Sanofi CHC on track to be standalone unit by end-2022

At Sanofi’s Capital Markets Day 2021, the company’s Head of Consumer Healthcare, Julie Van Ongevalle, shared her vision for the business: “With the ongoing implementation of our fully integrated standalone model, we look forward to being more agile and reducing the complexity of our portfolio to drive growth with our consumer-centric, data-driven marketing approach.” The aim is to divest around 150 brands (from the current 250) in the next two years to focus on “priority categories”, such as allergy, body pain, general pain and mental wellness – particularly sleep aids – via a “granular approach”.

Rx-to-OTC switch has already been a key factor in driving growth in one of Sanofi’s priority categories, allergy remedies, thanks to the successful global OTC rollout of Allegra (first available in the USA in 2011) and launch of Xyzal Allergy 24HR (USA, 2017). Josephine Fubara, Chief Science Officer at Sanofi CHC, noted that Sanofi continues to make progress in bringing two potential OTC switches to the market in the coming years, erectile dysfunction treatment Cialis and flu antiviral Tamiflu, presenting a blockbuster opportunity with a combined sales potential of €1bn in the US market alone.

Source: Sanofi Capital Markets Day 2021 presentation

Sanofi also stated that it is on track with its plans to be a standalone CHC business by end-2022. The company said that the overall planning for the transition was complete, and that the majority of its standalone CHC legal entities would be operational by end-2021. Among the benefits that Sanofi believes this transition will bring include the agility to reignite its innovation engine and reduce time-to-market by around 20%.

Looking ahead, Sanofi is targeting above average market growth, driven by its focus on priority categories and Rx-to-OTC switch, with a view to becoming the best-in-market CHC performer by 2024-25. Supporting this objective will be a focus on consumer insights, an emphasis on e-Commerce and digital channels and the operational independence provided by Sanofi’s standalone model.

Save up to GB£1,350 when you pre-order our forthcoming report from CHC New Products Tracker, Innovation in CHC: 2020’s NPD & Launch activity under the spotlight before 31 March. The report showcases the Top 100 innovations in 2020 and features major ingredient trends, delivery format trends, and much more. For further details, or to pre-order your copy, please contact melissa.lee@NicholasHall.com.

IRI: Top Product Claims, Retail Trends

New research by IRI points to some of the consumer retail trends that have emerged in the US market in the past year as a result of Covid. Looking at the entire CPG (consumer packaged goods) market in the USA, IRI’s recently published Leader Board report for 2020 highlighted some key trends, including consumers of all income levels driving more growth of premium and super-premium products, with health and wellness and self-care products experiencing higher demand. Among the fastest-growing categories in 2020, IRI listed home health care / kits (+172%), personal thermometers (+127%) and sleeping remedies (+28%).

The report also lists some of the marketers and categories that benefited from the strong shift to e-Commerce, including Vi-Jon (marketer of hand sanitiser Germ-X) and external analgesic rubs, as well as highlighting the leading product claims among both edible and non-edible consumer goods. As the chart below from the report indicates, “more vitamin C” was one of the fastest-growing claims in terms of sales (+24%) in the edible sector, while hemp seed oil (+110%), aromatherapy (+37%) and sleep health (+34%) were all in the Top 10 non-edible product claims in 2020.

Copyright: 2021 Information Resources Inc. (IRI).

Further IRI research found that small and extra-small CPG manufacturers’ and retailers’ own brands gained US market share vs larger players during 2020. Of the CPG industry’s US$933bn sales in measured channels in 2020, large manufacturers lost 1.3 share points (US$12.1bn in sales) to smaller players, owing to channel and category shifts and supply constraints. The CPG industry grew 10.3%, with smaller manufacturers (annual measured channel sales <US$1bn) capturing nearly one-third of that and private label products accounting for roughly 18%. This resulted in smaller manufacturers and PL gaining 1.1 and 0.2 share points, respectively, from larger manufacturers (measured channel sales exceeding US$5.5bn annually), which have lost market share in each of the past five years, but still represent 46.7% of total US sales in measured channels.

