Sales of over the counter (OTC) medicines continue to grow, with 835 million packs sold in the twelve months to June 2004. This represents an increase of 2.2% versus the same period to June 2003. This volume growth is principally due to a combination of three factors: the impact of the strong winter season at the end of 2004 on sales of cold and flu treatments; the recovery of the vitamins sector; and the continued underlying long-term trend towards self-medication.
The value of the market topped the £2bn mark for the first time in 2004 and maintains the growth level of around 4% established for the calendar year 2003. OTC markets tend to be seasonal and the last three months of the year typically provide the most sales, followed closely by the first three months. Winter ailments such as coughs colds and sore throats contribute significantly to this fluctuation in sales. As a result, it’s reasonable to expect that this year-on-year growth will abate over the next six months.
More consistent in terms of year round sales is the pain relief market. At more than £450m, adult and children’s oral painkillers and topical creams combine to make the biggest sector, one which continues to grow, albeit slowly. All of the major areas of OTC are growing but a big recent change has been the recovery of the vitamins, minerals and supplements (VMS) category. Sales have been in decline for a number of years but the market is now growing at 5%.
While the seasonal categories and VMS have performed better than usual, the recent big growth driver sectors such as hayfever, smoking cessation and various skin care categories are now growing more modestly. This is partly because value sales have been hit by promotions and EDLP (every day low pricing) activities by retailers; and partly because the growth of these categories in 2003 had been exceptionally strong when availability increased due to deregulation from P (pharmacy listed) to GSL (general sales list) status.
Brand drivers
Most of the leading manufacturers are in growth but only a few are increasing their value share in this competitive market. Reckitt-Benckiser, whose brands include Lemsip and Gaviscon has made small but significant progress, while Seven Seas has been helping to revitalise the VMS sector.
Brands continue to be very important. As in almost all FMCG markets, the most successful new launches in 2003 were new sub-brands launched as part of an established brand, in many cases using the established active ingredient of a competitor brand. Gavilast, using the power of the Gaviscon brand in indigestion, and Canesten Oral, capitalising on the stranglehold Canesten has on the thrush market, have both immediately captured significant share. Gaviscon (including Gavilast) showed the fastest growth in terms of absolute sales, adding £6.3m in the latest year. Also riding high is Canesten on the back of a heavyweight television advertising campaign and the introduction of Canesten Oral Capsule (Flucanozole) for thrush.
The revival of the VMS market has been boosted not only by Seven Seas, thanks in part to the development of cod liver oil with glucosamine to help promote healthy joints, but also Eye Q which has added more then £4m in sales. Eye Q is one of the first supplements designed to help maintain eye and brain function with its EPA-rich marine fish oil and virgin evening primrose oil. Even from a very high base, Nurofen continues to grow but at a lower rate and largely though a strong performance from Nurofen for Children. Other brands which have added significant value are Beechams, 4 Head and NiQuitin.
The trend towards self-medication and one-stop shopping in the supermarkets continues apace. Sales through the pharmacies (including Boots the Chemists and Superdrug) are still growing but at a slower rate than in the grocery sector. This appears to be an irreversible development.
Switching
The switching of products from POM (prescription only medicines) to P means there is a constant flow of new products entering the OTC market. Despite this, the impact in relatively modest in total terms. The biggest success in recent years of POM to P switches has been the Levonelle morning-after pill but even this high value product is estimated to have taken less than 1% share of the OTC market.
It is too early to evaluate the impact of the long-anticipated introduction of cholesterol-lowering statins (e.g. J&J MSD’s Zocor Heart-Pro) in the summer of 2004. However, it would appear unlikely that these switches will have the same immediate impact on the market as a strong winter season or a pack-size legislation change to an established category.
In contrast, P to GSL switches have helped increase OTC sales more dramatically by increasing availability. Solpadeine’s switch to GSL and the deregulation of most hayfever and smoking cessation brands to GSL in 2003 are three such examples.
For more information contact Martin Wood +44 (0)1344 746000