supplements are already in the Top 10 most active subcategories – a sign of the rapid increase in new product development in response to the Covid-19 pandemic – and we fully expect this growth in NPD activity to accelerate over the remainder of the year.

Screen Shot 2020-07-13 at 12.50.19.png

There has been a wide array of immunity NPD activity across all regions, notably Europe, North America and Asia-Pacific. In certain markets, such as India and China, there is also likely to be a rise in sales of country-specific natural remedies (Ayurvedic medicine and TCM) positioned for immunity support, though marketers will have to be wary of government clampdowns on products that are claimed to prevent or cure Covid-19.

Notable immunity supplement launches in the USA so far in 2020 include GSK’s Emergen-C Turmeric & Ginger and Emergen-C Elderberry, available in fizzy drink mixes, and RB’s Airborne Immune + Natural Energy Ready To Drink Shot. In Europe, Neuraxpharm unveiled Preventan Clasic in Spain and Italy, while Sambcol Immuno Forte and Sambucol Kids + Vitamin C were rolled out in Germany. As for Asia-Pacific, Grandma’s Kadha effervescent tablets were launched in India and Sanofi’s Cenovis line was relaunched in Australia.

Thousands of innovations are launched every year in the global consumer healthcare market, but relatively few offer notable new benefits for consumers in terms of delivery format or formulation. Which new products are breaking through and offering a unique proposition? Where will new product development take the CHC market in future? Contact Melissa Lee (melissa.lee@nicholashall.com) today to pick up your copy of the Innovation in CHC report.

e-Commerce CHC growth accelerating

CHCINACTION

All the signs point to accelerated growth for the internet & mail order channel of the global CHC market in the first quarter of 2020. In 2019, the overall global retail CHC market recorded growth of 3.9%, while internet & mail order sales achieved much faster growth of 12.4% that same year, and the channel is forecast to rise by 22.5% in 2020.

Several leading CHC companies reported dynamic e-Commerce growth in their latest quarterly results, with RB reporting a strong e-Commerce upturn across all major platforms and market places, particularly in Greater China, led by Dettol and Infant & Child Nutrition (IFCN), and North America, with Mucinex and VMS in particular making good progress. Likewise, P&G reported 35% growth for e-Commerce channels in its fiscal third quarter (calendar Q1 2020), translating into around 10% of company business. CFO Jon Moeller acknowledged social distancing orders were a key driving factor, but still expects a permanent shift in the portion of business conducted online post-pandemic.

GSK is another company that has been boosted by increased online demand for its analgesics, CCA and VMS products. The company reported that the impact of Covid-19 varied across regions in Q1 2020, as a result of differing government actions and consumer behaviour. USA, UK, Australia and several other markets benefited from increased demand and shopper activity in both traditional retail and e-Commerce channels, which resulted in accelerated purchases across all categories, while some markets, including India and China, were negatively impacted by mandated retailer shutdowns.

Likewise, the benefits of increasing trade channel liberalisation will not be shared equally among all CHC marketers. While many leading companies are well prepared for this increasing consumer appetite for internet & mail order purchases, some marketers with a more limited e-Commerce profile may find it hard to adapt to this shift in demand, especially if they’re highly leveraged in brick & mortar retail outlets, as is the case – for example – with Prestige Brands and the convenience store channel in the USA.

Coming this month — with two timing options on 22 and 23 July — is an all-new Hot Topic webinar focusing on COVID-19: The Impact on the Global and Regional CHC Markets. To find out more or register to join your preferred session, contact elizabeth.bernos@NicholasHall.com.

NPD activity in CHC in Q1 2020

CHCINACTION

At the same time as our DB6 division publishes data on the sales performance of the global CHC market in the first quarter of 2020, it’s also a good time to reflect on headline new product development trends in the period from January to March 2020, using our CHC New Products Tracker tool which covers 20 key markets. The major development that stands out this year is the dramatic fall in the volume of new product development (NPD) in March 2020, compared to the same month in the three previous years.

March is traditionally the month we see a sharp rise in NPD activity after the quieter month of February, but this year Covid-19 halted that trend. So far for March 2020, we only have 271 entries – including launches, Rx-to-OTC switches, line extensions, rollouts and relaunches – recorded in our Tracker archive, compared to much higher totals in March 2019 (464 entries), March 2018 (434) and March 2017 (397).

This sharp fall in global NPD activity in March 2020 is likely the result of CHC marketers shelving plans to launch new products in response to the uncertainty caused by the Covid-19 pandemic. The question is whether these plans have been postponed or abandoned altogether? We know that several CHC companies have streamlined their portfolios during the pandemic to ensure continued production of core SKUs, so it’s possible portfolio innovation has fallen down the priority list. Alternatively, we may see a surge in NPD activity in the remainder of 2020. Only time will tell.