Comment from President of Strategic Analytics for IRI, Dr Krishnakumar Davey: The consumer shift towards smaller manufacturers and PL products is something that IRI has been documenting for several years, and we saw the trend accelerate during the pandemic. Many large manufacturers were not able to meet the surge in demand in Q2 when they lost most share to smaller players, who seized on this opportunity. Several brands attracted a number of new buyers as in-home consumption surged. Large manufacturers fared relatively better in Q3, but still lost significant share. Q4 saw some improvement and reversion to historical trends. Many extra-small manufacturers are mostly new entrants to the market into supply-constrained categories (e.g. soap, hand sanitisers, home healthcare kits). Small manufacturers playing in high-demand categories such as hygiene, personal care and health & wellness saw high growth.

Nicholas Hall will be joined online by experts from GSK, J&J and Convert Group during our European e-Conference 2021. Taking place on 28 & 29 April, there are options for individual passes or corporate licences. Take the chance to keep up with what’s happening in consumer healthcare today by contacting elizabeth.bernos@NicholasHall.com to reserve your space.

OECD: Covid’s impact on e-Commerce

A new report published last month by the OECD, entitled e-Commerce in the time of COVID-19, explores how the pandemic has caused an expansion of e-Commerce towards “new firms, customers and types of products, likely involving a long-term shift of e-Commerce transactions from luxury goods and services to everyday necessities”. Below we pick out some of the highlights that relate to medicines.

In the opening summary, the OECD says that, “while e-Commerce in the past for many consumer groups was centred on high tech goods, toys or books, it now increasingly involves goods for which availability is critical to a large share of the population, including groceries, medicine and other necessities.” There were two examples given by the OECD from Brazil and Germany showing how e-Commerce has disrupted the medicines market.

In Brazil, “around 54% of Internet users had bought food or food products over the Internet in 2020, substantially up from only 22% in 2018. Significant increases were also observed for cosmetics, toiletries and medicines. As convenience has always been one of the key drivers of e-Commerce participation, it is likely that many of the new users will keep ordering at least some goods online in the future.”

As for Germany, “online sales grew significantly for medicines and groceries, historically laggard sectors in terms of e-Commerce, while overall online sales contracted by around 18% in March 2020 in comparison to the previous year.” The OECD report also highlighted the impact of Covid-19 on e-Commerce’s share of total retail sales in the UK, USA and EU.

Writing in last Friday’s CHC.Newsflash, Nicholas Hall said: “Let’s take the best case point-of-view, that the incidence of Covid-19 will shrink dramatically during the middle of 2021, with a significantly lower death rate. How do we get back to normal? Will personal and professional life pick up where it left off? I doubt that very much. It seems to me that, at the very least, working from home is here to stay, which could mean the revival of suburban shopping, with lower footfall in city centres and out-of-town shopping malls. One impact on consumer health could be a marked revival in community pharmacy and online purchases growing from 9% to 19% of total CHC sales globally in the next 10 years, and from 11% to 27% in Asia. Another fascinating statistic courtesy of Eurostat is that, uniquely, the over-55 cohort is the largest purchasing group for medicines online, which runs counter to the theory that digital equals youth.

Don’t miss out on the chance to save up to 50% on selected reports with our Q4 promotional event, which will run until the end of the year! Stay tuned for new deals coming in December! To find out what promotions are available, or to make a purchase, please contact melissa.lee@NicholasHall.com

Digital strategy: Examples from China

In Sanofi’s recent Q3 earnings call, new head of Consumer Healthcare Julie Van Ongevalle said the company’s CH operation had “untapped potential”, and that her previous experience in the beauty industry would help with the strategy of leveraging consumer insights and maximising the digital and e-Commerce channel. In this week’s blog, we summarise three examples of innovative digital strategies by three companies (Alibaba, GSK and Bayer) operating in China.

