Natural & Organic a focus for M&A and innovation

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Continuing our series of blogs on the 10 Infinity Zones for future CHC growth recently outlined by Nicholas Hall, in this edition we take a closer look at natural & organic products. This is by no means a new trend, but it’s certainly one increasingly on the radar of multinationals, as exemplified by J&J’s recent purchase of Zarbee’s Naturals.

Among herbal & natural cough remedies, Zarbee’s has been gaining share on rivals such as Little Remedies, Hyland’s and Chestal, while also growing faster than most medicated OTC cough remedies. Another growth driver in the US market is Maty’s all-natural and organic range, including honey-based cough remedies, while Unilever recently bought Olly Nutrition, another range of VMS products with a strong emphasis on natural ingredients, such as the 10 phytonutrients in its Super Foods Multi line.

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A+P for most herbal & natural products often emphasises the importance of quality standards and – increasingly – organic and responsibly-­sourced ingredients. In China, the No.1 probiotic brand Biostime (Health & Happiness for Institut Rosell) is promoted on the basis of the organic sourcing of its ingredients, while marketing involving brand ambassador Juliette Binoche also emphasises the natural heritage of the brand.

According to OTC New Products Tracker, the number of launches that include the word “organic” either in their branding or list of ingredients is growing fast, with 246 innovations in 2018 vs 168 in 2017 and just 81 in 2016. Over half of these products are unsurprisingly classified as vitamins, minerals & supplements, however there is also a growing number of “organic” Lifestyle OTCs, especially among medical cannabis products, sedatives & sleep aids and stimulants.

Last chance to pre-order Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself! Examine each aspect of the CHC industry in 20 chapters, with a focus on major issues including Regulation, Pharmacy Point-of-Care, M&A, Switch and much more. Nicholas will also unveil the “infinity zones” he has identified as being crucial to the future growth of the industry. In addition to this, you can upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

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Prevention better (and growing faster) than cure

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For many years now, Nicholas Hall has been highlighting how OTC subcategories focused on prevention are growing faster than those directed towards treatment or intervention. This long-term trend in the CHC industry continues to take root, thanks to the growing power of categories like probiotics (another Infinity Zone, covered in last week’s blog).

At this year’s Vienna conference, Nicholas Hall presented a slide of the fastest-growing OTC subcategories by CAGR (2014-18), comparing those focused on prevention with those centred around treatment, and this showed that seven of the Top 10 most dynamic subcategories in recent years had a preventive focus. Sexual health is a relatively new driver of this trend, with two subcategories in the Top 5 – erectile dysfunction and emergency hormonal contraception.

Top 10 prevention

Vitamins, minerals & supplements have long been the main driver of this prevention trend, with probiotics and vitamin D the two key subcategories. Innovation and niche product positioning (i.e. to prevent allergies, candidiasis, age-related illnesses, etc) have helped fuel probiotics growth, while the dynamism of vitamin D sales has been driven by rising awareness of the high levels of deficiency in many markets and the benefits  of supplementation.

Herbal memory & brain health is an increasingly attractive subcategory, as exemplified by RB’s recent launch of Neuriva, a new product designed to support “brain fitness” and prevent cognitive decline. Royal jelly is taken widely in Europe and Asia-Pacific as a way to prevent fatigue, while just outside the Top 10 in CAGR terms are magnesium, zinc, pregnancy vitamins and hair & beauty supplements. According to OTC New Products Tracker, the latter was the fifth most active OTC subcategory in 2018 in terms of launch activity, with 150 innovations.

Last chance to pre-order Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself! Examine each aspect of the CHC industry in 20 chapters, with a focus on major issues including Regulation, Pharmacy Point-of-Care, M&A, Switch and much more. Nicholas will also unveil the “infinity zones” he has identified as being crucial to the future growth of the industry. In addition to this, you can upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

Probiotics the main CHC growth driver in Europe

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As part of our series of blogs on the 10 Infinity Zones for future CHC growth outlined by Nicholas Hall, this week we take a closer look at the fast-growing probiotics category. As Nicholas mentioned in his keynote speech at this year’s Vienna conference, probiotics is a category that has moved from adjacency to mainstream, producing more value growth in Europe in the past 5 years (additional US$364mn in sales) than any other OTC category.