What will also be interesting to see play out is how NPD activity in 2020 differs in terms of its focus on fast-growing subcategories, fuelled by the Covid-driven spike in demand. For example, we saw an increasing number of antiseptics & disinfectants launched in March 2020, compared to the same month in previous years. This trend will likely be replicated in other subcategories, such as herbal & natural immune stimulants, when we come to analyse NPD activity in Q2 2020 and later quarters.

Thousands of innovations are launched every year in the global consumer healthcare market, but relatively few offer notable new benefits for consumers in terms of delivery format or formulation. Which new products are breaking through and offering a unique proposition? Contact melissa.lee@nicholashall.com to secure your copy of Innovation in CHC, a report showcasing many of the “wow brands” launched in 2019 and highlighting ingredient and delivery format trends that continue to characterise the market in 2020.

 

Health Report 2020: How Europe moves towards the future

CHCINACTION

Stada last week published its Health Report 2020: How Europe Moves Towards the Future, conducted by Kantar Health and involving more than 24,000 participants in 12 European countries. The report contained a “corona special feature” involving 6,000+ respondents from six countries, which found that 61% rate medical care during the crisis as positive / very positive. The highest approval rates were in Spain (75%) and UK (74%), which both dealt with particularly high mortality rates, while the assessment was significantly more negative in Russia (31%). Some 44% declared a newfound respect for the work of medical staff and one in four have a better understanding of the importance of good medication.

Everyday illnesses was among the many other topics covered in the report, and this section revealed that – despite the increasing prevalence of sleep problems among Europeans – only one in three are willing to take sleeping pills. Across Europe, 26% of people reported being afraid of developing an addiction to sleeping pills, while awareness of possible causes of sleep disorders was low. Other key findings of note for CHC marketers are that a high proportion (over 80%) of European employees state they will still go to work even if they have a cold, while only 61% of respondents say that they read the instruction leaflet when taking medication. As for other topics, the willingness to receive a remote diagnosis via webcam has notably increased compared to 2019 (70% vs 54%), while 82% of Europeans support the idea of compulsory vaccinations.

Stada_healthreport2020_infographic_cityofhealth

Nicholas Hall commented: How Europe – indeed, the whole world – moves towards the future is a vital topic in these difficult times. Stada’s findings on remote diagnosis bring up the whole question of Telehealth. Earlier this week, we conducted regional trend (d)e-briefings, with delegates from North and Latin America in attendance. One of the questions related to the importance of new technology, and my answer was that a year ago the answer would have focused on medical devices, but now the issue is whether we remain “wired” after Covid-19 recedes.

So, will healthcare be delivered virtually in the future? Will e-detailing and e-selling replace medical and pharmacy reps? Will digital solutions increase the chances of more prescription ingredients going over the counter? This is a big topic, much more than I can go into here, but worthy of its own (d)e-briefing, which we are planning for September. Other webinars will cover the impact of Covid on consumer purchasing and usage – no surprises there – together with CBD and sustainability, two themes echoed in some of our lead stories this week.

Take your final chance to register for the Asia-Pacific CHC Trends webinar, taking place tomorrow (Tuesday 23rd June). You will hear about successful brands from the past 3 years, hot topics, the impact of the Covid-19 situation on the market in 2020 and much more! Please contact elizabeth.bernos@NicholasHall.com to find out more or register without delay.

How will CHC supply chains evolve in Covid-19’s wake?

CHCINACTION

Supply chain issues are high on the agenda of consumer healthcare marketers in the wake of the Covid-19 pandemic. Bayer said in its Q1 results that its Consumer Health division was able to respond very flexibly to significantly higher volumes and shifts in the product mix thanks to its supply chain operation. In addition, RB last week appointed Sami Naffakh as Chief Supply Officer and member of the Executive Committee, effective 1st July 2020. RB CEO, Laxman Narasimhan, said: “Throughout the Covid-19 pandemic, the global supply chain teams have worked tirelessly to step up for our consumers and our customers. As we continue to ‘navigate our new normal’, we must also start to focus on our medium-to-longer-term supply needs across the entire, diverse portfolio.”

Novartis’ supply chain has also coped well during the pandemic, thanks to the extraordinary efforts of its staff – as outlined in this report – but some companies have been harder hit. In February 2020, Blackmores downgraded its FY2020 forecast saying that, while the outbreak has increased demand for key immunity products, this has been countered by supply chain disruptions that the company expected would continue to affect China sales for at least 2-3 months.

