By Jill Rivkin

In less than five years, more than 33 percent of the U.S. population will be 50 years old or older and facing the physical challenges that come with age. For the past few years and potentially a couple to come, most Americans will feel financial strain as the economy flounders, and will face hurdles in finding affordable healthcare as a result. Today, the proportion of Americans who are overweight or obese is 66 percent, and that’s unlikely to change as Americans continue to eat in a super-sized world. And according to these trends and statistics in a recent report from Chicago’s Euromonitor International, the over-the-counter segment will reap some significant benefits as a result and maintain a “strong growth trajectory.”

“The downturn in the U.S. economy has helped the U.S. OTC industry because OTC products present an affordable, and increasingly effective, alternative to visiting a doctor and taking prescription medications,” Euromonitor reports. “Furthermore, the continued aging of the U.S. population contributed to strong demand for healthcare products as a whole, as baby boomers aimed to stave off the effects of aging and to remain active and healthy.”

The OTC market overall saw growth of 2.3 percent to reach total sales of $21.8 billion over the past 52 weeks ending Aug. 9, 2009, according to Chicago’s Information Resources Inc. And according to Euromonitor, “while the majority of consumer-goods categories suffered slower growth or declining sales in 2008, the OTC industry maintained a strong growth trajectory.”

Self-serve Approach

With healthcare costs through the roof and consumers curbing spending anywhere possible, the remedies provided by OTC products serve as a reliable and often suitable first line of defense before a doctor’s visit becomes necessary.

There has been a “steady rise in the number of consumers who are self medicating due to higher healthcare costs,” says Matt Wolf, chief executive officer of Contract Pharmacal Corp. (CPC), Hauppauge, N.Y., pointing out that, in his opinion, the OTC market is “burgeoning.”

“With healthcare costs on the rise, more and more consumers are migrating toward self medicating – and purchasing private label as a means of saving money while maintaining health,” he says. “They also are experimenting less with new ‘fad’ items and are demonstrating more loyalty to tried-and-true products.”

According to IRI, the analgesics segment, for example, reported sales that were about flat for the past year, but given the size of the $2.7-billion segment, 0.1 percent growth still is respectable. And IRI data indicate consumers’ efforts to stave off illness through vitamin usage. Total nutritionals were up 2.3 percent to $21.8 billion, with the sub-segment of one- and two-letter vitamins reporting double-digit growth of 17.4 percent.

Brands beware, however, as OTC is proving to be a strong advocate for private label brands. Since private label has captured a lot of media attention in recent years, sales have spiked in many consumer-goods categories as consumers become more willing to try new brands. And with the media comes an education so many consumers understand that OTC products, in particular, are held to the same FDA standards as major branded products. They’re realizing the true value of private label here, and the real savings that often come along with it.

“Branded players as a whole saw slowing sales at the expense of cheaper private label competition,” Euromonitor reports. “…Sales growth for most branded products slowed significantly in the second half of 2008, when the U.S. economic situation became particularly acute. Private label brands are considerably cheaper, but by law must offer the same efficacy as branded products.”

Though consumers certainly are cutting back spending, OTC is not the place.

“Healthcare products represent one of the last categories of spending consumers are eliminating,” Wolf says. “Feeling good and maintaining health is always a priority. After all, we have one short life, and one body in which to live it.”

Desired Remedies

Today’s consumers are seeking “natural,” “green,” “organic,” and “environmentally friendly” products, according to Randy Osmun, sales and marketing director at Ada, Mich.-based Access Business Group, emphasizing that these attributes pertain to both ingredients and packaging.

As all of these features fall in line with the movement toward more sustainable products and consumption of overall healthier products. “Companies are looking to differentiate themselves in the public eye,” he says. “Sustainability is a key issue in the public. This trend seems to be gaining momentum.”

When developing delivery mechanisms, sustainability plays a role, but convenience also is an attribute consumers aren’t willing to sacrifice. Stick packs, Wolf says, are a newer development that offers a single dose of powdered product in a carry-and-consume package. Multi-product blister packaging and new formulas developed for softgels and gelcaps also are increasingly popular, Wolf adds, pointing to joint health, pain relief, cough/cold/allergy and staple vitamin products as the products that “dominate the OTC space.”

Euromonitor reports that as consumers become more informed about holistic and alternative remedies, brands would be wise to recognize this, and some have. According to the firm’s report, in 2008, Bayer Aspirin and Vick’s DayQuil/NyQuil launched brand extensions to satisfy the growing consumer interest in vitamins and dietary supplements. The Bayer Aspirin product features plant sterols, which have cholesterol-lowering qualities; and the DayQuil/NyQuil product offers an added dose of vitamin C to improve the body’s immune system.

“These products are the latest examples of a more holistic approach to healthcare that combines a standard Rx or OTC medication with vitamin or supplement therapy to treat a specific condition,” the report says.

When drugs make the transition from prescription to OTC, the segment often experiences giant spikes and the playing field changes for all brand owners, manufacturers and retailers. And the next few years will prove no exception, as transitions are expected.

“Industry forecasts call for nearly $10 billion in potential switches over the next five years, in branded sales,” Wolf says. “To date, Rx-to-OTC switches have fueled explosive growth in the category,” Wolf adds, calling attention to ibuprofen, loratadine, cetirizine and omeprazole as a few examples that have made a major impact.