Alibaba has kicked off its 11.11 Global Shopping Festival with new features to meet rapidly-changing consumer needs. These include the participation of Alipay’s digital lifestyle platform, broader consumer reach, as well as livestreaming technology creating more engagement for Chinese consumers, and with the largest international presence to date. A new sales window will be added from 1st-3rd November, ahead of the main event on 11th November, to provide merchants – specifically new brands and small businesses – the opportunity to showcase their products and tell their brand stories amid the pandemic. For many brands, 11.11 is the single biggest growth driver. This year, more than 2mn new products will be introduced, double the amount compared to last year.

OTC marketers are also building ties with local digital shopping platforms in China. GSK CH and Dingdang Kuaiyao have agreed a new strategic co-operation, which will utilise their R&D and data capabilities to drive growth and improve consumer access to healthcare products. Initially, the companies will focus on the concept of “Internet + Medicine” and work together to build brands and content, as well as consumer traffic and experiences. In 2021, the collaboration will cover brand awareness, global marketing, consumer trust and consumption scenarios. The news comes a month after GSK CH became an Alibaba “digital captain” after agreeing a joint business plan with its marketing technology platform, Alimama.

In addition, under a strategic co-operation agreement with digital shopping platform Meituan, Bayer CH aims to become a full-service healthcare solutions provider to help individuals better manage their own health. The businesses will work with 20+ chain pharmacies to integrate online and offline healthcare products and services by exploring digitalisation options, expanding consumer services and developing a new era of pharmaceutical retail. The co-operation aims to reach consumers more efficiently under the “new normal”, which has resulted in growing public awareness of healthcare issues, rising demand for healthcare products and a change in consumption habits, with online purchasing increasing significantly.

We are pleased to announce the next round of savings in our special Q4 promotional event, running until the end of the year! Plus, for November only we are offering a 25% discount on annual subscription rates for our combined CHC.Newsflash and CHC.NewDirections news service! If you would like additional information on any of our publications or subscriptions, or would like to place an order, please contact Melissa.Lee@NicholasHall.com

How consumer shopping habits are changing

A recent report by Global Data in collaboration with Amazon describes changing consumer shopping habits during the Covid-19 pandemic. The report highlights a stark increase in online sales, but stresses that the online channel did not dominate during the peak of the pandemic — the majority of sales during lockdown were made at physical stores that remained open. In addition, the highest growth rates over the past few months are attributed to multichannel retailers, rather than pure-play online retailers.

The pandemic has catalysed closer integration of physical retail and online spaces, with many traditional retailers emphasising or introducing additional services such as curbside pick-up. These services have been well-received; almost 68% of US consumers say they will use curbside collection more, even after the pandemic has subsided. Also, in countries that have reopened post-Covid, there has been a “mini-rush” back to bricks & mortar retailers, highlighting how much consumers – especially in the US, UK and France – have missed the social interaction that physical stores offer.

As a result, the penetration rate for online is coming down as consumers resume physical shopping. According to the survey, penetration will remain elevated compared to 2019 but the peaks seen during lockdown were exceptional, not a new normal. If anything, the report suggests that the role of the physical store is actually being strengthened in some ways. In the USA, Global Data projects around 35.7% of non-food sales transacted online will be supported by a physical store this year – more than in 2019.

Comment from Laura Howard Werling, Market Analyst CIMA, Nicholas Hall Group of Companies: The Global Data report challenges the narrative that the pandemic, and subsequent growth of the online channel, spells the end for physical retail. Instead, retail stores have performed well over the past few months and are successfully utilising a multichannel approach to adapt to the disruption. Consumers have been satisfied with this approach and it should be no surprise: the modern consumer views online and retail stores as one market and navigates both spaces seamlessly to achieve maximum efficiency when shopping.

