Categories / OTC/Healthcare

Category Insight: Challenges and Champions of Store Brand Healthcare

Private label shows strong performances—and significant promise in several OTC/Healthcare segments.

August 1, 2014
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The OTC/Healthcare category includes a tremendous range of products—and shoppers often have a strong preference for private label in these product areas.

According to a recent report from The Integer Group and M/A/R/C Research (“The Checkout,” Issue 3, 2014), when it comes to OTC/Healthcare, “there’s an almost universal perception across ages and income levels that there’s little difference between private label and national brands.” The group’s survey showed that regardless of annual income level (from $25,000 to north of $100,000), an average of 63 percent of shoppers are comfortable buying private label, a consistent shopping pattern the group called “remarkable.”

Per IRI, for the 52 weeks ending May 28, 2014, many private label OTC/Healthcare items have shown good to strong growth and penetration, including diarrhea medicines (up 26.02 percent in dollar sales), lancets (up 19.22), stomach-remedy tablets (up 18.49) and smelling salts (up 16.18).

 

Kit and Caboodle

Healthcare kits are an area where retailers—traditionally those operating in the drug store channel—can shine. While bandages and other similar first-aid products have proven a strong segment for private label, currently accounting for 24.77 percent of total units, first aid kits of varying sizes are finding added appeal. First-aid kits saw 19.15 percent dollar sales growth over the past year, and insect bite first aid kits, valued at just under $1.4 million, saw a whopping 290 percent growth.

Walgreens has run promotions that offer a free first-aid case (with basic minimum purchase) to help shoppers build their own personalized first-aid kit, with qualifying products including both national brands and Walgreens private label products.

All products within the home health care/kits segment saw positive growth over the past year, with “other home testing kits” gaining particularly significant ground. These types of kits and devices, such as those that monitor glucose (diagnosis of diabetes continues to rise…) and blood pressure levels, can prove quite costly, giving value-priced store brand products a significant edge. And this activity need not be limited to the drug store channel. Retailers that have made moves to position overall retail branding in line with health-and-wellness might find a ready audience for such products in grocery and other channels.

 

Easing Distress

Both private label stomach remedy tablets (up 18.49 percent in dollar share) and diarrhea liquid/powder remedies (up 26 percent) showed pronounced growth versus a year ago. Many OTC and prescription medications—a daily part of life for a growing percentage of America’s aging boomer population—can often produce gastrointestinal side effects, perhaps pointing the way toward opportunities for cross-merchandising.

This increase in shoppers seeking private label gastrointestinal relief could also stem from the increasing spate of complex intolerances and sensitivities to foods like dairy and gluten, among other factors.

 

Hispanic Perspective

Hispanics as an ethnic group have shown significant growth in America over the past 50 years.

The needs of the Hispanic consumer have been studied by savvy marketers, managers and manufacturers far and wide. Greg Rubin, CEO of Garcoa Laboratories, stressed the need for everyone to “wake up to Hispanic products.” He noted that 16.7 percent of the U.S. population is Hispanic (per the 2011 U.S. census), equating to an estimated 57 million people. “Add that on to the birth rate experienced in the Latin American household, and by the year 2020, the leading consumer in America will be the Hispanic woman,” he said. “That is a trend!”

Appealing to the Hispanic market will incrementally fuel private label growth moving forward, and concerted efforts are particularly necessary in product categories, like OTC/Healthcare, that have yet to sway Hispanic shoppers over to store brands.

Last year, Walgreens announced that it was entering into an exclusive brand agreement with Televisa Consumer Products to offer various products, including cough/cold, pain relief and sleep aid products, designed to reach today’s Hispanic shopper.

And in 2012, Navarro Discount Pharmacy launched its successful Vida Mia store brand, which includes dozens of OTC/Healthcare SKUs. Navarro has sold over 7 million Vida Mia product units since launch and has projected approximately 4 percent annual sales growth through 2017.

 

Poised for the Next Level

Value-tier and national-brand-equivalent (NBE) is often par for the course in OTC/Healthcare. In order to expand the category into the next level, retailers need to more effectively collaborate with their manufacturing and supplier partners. “We copy the best,” said Rubin. “We do not have the time, money or incentive from retailers to take them ahead of the brand. We need retailers to develop brand-management staff to make this work.”

One area of growth includes condition-specific OTC/Healthcare products designed to meet the needs of many aging consumers. CVS has expanded into Advanced Menopause Relief and Adult 50+ Eye Health products, as well as pouch-packaged chews designed to boost energy metabolism and bone health, within its CVS store brand line.

 

Hitting the Curves

Some of the trickier challenges in OTC/Healthcare stem from regulatory oversight. “Audits, product testing and regulatory have gone over the limit from American retailers, and they are auditing their supply channel for private label, which runs up the cost,” said Rubin. “There is no standard that the national brand must maintain … so private label has all the costs added that retailers want to have done to protect themselves.” These costs are often absorbed by the manufacturer/supplier, significantly reducing profit potential.

But promotion of products through social media networks, implementation of value sizes, using combination packing, encouraging trial through sampling and capitalizing on new designs can all attract attention from shoppers, noted Rubin—while suggesting that retailers should likewise work toward fostering better involvement with their suppliers and manufacturing partners throughout the process of bringing new products to market in order to maximize impact.


The Bottom Line

• Profit potential of kits

• Easing stomach distress

• Hispanic shoppers ascendant


EYE ON THE NATIONAL BRANDS

One key to hitting the “next big thing” in OTC/Healthcare comes from monitoring the regulatory barometer to determine impending conversions of drugs from prescription-only to OTC—an approach quite familiar to the national brands.

As noted by Informa Business Information (The Tan Sheet, “Switches Drive Overall Consumer Health Care Industry Growth,” January 2014), the top-selling self-care brands in the United States are regularly those that made the jump from the pharmacy to store shelves.

 The report notes that a key catalyst for this is patent expiration, and that over $200 billion in U.S. branded prescription sales went off patent in 2012, including: Plavix (blood thinner), Lipitor (high-cholesterol treatment), Singulair (asthma medication) and Actos (type 2 diabetes treatment).  

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