In 2018, global sales of probiotics totalled US$4.2bn, representing 10.8% growth. This was a slightly better performance than the previous year (sales of probiotics were up 10.4% in 2017) but still marks a deceleration compared to the recent peak in 2016 of 13.6% growth. Looking at global product innovation trends, thanks to our OTC New Products Tracker tool covering 20 key markets, there are also indications that probiotics expansion may have hit a temporary plateau, with roughly the same number of innovations in this category in 2017 (277) and 2018 (270).

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However, the appearance of new probiotics niches looks set to energise further growth and innovation going forward. As highlighted in our recently published Lower GIs report, the development of probiotics with novel positioning (IBS, hangover, etc) and for specific life stages (infancy, pregnancy, etc) are expanding the category’s appeal even further. Recent examples of new probiotics for kids include Zarbee’s Naturals Baby Daily Probiotic Drops (J&J) and Biocodex’s launch of Florastor Baby.

Personalisation will also be an important future growth driver for probiotics. Despite the increasing number of proprietary bacterial strains, the probiotics category is still largely characterised by a one-size-fits-all approach. As scientific understanding of the microbiome advances, however, we may soon reach a stage where tailored probiotic strains are recommended for people with specific host microbiomes or diets. This sort of precision therapy could also eventually see a growing number of probiotics regulated as medicines rather than dietary supplements.

How is regulation of consumer healthcare products set to evolve in future? Find out in the chapter dedicated to regulation in Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself. Other chapters will look at issues surrounding the CHC market including digital engagement, M&A, healthcare trends and much more! You also have the option to upgrade your purchase to include a customised in-house presentation or webinar with Nicholas for an additional GB£10,000. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

Emerging Markets drive OTC growth in 2018

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Emerging Markets constitute one of the 10 Infinity Zones for future CHC growth that we highlighted in our recent blog previewing Nicholas Hall’s upcoming New Paradigms report. Recent figures from the IMF’s World Economic Outlook forecast that developing economies will continue to outpace advanced economies and, according to the latest data from DB6, Rest of World (Middle East & Africa + Kazakhstan) and Latin America (including Puerto Rico) growth – 7.2% and 9.5% respectively – fast outpaced that of the the global OTC market (+4.0%) in 2018.

Middle East & Africa and Latin America still account for a relatively small share of global OTC sales – 7% and 5% respectively – but both are rising in power every year. Brazil (+10.1%) is the No.9 OTC market globally, while Mexico (+6.9%) ranks 16th globally in terms of OTC market size. As for the Middle East & Africa, there are now three countries clustered close together in the global OTC rankings – South Africa (+8.7%), Turkey (+15.8%) and Saudi Arabia (+6.7%) – claiming the 19th, 20th and 21st positions.

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As well as double-digit growth in Turkey, there were also strong OTC performances from Algeria (+8.6%), Egypt (+15.2%), Nigeria (+7.9%) and UAE (+7.8%) in 2018. High consumer demand for preventive medicines is a key driver of CCA and VMS growth in key markets such as Egypt. According to a DSM survey of almost 7,000 people in EMEA (Europe, Middle East & Africa), some of the top health concerns for the young include immunity and resistance to disease and colds.

Multinationals have already established a strong foothold across the Middle East & Africa, but in some countries like Egypt and Iran local marketers still remain dominant. GSK, Sanofi and Bayer are the Top 3 OTC marketers in the region, followed by South Africa’s No.1 OTC marketer Adcock Ingram and RB. GSK’s OTC portfolio is highly focused on analgesics, especially Panadol, while Sanofi and Bayer have extensive VMS portfolios across the region.

