Serious Symptoms
December 8, 2008
The over-the-counter segment is home to numerous categories reaping the benefits of growing consumer needs.
By Jill Rivkin
Of the economy and the stock market aren’t enough to give consumers a walloping headache or upset stomach, politics just might be. Or what about the ever-fluctuating costs of just about everything from gas to groceries to personal care items and pet supplies, and of course medical treatment and prescription drugs. Given all the symptoms affecting consumers’ overall well being, it’s not surprising that the over-the-counter segment has experienced steady growth in recent years. After all, single-handedly fighting these negative influences, their health effects and the signs and symptoms of aging have become critical issues for a big part of the population.
OTC medicines generated $68.4 billion worldwide in 2007, according to a study by Kalorama Information, Rockville, Md. That figure has been growing 3.9 percent on a compound annual growth rate since 2005, the study says. And, the organization predicts, OTC products will generate more than $84 billion in sales by 2012 thanks to longer consumer life spans, an increase in self-medicating trends and improved availability of OTC products.
Self-medicating
There are a number of factors contributing to consumers’ increased interest in self-medicating. For one, pinched pocketbooks — going to the doctor is expensive, as we all know, and filling prescriptions is often cost prohibitive.
Also, increased exposure to self-medicating options in the OTC segment through strong branding campaigns and consumer education programs is making consumers more comfortable with their own decisions. It is common in recent years for major brands to blast the marketplace with messages regarding the usage and efficacy of products. Multi-media campaigns using the power of print, TV, radio and the Internet provide the education and thus the confidence consumers need to make appropriate choices. This is particularly true with new launches that are a result of prescription drug to OTC transitions – “switch products.”
“The Rx-to-OTC switch pipeline has been strong in recent years and will be key in delivering continued growth in the OTC market,” says John J. Francis, senior vice president of sales and global business development for Westbury, N.Y.-based P.L. Developments/Avema Pharma Solutions. “Switch products have capitalized on the trend toward more consumer education that allows for self-medicating and potentially lower medical costs to the patient.”
Consumers and retailers are benefitting from good private label options here, too, Francis says, adding: “While it is difficult to predict the future Rx-to-OTC switch pipeline, all indications show a strong push as brands look to protect market share as patents expire, as well as the push for cost-effective solutions for the consumer.”
Broad Consumer Groups
The OTC segment reaches across demographic groups, so brand owners and manufacturers have a broad range of consumer groups to think about. Each one demands different things, including various types of products and delivery methods, and the ways in which marketing messages are sent varies a lot.
“Brand owners will be smart to target condition-specific groups with their own consumer advertising efforts,” Francis says. “Depending on the brand legacy, the type of product, and the trend in that specific condition, brands need to be flexible on when and how they communicate.”
Baby boomers, for one, are a demographic that has proven lucrative in many segments. In their efforts to fight the signs of aging and continue to live healthy and active lifestyles, baby boomers have embraced new products and marketing in personal care and OTC, in particular.
“Obviously with the baby boomers all hitting their 50s now, they are a prime target for many OTC products not only in anti-aging, sun protection, pain relievers and overall wellness,” says Christine Lee, product development manager at Irving, Texas-based Chemolee Lab Corp.
Francis, however, emphasizes that while “the demographic from a ‘real’ number of consumers is substantial, the aging of that group in and of itself will not be the key driver. Rather the delivery of information and education about the benefits of OTCs will provide more assurances to those who had not considered self-medication but begin to understand the benefits.”
Again economic issues come to the forefront with this demographic, too. “Another key variable will be the economic situation of that group and the fact that OTCs are not only proven safe and effective, but can also provide cost-effective solutions in certain circumstances to large groups that will be on fixed incomes,” Francis says.
And, thanks to modern medicine, people are living longer. “Given the continued growth of the aging population as people live longer,” Francis adds, “it is likely that you will see more tailored OTC solutions and options by manufacturers and retailers to take advantage of the sheer numbers associated with the demographic.”
Another group gaining an education more than ever before are teens, Lee adds, pointing to more disposable income and more exposure to their parents’ usage of wellness products and services. “Teens today seem more educated in terms of products and ingredients,” she says.
Giant Brands The contract manufacturing and packaging model is extremely common in the OTC segment as many leading drug companies have opted to focus on research and development, and marketing. And while some are manufacturing products, many still outsource at least the packaging. Regardless of how much outsourcing is done, it’s clear that in OTC branding has become a major business.
“The transition from the major drug companies to being the one-stop shop of the past – research and development, manufacturing and packaging, marketing, sales and distribution – to primarily an OTC marketing company has accelerated in recent years and will continue in the future,” Francis says. “Branded OTC companies are realizing that a significant amount of the value of their product is the brand itself, and they are evaluating all opportunities to enhance the brand’s profitability through cost-effective alternatives such as having a contract manufacturer producing and packaging the product.”
In pain relief and cough and cold treatments, brands such as Tylenol, Advil, Benadryl, Sudafed and others have giant marketing programs and extended product lineups. And they’re reaching out to consumers through various medium including print and online media outlets so that every consumer group knows there are options out there for them. Francis credits new delivery methods and combination products with driving innovation in this segment. New dosage forms including quick-dissolve tablets, quick-dissolve strips, soft gels, soft chews and single-dose delivery are ensuring that brands meet each consumer’s demands, which range from speed of delivery to convenience and ease of use. Francis adds that while combination OTC products have been around for a while, major companies now are combining OTC products with nutritional products such as vitamins. “While it is still too early following these product launches to determine their success,” Francis says, “again, manufacturers are looking at creative alternatives and options to meet the needs of consumers.”
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