Q1 2018: Focus on Middle East & Africa

OTCINACTION

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

Here are 4 key learnings from the latest Q1 update:

  1. South Africa’s OTC market broke through the US$1bn barrier in Q1. Now established as a Top 20 OTC market globally, South Africa generates sales of just over US$1.0bn following 8.6% growth in the MAT Q1 2018 period. OTC sales are forecast to total US$1.8bn by 2027, powered by demographic change (rising middle-class of consumers) and growing investment. Indian companies are showing strong interest, with Cipla now the No.7 OTC marketer in South Africa, while Dr Reddy’s and Lupin have announced plans to expand operations in the country.
  2. Turkey remains the powerhouse of regional OTC growth. Up 14% in the MAT Q1 2018 period, Turkey is fundamental to the rapid OTC progress of the region. Compared to South Africa, multinationals have a more prominent share of Turkey’s OTC market, with Abdi Ibrahim the only local company in the Top 5 – Bayer, Sanofi, GSK and RB are all Top 5 OTC marketers enjoying double-digit growth. The prospect of an official OTC classification in Turkey is encouraging MNCs to invest for future growth.  Screen Shot 2018-07-23 at 09.36.06
  3. Scope for VMS development in Middle East & Africa. One noticeable fact about OTC sales in the region is how heavily reliant the market is on the analgesics and CCA categories. The same is true for the No.1 OTC marketer GSK,  which generates almost 80% of its portfolio turnover in the region from analgesics and CCA. Whereas VMS takes a 30.2% share of the global OTC market, it takes just a 26% share of the Middle East & Africa market, highlighting the need for more VMS product development and investment in education about lifestyle & wellness.
  4. Scope for Lifestyle OTCs development too. Compared to a global share of nearly 10% for Lifestyle OTCs, the category only takes an 8.6% share of Middle East & Africa’s OTC market. Eye care, sedatives & sleep aids and systemic cardiovasculars (low-dose aspirin) currently dominate in the region, while smoking control and EHC only have a small share compared to the global average. As the regulatory landscape evolves and becomes more favourable to OTC, we would expect to see more products making the transition from Rx to OTC status in the region.

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

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MAT Q3 2017: Trends to look out for in 2018

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Intense work is underway to complete the Q3 2017 update early next week, which will provide OTC DASHBOARD subscribers with the latest trend info and analysis on the performance of the global OTC market. In the meantime, taking a closer look at the latest news and data does reveal a few trends that are likely to characterise the OTC space in 2018, not least:

The growing power of the Emerging Markets

A coming shake-up of the global Top 10 OTC marketers

As this week’s infographic demonstrates, Turkey was one of the leading contributors to OTC growth in the MAT Q3 2017 period. Over recent years, both Turkey and South Africa have emerged as global Top 20 OTC markets, powered by high growth (though the trend in South Africa did show signs of slowing in Q3 2017). In No.21 spot, Algeria looks poised to enter the Top 20 in the very near future, thanks to continued high growth (+10% MAT Q3 2017). To keep up with the latest trends in the Middle East & Africa, OTC DASHBOARD remains your best port of call.

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Top 3 Middle East & Africa markets, according to MAT Q2 2017 data

As for the leading OTC marketers, the big news in 2017 was Pfizer’s October announcement that it would be starting a bidding war for its consumer healthcare division, with RB, J&J and GSK all widely cited as possible suitors. However, there were at least two other major developments in 2017 that could cause a shake-up of the global Top 10 in the coming years – in October 2017, Novartis announced that plans to spin off its Alcon eye care business, following a strategic review, would be delayed until H1 2019 at the earliest, while in the same month the FT reported that Merck KGaA was pressing ahead with the sale of its consumer healthcare unit.

Nestle has been cited as a potential suitor for Merck KGaA’s OTC business and will be one of the companies to watch next year. Last week, Nestle agreed to acquire Canadian-based Atrium Innovations from investors led by Permira Funds for US$2.3bn cash. Atrium will become part of Nestle Health Science upon closing, which is expected in Q1 2018. Atrium’s largest brands are Florida-based Garden of Life, which manufactures certified organic, non-GMO supplements sold in health food stores and online in the US, and the Pure Encapsulations line of hypoallergenic, research-based dietary supplements sold in the US via healthcare practitioners, online and in pharmacies in several European markets. The portfolio also includes specialty brands such as Wobenzym, an oral enzyme combination containing proteolytic enzymes + bioflavonoid for osteoarthritis pain. 

If Nestle were to also acquire the Merck KGaA OTC business next year, and continue on its path of strong M&A growth, it could soon break into the global OTC Top 10. In addition, Merck KGaA would not only be a good fit with Nestle’s strategy of expanding in the field of high-quality vitamins, minerals & supplements, but would also give the company a strong foothold in the Emerging Markets, where Merck KGaA currently generates around half of its global Consumer turnover.

Q3 2017: Global OTC growth stays at 4.7%

According to the latest figures published by Nicholas Hall’s global OTC sales database DB6, the OTC market maintained 4.6% growth in MAT Q3 2017. Commenting on the results, DB6 VP Celine Waller said: “Russia remained the fastest-growing leading market, though its growth slowed slightly compared to MAT Q2 2017 (+17.3%). Brazil and Turkey (+13.1%) also both achieved double-digit growth. Growth in the US increased marginally, with an improved performance in cough & cold offset by continued weakness in gastrointestinals and dermatologicals. France and Australia (-0.7%) remained in decline – France owing to the poor performance of the large OTx sector and reverse switch of some cough ingredients, and Australia driven by a slowdown in demand from Chinese consumers buying VMS products for resale in China (daigou or ‘suitcase entrepreneurs’).”

DB6-MAT-Q3-2017-Dashboardlogo

Though OTC growth remains high in many of the Emerging Markets, the established markets of North America, Japan (+0.6%) and western Europe – notably Germany (+1.8%), France (-1.2%), Italy (+2.0) and UK (+1.7%) – remain relatively flat. Innovative Rx-to-OTC switches, such as the UK MHRA’s recent approval of the POM-to-P reclassification of Viagra Connect, or the emergence of new OTC categories, such as e-cigarettes or medical cannabis, offer the most promising route back to growth for many of these established OTC markets.

Nicholas Hall said: “Q3 data confirms 4.6% as the baseline for CHC growth, and frankly it’s not good enough!! Only the sleepiest or most risk-averse companies will accept competing in a market where growth is only modestly ahead of inflation + higher population. That is why the first serious step by Pfizer to switch Viagra is so important. Since we made our first detailed review of the ED category for a Big Pharma client exactly 5 years ago, we have been convinced that Viagra is potentially the world’s largest consumer health brand. Some might say that it already is, although that would be true only for the use of the Viagra brand name on the internet as most of the blue pills sold in that channel are not from Pfizer. As a legitimate CHC category, and with recreational use included — which Big Pharma companies dislike as they see ED brands as treatments — the overall CHC reproductive health category, including ED brands, condoms, oral contraceptives, EHC and conception products and diagnostics, could easily reach sales of US$20bn at MSP in all channels of distribution.”

Nicholas Hall Writes from Istanbul

NHPostcard.2014Nicholas Hall’s Postcard from Istanbul: I’m here to scout venues for a May 2014 OTC Action Workshop (make a note in your diary!). We are also working with Turkish pharma association AIFD to lobby the Ministry of Health to set up a fully-functioning OTC sector and, along with Network Partner, Tulay Izbul, I’ll be feeling the pulse of the market on this trip.

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