Available on tablet, smartphone and desktop, OTC DASHBOARD covers 63 markets across the world, allowing you a bird’s eye view of the CHC market! We’ve now published our latest Q4 update, giving you the most up-to-date trend reports on Middle East & Africa markets such as South Africa, Turkey and Saudi Arabia. Contact hannah.burke@nicholashall.com to find out how you can benefit from OTC DASHBOARD by setting up a free trial today!

10 Infinity Zones for future CHC growth

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Nicholas Hall’s New Paradigms for CHC report, due to be published later this year, outlines 10 Infinity Zones for future consumer healthcare growth, which were shared as an exclusive preview with delegates at our recent Vienna conference. Below we outline these Infinity Zones to OTC DASHBOARD subscribers, with a short description of each.

1. Prevention: A long-term theme in the CHC industry which is now taking root. Nicholas Hall presented a slide of the fastest-growing OTC subcategories by CAGR (2014-18), comparing those focused on prevention with those centred around treatment, and this showed that seven of the Top 10 most dynamic subcategories had a preventative focus.

2. Probiotics: One of these Top 10 fastest-growing subcategories was probiotics, an area of the global consumer healthcare market that has moved from adjacency into the mainstream. In the 2014-18 period, probiotics delivered more value growth (in €mn terms) than established subcategories like systemic analgesics and sore throat remedies.

3. Food Intolerance: Changing diets across the globe are causing a huge increase in food intolerance issues. Nicholas Hall is planning to provide an estimate of the size of this emerging category in his New Paradigms report, but for now he emphasised to delegates the opportunities that OTC marketers have here, notably in terms of cross-branding.

4. Natural & Organic: Like prevention, this is not a new trend in consumer healthcare, but instead one that is increasingly on the radar of major multinationals. A recent example here is J&J’s acquisition of the Zarbee’s Naturals line of OTC products.

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5. Cannabis: Nicholas Hall outlined the huge investment already being seen in this fast-growing market, especially in key countries like Australia, and outlined how the future CBD market could be split into five categories, including Rx, OTC medical cannabis via Rx-to-OTC switch, VMS & topicals, beauty & food and lifestyle marijuana.

6. Sexual Health: Nicholas Hall said that, while Bayer has made it clear that erectile dysfunction treatment Levitra will not switch, we’ve already seen the Rx-to-OTC reclassification of Viagra Connect in the UK market and it’s possible that Sanofi’s Cialis could soon follow once the company has navigated the necessary regulatory hurdles.

7. E-commerce: This year DB6 has introduced an “all channels” version of the dataset, showing that total OTC sales through all channels were worth US$174bn in 2018, of which store-based sales account for 78%, with direct sales (MLM) generating 14%. Internet & mail order currently accounts for 9% of the “all channel” universe, with sales dominated heavily by VMS supplements in China and USA. However, this channel has seen a CAGR of 20% since 2014 and will continue to increase dramatically in importance.

8. Pharmacy: Nicholas Hall also emphasised the continuing importance of bricks & mortar retailers to consumer healthcare, with Pharmacy Point-of-Care still the driving force behind recommendations and purchases of key OTC brands.

9. Big Data: The Big 5 tech companies are now dominating healthcare information, and while there are concerns about privacy, Apple CEO Tim Cook has stated that his company’s “greatest contribution to mankind” will be within the sphere of healthcare.

10. Emerging Markets: Nicholas Hall said that Emerging Markets now account for a 55% share of global OTC sales (in the retail channel). Recent figures from the IMF’s World Economic Outlook forecast that developing economies will continue to outpace advanced economies.

Take a look at what the future holds for the CHC industry in our upcoming Signature report, Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, written by Nicholas himself. The report will take a look at major issues including innovation, future competition, emerging categories and markets and M&A. You also have the option to upgrade your purchase to include a customised in-house presentation or webinar with Nicholas. To find out more or to place your order, please contact melissa.lee@NicholasHall.com.

Nicholas Hall’s Conference Report

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Nicholas Hall sends this report from the 30th European CHC Conference, held last week in Vienna.

