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.

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RB 2.0: E-commerce a key focus

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With CEO Rakesh Kapoor retiring at the end of the year, and ambitious plans for RB 2.0 to be implemented within the next year, this is without doubt a transformational time for RB. Nicholas Hall believes RB 2.0 will lead to the “end-point of divesting the Hygiene Home business, and with the company quickly moving on to v3.0 and a major merger. I can think of at least four CHC companies that may want to be associated with RB v3.0, not all of whom could be considered equals, but who would be attracted by a cashless transaction and the benefits of scale.” 

RB released its full year results last week, with net revenue in 2018 up by 3% on a like-for-like basis, while Health grew by 2%. Within Health, the OTC segment rose by 5%, driven by innovations (Nurofen 24-hour patch, Strepsils flurbiprofen spray) and strong regional performances (Lemsip in UK, Luftal in Brazil, Moov in India and Tempra in Mexico). As part of its RB 2.0 mission, the company is planning to “supercharge” innovation even further, focusing on new categories (i.e. the launch of brain health supplement Neuriva later in H1 2019), new consumers and new channels (i.e. MegaRed and Move Free in e-commerce outlets in China).

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In its 2018 results presentation, RB emphasised its “best-in-class digital and e-commerce capability” as a key driver behind RB 2.0 growth, highlighting the specific case of China where the company’s online sales already outweigh “offline” sales thanks to strong partnerships with the likes of Alibaba and JD.com. Innovations such as MegaRed CoQ10, Move Free Ultra and Move Free Advanced have been specially developed for the e-commerce channel in China and the USA. 

In its results, the company also reported that 9% of RB Health sales are generated in the e-commerce channel, which it says ranks second among its consumer healthcare peers, while its operating margin of 28% is way ahead of the consumer healthcare average. RB attributes its success in e-commerce to its FMCG heritage and its strong margins to the relatively high proportion of its portfolio devoted to Consumer Health vs key OTC competitors.

Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, our upcoming new Signature Report written by Nicholas, includes a chapter dedicated to reviewing M&A within the CHC industry. Exploring recent transactions, multiples and the buyers and sellers — with predictions of likely future deals — Nicholas also asks whether M&A actually works and examines the role of private equity. An essential read for all players striving to compete in this rapidly-evolving marketplace, for the full table of contents or to pre-order your copy, please contact melissa.lee@NicholasHall.com.

 

E-commerce shake-up in India

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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.

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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.

Bangladesh: Amazon eyeing 2020 entry

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As today’s OTC DASHBOARD hot topic report shows, the e-commerce market in Asia-Pacific is undergoing rapid change, with China passing new e-commerce laws that will take effect in January 2019, while India has also just released draft rules for the online sale of medicines. Amazon also last week unveiled a new Hindi version of its website.

Yet all this upheaval is not isolated to the major markets of India and China. Amazon announced over the weekend that it is planning to begin operations in Bangladesh within the next couple of years, to compete with its arch e-commerce rival Alibaba, which is already present in the country via Daraz. With a population of just over 166mn, Bangladesh is an attractive and fast-developing market.

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According to local reports, however, resistance from local e-commerce players in Bangladesh is likely to be strong. Many are opposed to the government’s new Digital Commerce Policy, which allows foreign companies to have 100% shares in local e-commerce ventures (previously it was capped at 49%).

Key areas of sensitivity will be pricing and investment in the local economy. The e-Commerce Association of Bangladesh (e-Cab) is in favour of protection for local e-commerce companies and is reportedly working on a list of policy recommendations, including foreign firms having to host their websites locally, as well as ensuring 90% of staff are locals and that companies have a logistical presence in the country.

Explore the digital landscape at Nicholas Hall’s upcoming OTC.NewDirections Executive Conference. Other topics on the agenda include Medical Device Regulations, Medical Cannabis, Switch and Smart Probiotics. This will be an inspiring day on 12 September in London, focusing on Where Innovation Meets Regulation. For details of the full agenda or to reserve your place contact elizabeth.bernos@NicholasHall.com

Alibaba buys in to “digital silk road” vision

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According to a report in the FT over the weekend, Chinese e-commerce retailer Alibaba is close to agreeing a deal with Russian internet company, Mail.ru, and sovereign wealth fund, Russian Direct Investment Fund, to form a joint-venture e-commerce company.

As highlighted in our earlier blog on Chinese investment in Africa, there is a clear vision from China and Chinese companies to invest in the physical infrastructure for a new silk road (Beijing’s Belt & Road Initiative) connecting Asia, the Middle East and Europe, and this latest news on a China-Russia e-commerce tie-up underlines the appetite for a digital silk road too.

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In October 2017, the Russian Government approved a Ministry of Health bill to allow the online purchase and home delivery of OTCs, which came into force in January 2018. As a result, Mail.ru announced the launch of its online pharmacy in April 2018. At present, established western e-commerce giants like Amazon are largely absent from Russia, giving Alibaba the freedom to chart new territory in a market of 147mn consumers at an opportune time.

As the FT article points out, Alibaba is also fighting back against Amazon in certain markets, like Indonesia, where the US retail giant has stolen a march. For example, Alibaba has invested heavily in two e-commerce companies, Tokopedia and Lazada, both of which market goods, including healthcare products, across southeast Asia.

