Cough & Cold Products: Under the Weather

April 24, 2008
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A decrease in unit sales within the cough and cold category isn’t an indicator that folks are evading the cold and flu season.

Nearly every segment of the cough and cold products category experienced a decline in unit sales over the past year, according to Chicago-based Information Resources Inc. Even category strong-holds such as cough syrup saw declines - unit sales in the category were down 6.6 percent for the total category and 2.7 percent for total private label over the 52 weeks ending Dec. 30, 2007.

The downturn in unit sales isn’t the result of healthier consumers walking the aisle, but instead the consequence of several factors within the cough and cold products industry that are preventing it from growing, or even rebounding for that matter.

“[The category] is flat,” says Len Smith, vice president of sales and marketing, retail for Deseret Labs, St. George, Utah. “There are some new items such as the mucus-relief products that have come out and made some movement. But right now, those products are out of reach for private label because of patent issues. As you look at the whole industry, it’s flat. There’s nothing taking off.”

If nothing is happening on the branded side of things in the cough and cold category, then it’s especially hard for private label to make headway. According to Smith, it’s very difficult for private label to be ahead of the curve with regard to technological advancements and innovation.

“The category is set up in such a way that there has to be a brand out there to follow,” he says. “In cough and cold products, very rarely is something introduced by private label that is new and unique to the entire industry.”

And when a national brand does release a new type of product to the category, it often takes more than 18 months for private label manufacturers to enter the market with a similar item.

Although the lead time for product development in the cough and cold products category is a bit damaging with regard to momentum or instantaneous growth, a slow product release cycle isn’t the only thing stifling growth in the category. Lately, the cough and cold products industry has been plagued by some pretty bad press. The result? Many consumers are backing away from the aisle for the time being.

Overcoming Adversity

One of the most poignant of the category conundrums in cough and cold today is the removal and reformulation of products that took place a year and a half ago.

“Consumers haven’t gotten over what happened to products during the reformulation process,” Smith notes. “As a result, they’ve put more faith in the brands and less in private label.”

The trouble began with the implementation of the Combat Meth Act, which forced medicines that contain pseudoephedrine (PSE) behind the counter or into locked cases by Sept. 30, 2006.

Many manufacturers removed PSE from their formulations, either dropping it completely or, more often, replacing it with phenylephrine (PE). Store brand suppliers tried to anticipate which way the national brands would go with their reformulations, but they didn’t always guess right, sometimes leaving retailers without a true national brand equivalent - a serious problem in a category in which consumers often compare ingredients.

And today, consumers still are unable to easily compare private label brands of cough and cold medicines with the national brands and readily see the value in private label. Therefore, many of the purchases being made in the category are based on familiarity with the national brand.

In addition to the restricted placement, the industry now is having to cope with a new assault.

On January 17, the FDA issued a public health advisory for parents and caregivers, recommending that over-the-counter (OTC) cough and cold products not be used to treat infants and children younger than 2 years of age because of serious and potentially life-threatening side effects that could occur. The OTC products under scrutiny include cough and cold items such as decongestants, expectorants, antihistamines and antitussives (cough suppressants) for the treatment of colds.

According to a January 23 article in The Wall Street Journal, after scrutiny of children’s cold medicines mounted, a number of manufacturers voluntarily withdrew the products aimed at kids younger than 2 years old. However, the manufacturers said the cough and cold products in question were safe and effective for older children.

And as if that weren’t enough, a debate has emerged recently among professionals in the medical community as to whether or not cough and cold medications are even effective in remedying the illnesses they claim to remedy! (Understandably, such an argument has not been helpful in efforts to grow the cough and cold products category.)

According to a January 29 article in The Washington Post, the FDA currently is considering whether or not to further restrict the use of such cough and cold products because of concerns regarding their risk and questions about their effectiveness.

Also in the discussion phase right now in the cough and cold category are several product segments being considered for a new classification that would make them more easily accessible to consumers.

A January 22 bulletin released by the FDA says the agency is considering creating a new class of behind-the-counter (BTC) drugs, which would include OTC cough and cold medicines for children, epinephrine injections, Tamiflue and oral contraceptives. The FDA bulletin states that it has not put forth a specific proposal for BTC drugs, but is evaluating the challenges in creating a BTC class system. Some in charge of the decision say the program would improve patient access to medication, while others argue the class would be unnecessary and raise drug costs.

A Positive Look Ahead

Contrary to what the cough and cold products category looks like on the surface level, it’s not all doom and gloom for the aisle. A number of areas within the category actually are performing well, and might be just what the doctor ordered for category growth.

“Specialty items such as immune products are doing really well in the category today,” Smith says. “Airborne has done really well with its product, and it’s advantageous for private label manufacturers to be in that area right now.”

Smith also points to the cold and flu relief sector as one that shows great potential for category growth. And just as the concept of organics continues to strengthen in the food segment, consumers are wanting more natural medicines as well. According to Smith, a small (albeit growing) consumer base exists for natural and holistic cough and cold medicines.

“There’s a limited amount of these kinds of natural items because the customer base is limited,” he says. “But as people start seeing positive results from [these items], the numbers of consumers wanting these types of medicines will increase.”

Keeping in mind that the cough and cold products industry is under a fair amount of scrutiny, a silver lining still can be found with regard to category growth. For example, The Washington Post reports that researchers recommend a number of steps to reduce the risk of child endangerment where cough and cold medications are concerned. As a result, the design and imple-mentation of better child-proof containers and the avoidance of colors that make the products look appealing to children could be successful selling tools for future cough and cold items, particularly for private label.

Essentially, the future growth of the cough and cold products category relies on a manufacturer’s - and retailer’s - ability to adapt to the changing market - taking the good with the bad.

“If you consider all the branded products that are being introduced today or have been introduced in the past several months - these are some pretty innovative products - next year the private label offering will be there as well, and that will help us grow the category,” Smith says. “The consumer will see there is a private label presence in these areas, which is something the industry needs right now.”

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