Well, after three days packed with expertise and insights, my key takeaways from the Vienna are as follows:

• Consumers are increasingly demanding personalisation of products and services, with digitalisation key to both driving and meeting this demand

• Digital is disrupting conventional paradigms of healthcare

• The empowered consumer expects to sit at the centre of their wellbeing, playing an active role in their healthcare choices. The role of HCPs is moving away from paternalism and closer to that of a mentor or coach

• In terms of technology, we must ensure we are delivering real added value to the consumer, using insights to generate a deeper understanding of what motivates them

• Don’t be afraid to partner with other companies and service providers to deliver the holistic care consumers increasingly seek

After I took to the stage to give my keynote reviewing the trends of the past year and outlining what is next for CHC, Tamara Rogers, SVP & Region Head, EMEA Consumer Healthcare, GSK reviewed the Consumers of the Future = CEOs of their Own Bodies.

She explained that the wealth of data available offers great opportunities to the consumer healthcare industry, but that we must have the ability to interpret it and leverage insights to better know, understand and connect to the consumer.

Tamara was followed by Luca Pagano, Group CEO, BeMyEye, who explained how the BeMyEye disruptive technology allows marketers to maximise the performance of their brands in the retail space, delivering actionable insights to constantly monitor their in-store execution. The most transformational companies are implementing new methodologies for their go-to-market strategies. BeMyEye allows marketers to respond to retail trends in real-time, enabling them to implement continuous performance improvements.

After the presentation of our Awards shortlists, Grigoris Karelos, Country Director, Greece & Cyprus, J&J, asked us “whether we create “Love Brands”? He argued that, by definition, communication about healthcare products is negative as we discuss illness and symptoms. Therefore, the way we talk about our brand is crucial. We must create emotional connections based on consumer insight to create impactful and relevant communication. It is important to have a clear and consistent brand belief if we want to create long-lasting relationships with consumers. However, the ways in which we communicate this message must evolve in order to stay relevant.

We were then lucky to be joined by Daragh Anglim, Managing Director, Prohibition Partners, to explore the Medical Cannabis landscape of Europe.

This is such a fast-paced and exciting category, yet Daragh explained there is a real lack of education for HCPs on this subject – it has been legal in the UK since November 2018, but has yet to be prescribed on the NHS, with doctors taking a risk-averse approach.

There is a need for education and clarity about the medical use of cannabis. There’s an existing user base for the product, so it’s not about educating on what it is, necessarily, but rather its safe usage, therapeutic applications and medical benefits

Medical cannabis offers huge growth potential, but independent and reliable data is necessary to drive the category forwards.

The Business of Being & Feeling Well was the next topic presented by both Dr Rodney Collins, Regional Director, EMEA, McCann Truth Central and Harjot Singh, Chief Strategy Officer, McCann Worldgroup EMEA. They argued that the notion of wellness and what it means to be well have evolved, with people today regarding it more as a state of mind, and one of the largest unmet needs is helping people to be happy and stay positive. Technology is improving peoples’ sense of wellness, but we must ensure that the technology is relevant and delivers added value, or else it becomes technology for technology’s sake.

Dr Iris Hardewig, Senior Consultant, Analyze & Realise explored Digitalisation in the Natural Health Space, and identified key areas in the natural health sphere where digitalisation plays a role, including growing interest in personalised products. Consumers increasingly want to know more about themselves, possible through tools such as tracking and genomics, and are willing to invest in personalised natural health products to supplement their health and lifestyles. Prevention has been a growing theme in recent years, albeit at a slower pace in Europe, and we see continued investment in this segment. Much of the investment in personalisation of supplements and natural products – achieved via digitalisation – comes largely from start-ups, rather than established pharma players.

Iris was then followed by a series of Innovation talks over coffee, led by Don McKernan of Impact and our partners at The CHC Innovation Connection.