Explore the digital landscape at Nicholas Hall’s upcoming OTC.NewDirections Executive Conference. Other topics on the agenda include Medical Device Regulations, Medical Cannabis, Switch and Smart Probiotics. This will be an inspiring day on 12 September in London, focusing on Where Innovation Meets Regulation. For details of the full agenda or to reserve your place contact elizabeth.bernos@NicholasHall.com

Barcelona Conference Report

In this week’s blog, we report back from Nicholas Hall’s OTC INSIGHT 29th Conference & OTC Training Academy Workshop in Barcelona, the first to ever see Nicholas Hall’s keynote address livestreamed to an audience across the globe via YouTube.

Nicholas’ opening address to delegates explored the 4 elements of PACE, which all marketers need to adopt in order to increase their pace and move faster:

P = Pharmacy and retail, the bedrock of the OTC market = 80% of revenue outside US (70% if inc US)

A = Adjacency, reaching beyond the 6 core categories of OTC and seeing where we can branch out (i.e. diabetes, Alzheimer’s, hearing screeners, etc)

C = Consumer (Nicholas was joined on stage by Luca Pagano of BeMyEye who explored how social changes have impacted how and when people buy, and the power of crowdsourced insights to transform in-store execution)

E = Engaging with the consumer and e-commerce (as Nicholas said, the topic of e-commerce would be deserving of a whole conference of its own)

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Nicholas Hall encourages OTC marketers to pick up the PACE

On Day 2, another packed schedule of speakers was rounded off with David Blair, Google’s Head of Industry Heath. His presentation to delegates explored three major trends which are impacting everything we do: chip, cloud computing and AI / machine learning.

Today we practically live online, and the smartphone is now the consumer’s main device – through which nearly all traffic passes – a fact that is having a massive impact on the health industry. Blair said that voice search is going to become the next key driver and could have implications for healthcare marketing (see our recent blog on this topic), as we move from Point of Care, where we expect the consumer to wait for appointments, visit the doctor and then the pharmacist, to a space where we can have care anywhere.

In 2017, there were 160bn searches for healthcare globally via Google, with 2bn alone just for the allergy category! Almost two-thirds of these searches were conducted via a mobile device. There was also an increase for searches for “best non-drowsy allergy medicine”, “best cold & flu medicine” and so forth. Last year, Google also saw a 60x increase in searches for “near me”, highlighting the shift towards immediacy.

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Google’s David Blair closes out proceedings

For more updates on consumer healthcare trends, and a full round-up of Day 1 and Day 2 proceedings, be sure to follow Nicholas Hall on Linkedin

Voice search: How will OTC adapt?

A recent Wall Street Journal video, exploring how the advent of voice-activated online shopping is forcing consumer goods companies to adapt their marketing models, has caused a lot of discussion internally here at Nicholas Hall & Company. In this week’s blog, we provide some context on this growing trend – a phenomenon some are calling “v-commerce”, with the “v” standing for voice – and look at the implications for the consumer healthcare industry.

According to an Accenture survey conducted in late 2017, ownership of voice-activated devices, or “smart speakers”, is rising sharply in many countries, up from 7% to 21% of Americans over the past year, and up from 4% to 14% in China. Whether it’s Apple’s Siri, Amazon’s Alexa or Google Home, this rising tide of “digital voice assistants” is expected to achieve penetration of 30-40% in many countries by the end of 2018.

50% of all searches will be done by voice within the next 5 years” – Sébastien Szczepaniak, Head of Sales & E-Business, Nestlé

If indeed half of all search queries are performed on voice-activated technologies by 2023, then this poses some stiff challenges for marketers. For example, at present, Amazon’s Alexa algorithm:

  1. Only provides two brand options in any product category
  2. Favours brands you’ve previously purchased, entrenching your preferences

Compared to retail outlets, where several brands are often on display, and e-commerce, where the brand options are even more extensive, voice search provides a very limited choice for consumers and this in turn could have a chilling effect on the brands and marketers that rank No.3 and below in certain categories.

When I tested Amazon Alexa, at home in the UK this past weekend, I was given two options when requesting a “stomach remedy” – Amazon’s first choice was Gaviscon Double Action (RB), followed by Andrews (GSK). When asking for a specific ingredient (“paracetamol”), Alexa was less reliable, with antacid Rennie (Bayer) offered as the top choice, followed by ibuprofen-based Nurofen Express (RB).

Of course, the technology remains in its infancy, so algorithms will evolve. One saving grace for OTC is that it will remain somewhat immune, compared to other consumer goods industries, given that medicines still require pharmacist intervention in many countries and that often the need to treat is so urgent that many people won’t be able to wait for their medicine to be delivered.

However, marketers of supplements – and other lifestyle and preventive remedies that are required less urgently – will need to start factoring this trend into their business plans immediately. With Amazon now starting to launch its own supplements and consumer healthcare remedies, the competition to be one of those Top 2 picks could get even more intense in the near future for OTC marketers.

Whether you want to find out more about the latest innovations, benchmark the competition or simply keep abreast of new launches, Nicholas Hall’s extensive OTC New Products Tracker is an essential competitive intelligence tool that you simply must trial. Subscribers can also benefit from a newsletter highlighting the key product innovations affecting the industry. Find out more or set up your free trial today by contacting david.redford@NicholasHall.com