We are pleased to announce a special Q4 promotional event, which will run until the end of the year! For October only, we are offering a 25% discount on annual subscription rates for Insight and CHC New Products Tracker, alongside up to 50% on selected reports titles. Watch this space — more promotions will be coming in November and December! To find out more, or to make a purchase, please contact melissa.lee@NicholasHall.com

Q2 company results: Key trends & developments

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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.

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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.

e-Commerce CHC growth accelerating

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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.

e-Commerce Developing Fast in Southern Europe

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As more and more countries go into lockdown to enforce social distancing, the way that consumers do their shopping is of course having to change dramatically. Some countries are better adapted to this change than others – according to a recent report in the Financial Times, southern European countries like Italy and Spain currently only have low e-Commerce penetration, with respective shares of 4% and 5% of total retail revenues (prior to the Covid-19 pandemic).

France (10%) has a higher share than the two countries at its southern border, but still lags behind other markets in Europe (20% in the UK) and globally (36% in China). However, this situation looks set to change fast, with Covid-19 leading to a revolution in e-Commerce sales of groceries in southern Europe – for example, according to the FT report, supermarket chain Carrefour stated that its online customer base in Italy has already doubled to 110,000. Is this a trend that will outlast the current crisis?

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And what impact will Covid-19 have on online sales of consumer healthcare products? Our recently published Digital Marketing & e-Commerce Report outlined the Top 20 leading internal & mail order markets for CHC products, with China and the USA the clear leaders, followed by Japan, Germany and the UK. Inevitably, the projected growth rates for 2020 will have to be revised, especially given this fast-changing crisis could also lead to changes in regulations governing the online sale of OTC medicines.

For example, Europe’s largest e-Commerce pharmacy group, Zur Rose, today submitted a request to Switzerland’s Federal Office for Public Health calling for a temporary exception that would allow mail order sales of OTC cold & flu medicines (at present, all non-prescription medicines can only be sold by mail order if specifically approved by a doctor). As well as owning Germany’s best-known pharmacy brand, DocMorris, Zur Rose is also active in France and Spain, and could be at the forefront of overcoming strict regulations governing the sale of OTC-registered medicines in those markets too.

For an in-depth look at the rising power of e-Commerce in the CHC market, order a copy of Digital Marketing & e-Commerce: Tapping the Potential of Online Sales and Digital Promotion in Consumer HealthcareThis report also explores social media, which CHC brands are employing effective digital marketing strategies, and the opportunities and challenges e-Pharma faces. For further details, please contact melissa.lee@NicholasHall.com.

eCommerce expansion led by Amazon limits store-based growth

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Continuing our series of blogs on the 10 Infinity Zones for future CHC growth outlined by Nicholas Hall, in this edition we take a closer look at eCommerce, following the news that Amazon has become the world’s most valuable brand, according to the 2019 BrandZ Top 100 Most Valuable Global Brands ranking released by WPP and Kantar.

Commenting on the latest DB6 MAT Q1 2019 figures, which show that global bricks & mortar OTC growth decelerated to 3.7%, Nicholas Hall said that “Amazon goes from strength to strength, and takes a 75-90% share of all eCommerce sales of CHC products, depending on whom you listen to. These are the glory days for the so-called GAFAA companies (Google, Apple, Facebook, Amazon, Alibaba), but will it last?

Top 10 country MAT Q1 2019

The rise of eCommerce is one of the factors causing the slowdown in store-based OTC sales, which now total US$136.7bn. According to Celine Waller, VP, DB6, store-based sales account for 78% of the global OTC market, with direct sales 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 over the next decade. In China, Alibaba continues to prosper from the Chinese government’s attempts to promote eCommerce and regulate the so-called suitcase trade (daigou), while Amazon remains supreme in the US market.

To help keep our clients abreast of these changes, this year we have introduced an “all channels” version of the DB6 dataset, which reports on topline sales of direct sales (MLM), Internet & mail order plus key brands in selected leading markets. eCommerce will also be one of the key topics in our upcoming report, 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.

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.