Back to the main stage, the next presentation showed us How Digital is Changing People’s Relationship with Health, and was led by Milena Leone, Head of Innovation & Digital Consumer Healthcare, Sanofi. She argued that in terms of digital, pharma lags far behind other industries. Through the creation of the ÜWell digital platform, Sanofi has sought to meet the needs of consumers who are becoming more curious, demanding and impatient. She explained how the ÜWell digital health platform is designed to simplify, speed up and improve consumer access to HCPs and healthcare services. ÜWell is an omni-channel strategy that allows consumers to manage their health independently, acting as a personal digital health coach.

Our final presenter of Day 1 was Dave McCaughan, who took a lighthearted look at the “History of Underwear” to explain that we must recognise and react to social change in order to maintain a meaningful relationship with the consumer, adapting to an evolving society in order to remain relevant. Stressing the importance of recognising social shifts to create meaningful relationships with consumers, Dave stated, “we live in a world driven by emotional benefit. Science and technology are the support”.

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Opening Day 2 was Niklas Larsson, PhD, Research Director, Probi, who took a detailed look at Probiotics and Female Health , exploring New Benefits and New Consumers.

He reviewed how probiotics for women’s health have historically focused on vaginal health, yet Probi is going beyond this and addressing other concerns that primarily affect women: anaemia (largely in teenagers and women of child-bearing age) and osteopenia and osteoporosis (in post-menopausal women). Niklas proudly reported that the products have strong efficacy, backed by animal trials and clinical trials, and offer health benefits for women throughout various stages of their lives.

Next up was CEO of Austria’s Institut AllergoSan, Anita Frauwallner, with a presentation entitled “With a little help from my friends” Or How Tiny Bacteria Helped Me to Outperform the German and Austrian OTC Market.

Established in 1991, Institut Allergosan began with a focus on innovation, employing a different approach to probiotics which included high CFU and multiple strains. Its first clinical trial was so successful that it’s still viewed as one of the Top 12 ever probiotic clinical trials in the world, according to the World Gastroenterology Association. Highlighting the importance of R&D in her business model, Anita detailed that they have more than 40 trials running currently, and research co-operations with all five university hospitals in Austria, as well as international co-operations. For Anita, research not only helps you realise what’s possible, but it builds trust in what you do.

Our data partners for France, OpenHealth Company, were represented by Nicolas Grelaud, Commercial & Marketing Director, who explored Meeting New Health Consumer Expectation: Engaging Experiences and Naturals. A complex subject by definition, we face challenges in multiple areas, including changes in demographics, culture and technology. Nicolas recognised that we must recognise the increasing demand for natural products, with 1 in 4 consumers preferring to take a natural treatment rather than a medicine. We are witnessing a shift in the consumer paradigm. Our health consumers used to be patients, and then became consumers, and they have now evolved to “Consum’actors”, who are open-minded and engaged in their healthcare decision-making process, often seeking natural and local alternatives and asking for personalised solutions. Nicolas stated that pharmacists must evolve, adapt and reinvent in light of this new healthcare consumer, becoming the place of truth that the consumer is expecting.

Our next presenter was Martyn Hilton, Chief Global Commercial & Marketing Director, HRA Pharma, who explored How the Digital Landscape is Changing the HRA Pharma Business Model. Detailing the digital strategy behind HRA Pharma’s two focus brands, ellaOne and Compeed, Martyn explained the importance of understanding the role the digital environment plays in the consumer journey today, as well as tomorrow, and also urged delegates to identify where we can look to intercept and influence consumers. We must create content that‘s relevant and in the right format for our intended audience.

Pointing to disruption in the way consumers access medicines, through tools such as telemedicine and mail-order, Martyn detailed that HRA Pharma invests in click & collect and delivery methods for ellaOne in certain markets, which have been received positively.

Alessia Scarpocchi, Market & Digital Strategies Director, Apoteca Natura, Strategic & Web at Aboca Group gave a presentation reviewing An Integrated Digital System to Evolve Customers’ Healthcare Journey: The Apoteca Natura Experience.