As our graphic below shows, China is a key producer of active ingredients (APIs), and absolutely vital to the world supply of ascorbic acid (vitamin C), for example. India, which imports most of its APIs from China, has been hit hard by disruptions in the supply chain, and in March 2020 the Government banned the export of 20+ APIs to protect the supply of essential medicines in the domestic market. This had knock-on effects around the globe, however last week India’s Directorate General of Foreign Trade lifted restrictions on the export of active pharmaceutical ingredients of paracetamol.

China, IndiaIn a recent report by the Economist Intelligence Unit (EIU), called “The Great Unwinding”, more and more companies are said to be moving parts of their supply chains away from China, a trend accelerated by Covid-19, with multinationals seeking to build “quasi-independent regional supply chains in the Americas and Europe”, to ensure future resilience. In addition, the report indicates that another long-lasting impact of Covid-19 will be companies looking to store inventory in “strategic locations from where it can be easily accessed and delivered to customers”.

The pharmaceutical industry is also facing rising prices of raw material. According to data from India’s Pharmaceutical Export Promotion Council (Pharmexcil), the cost of paracetamol went up up 50-60% at the start of the Covid-19 pandemic, and the prices of vitamins increased by 40-50%. As the EIU report indicates, companies will need to think strategically about pricing models, given that “both the regionalisation of supply chains and the build-up of strategic inventories will push up final goods prices, denting a product’s competitiveness”. However, one of the upsides to this change is that “a more regionalised supply chain will offer opportunities for companies to focus more on local tastes amid a greater capacity for product differentiation”.

Very soon we will be publishing the second edition of our hot topic review, Coronavirus 2020 and its potential impact on CHCThis report from our Competitive Intelligence & Market Analysis (CIMA) division explores the response to the pandemic from CHC brands and marketers as well as the overall impact on CHC to date. You will also be able to read about trends observed so far (key categories impacted, how consumer behaviour has changed etc), how key CHC players performed in Q1 and projections for the near and longer-term.  If you have purchased the original Coronavirus 2020 Review, you will receive the 2nd edition free of charge. For more information, or to purchase your copy, please contact Melissa.Lee@NicholasHall.com

Sales and innovation rising fast for sedatives & sleep aids

CHCINACTION

Covid-19’s impact on the consumer healthcare market is now well-established, with a notable spike in sales of certain CHC subcategories like analgesics, vitamin C supplements and antiseptics & disinfectants. Indeed, a fascinating recent report in the FT story reveals the lengths that RB has gone to in order to maintain supply of antiseptic brand Dettol during the pandemic. In addition, we’re also seeing some perhaps less expected upsurges in demand for other products as a result of Covid-19, for example eye care treatments and sedatives & sleep aids.

In the latter case, anxiety caused by the pandemic is leading consumers to seek refuge in products that promote relaxation and reduce stress. In response to this trend, US retailer CVS has this month created a new “Calm & Comfort” section in thousands of its pharmacies to accommodate this growing need for stress relief products, from weighted blankets and aromatherapy to supplements that promote enhanced mood and sleep, according to a report in WWD. Even before Covid-19, we were noticing a clear upturn in sales of sedatives & sleep aids, partly driven by rising NPD activity – as demonstrated by the chart below – and the pandemic is accelerating this trend.

Sedatives + sleep, 2017-19

According to CHC New Products Tracker, NPD activity in the sedatives & sleep aids subcategory reached an all-time high in 2019 (with almost 150 entries added to the database), and this upsurge in innovation was reflected in global sales growth, which accelerated to 7.3% in 2019 according to DB6, driven by the US market. Notable developments so far in this subcategory in 2020 include P&G’s New Chapter One Daily Multiherbal Stress Relief and Sleep Well products, as well as R3set, which will be a key feature of CVS’ new Calm & Comfort section. 

R3set, a new brand focused on helping people to manage stress, was recently launched in selected Target and 4,400+ CVS stores. The first two dietary supplements – citrus mint-flavoured Calm (l-theanine, valerian root + ahiflower) and lavender mint-flavoured Unwind (ashwagandha, passion flower + chamomile) – are formulated by co-Founder Dr Eric First, along with development partner Lonza. Each microdose capsule is coated with aromatherapy oils to provide a soothing experience and the products come with instructions for a simple breathing exercise. The supplements retail for US$19.99 for a 14-count bottle; 14-day combo packs cost US$34.99 and 5-day starter packs US$14.99. 

Where will NPD take the CHC market in the future? Find out in our recently published report, Innovation in CHC: NPD & Innovation in CHC under the Spotlight! This report, drawing on Nicholas Hall’s CHC New Products Tracker, assesses the global picture of CHC innovation, featuring ingredient trends, delivery format trends, analysing innovation trends by region and by marketer, plus much more! To order your copy, or for more information, please contact melissa.lee@NicholasHall.com.