She explained what Abioa are doing to keep ahead in the digital age – going beyond simply providing products and services to purchase, the company instead wants to offer health solutions for people, with the individual at the heart of its mission. Digital tools are key to supporting  this ambitious positioning, with a range of training materials available for pharmacists, as well as a multi-channel approach to its direct-to-consumer communication. The company launched its Health & Wellness System 1.5 years ago, with digital dashboards developed for all stakeholders, including the possibility of loyalty system for consumers. The MyApotecaNatura app includes a number of tools and functions to allow consumers to engage in their health management, including tracking metrics, creating a health profile and accessing healthcare information. Initial result are very encouraging, with around 175 thousand app downloads and impressive levels of user engagement.

From TV-centric to Digital-led: A Paradigm Shift in Consumer Healthcare – our final speaker was Maurizio Luongo, Corporate Consumer Health BU Director for Menarini. Pointing to the evolving consumer who demands more digital tools to make personal healthcare choices, Maurizio outlined how Menarini has risen to the challenge of the shifting paradigm, with two of the key elements in the digital journey being attention and relevance. He concluded that we must combine technology, processes and organisational structure if we are to achieve digital operational excellence.

Alongside these inspirational sessions, we were so proud to host various networking opportunities, and of course to celebrate successes with our Marketing Awards. We were grateful to be joined by MSF to discuss their charitable activities, and to present them with a donation from The Nicholas Hall Group.

As I wrapped up the event yesterday, I announced that our 2020 meeting will be in Athens, where I hope to see many of you again!

CBD rollout gathers pace

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2019 looks to be the “breakout year” for US cannabidiol-based products. Changing legislation – hemp’s removal from the Controlled Substances Act in December 2018 – along with growing retailer support, marketer innovation and high consumer demand have combined to make CBD the hottest property in the consumer healthcare market. CVS Pharmacy has announced plans to sell topical CBD products such as creams, sprays, roll-ons and salves in 800 selected stores across eight US states, including Alabama, California, Colorado, Illinois, Indiana, Kentucky, Maryland and Tennessee.

More recently, Walgreens announced it was following suit, with plans to sell CBD creams, sprays and patches in almost 1,500 stores across nine states – Oregon, Colorado, New Mexico, Kentucky, Tennessee, Vermont, South Carolina, Illinois and Indiana. “This is in line with our efforts to provide a wider range of accessible health & wellbeing products and services to best meet the needs and preferences of our customers”, said a Walgreens spokesman. Between CVS and Walgreens, CBD-infused topical products will be sold in at least 12 US states, including five where both retailers will be active – see our map below.

CBD states

Regulatory uncertainty is still an issue though, with the FDA insisting that marketers should not add CBD to food or sell it as a dietary supplement. The American Herbal Products Association has adopted a new Guidance Policy for dietary supplement and food products that contain hemp and hemp-derived cannabidiols to help ensure the industry complies with existing regulations. The policy was developed to encourage industry to be mindful of the federal regulations that apply to these product categories, notwithstanding the FDA’s ongoing review of the status of CBD and potential pathways for its lawful addition to food and dietary supplements.

This uncertainty isn’t completely holding back the market, however, with SPINS data showing that CBD functional ingredient sales in the US natural channel grew to US$40.4mn in the 52 weeks ending 4th November 2018, up from just US$1.2mn two years previously. Given that CBD is now moving out of the natural channel into mainstream retail, the potential for CBD is huge, with the Brightfield Group estimating the US market could be worth US$22bn by 2022.

Review 18,000+ new launches and innovations, including the latest medical cannabis developments, with OTC New Products Tracker, the ultimate competitive intelligence tool! Products are given a star rating, with “me too” items ranked 1*; launches / line extensions in a new category / adjacency 2*; major launches / line extensions with strong new benefits / positioning 3*, and 1st Rx-to-OTC switches in a category, creation of a new OTC class or other major leaps in innovation 4*. With a recently-released major update including eye-catching new graphics and powerful search filters that help you visualise and explore the vast archive according to your exact specifications, now is the perfect time to set up your free trial. For a demo or more information, contact waisan.lee-gabell@NicholasHall.com.