HEALTHCARE INDUSTRY: A LOOK INTO 2020 AND BEYOND In the consumer health and wellness market, growth has been an elusive goal for traditional OTC brands because of consumers’ desire to eat healthily, exercise regularly, and use natural products to stay well. Natural products and nutritional supplements that target specific issues such as brain, joint, and heart health are experiencing stronger growth rates than many traditional OTC treatments. Another source of competition for the traditional OTC market has come from the rapid growth and consumer interest in cannabidiol (CBD) to ease pain, help sleep, and manage stress and anxiety. The industry has also consolidated even further with the implementation of GlaxoSmithKline’s acquisition of the Pfizer Consumer Health business in June 2019. Some pockets of growth have been realized for independent OTC companies that are focused on specific brands/ therapeutic areas with a strong value proposition.
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Natural products drive growth Across many health and wellness categories, natural products are selling and growing faster than traditional OTC medicines.
• Natural products are no longer specialty but have been mainstreamed and are sold alongside traditional products through all retail outlets.
In a recent survey of American adult consumers, Kline found that the use of natural OTCs over time has increased. • 50% of consumers indicate more usage now than one year ago. • Nearly 67% of consumers note they buy and use natural OTCs more now than they did five years ago.
• Consumers are increasingly aware of specific ingredients that have become known as “harmful.” • As a result, they increasingly opt for products that are natural or, at least, perceived to be natural due to brands’ claims of inclusion of naturally derived ingredients or exclusion of “bad” ingredients.
Primary Reasons for Using Natural OTCs % Of total
I consider natural OTCs to be safer than traditional OTCs (fewer side effects)
138
They are gentler on the body/less harsh
28.3%
115
I prefer using non-drug natural OTCs and not take medications if possible
33.9%
23.3%
95
They are “healthier/better for you” than traditional OTCs
91
22.4%
Natural OTCs keep me healthy
90
22.1%
They provide a holistic approach, address root cause rather than just address symptoms
70
I see natural OTCs as part of my overall effort to live a “green” lifestyle and as being better for the environment
17.2%
55
I prefer to give natural OTCs to my children
13.5%
45
0
20
40
11.1%
60
80
100
SOURCE: Kline’s Natural OTCs: Impact of Non-drug Products on the U.S. OTC Market. www.Klinegroup.com
120
140
160
CBD market heats up • Hemp-derived cannabidiol or CBD is showing up everywhere in the media and is a trendy new natural ingredient found in dietary supplements, beverages, food, and cosmetics. • Regulatory and marketing uncertainty and consumer confusion about how to use CBD remain a challenge.
• Market potential for CBD products is very bright, with strong growth potential likely. • Online sales are the predominant outlet for CBD products given the speed, convenience, and discretion this channel offers. • As more regulatory guidance is offered and the market matures, sales through other more mainstream channels are expected.
• Education will be key to help inform marketers, retailers, and the general public about the advantages of CBD. Key Findings of Kline’s CBD Consumer Survey
92%
aware of cannabis
35%
71%
aware of CBD oil
have experience with CBD
SOURCE: Kline’s Consumer CBD Products, published March, 2019.
CBD represents a whole new industry CBD is more than just a new category—it has the potential to disrupt many existing markets, including but not limited to: e-cigarettes Beverages Foods and vaping
OTCs
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Beauty and personal care
Prescription drugs
Vitamins and supplements
Pet products
Sleep remains an elusive goal for many U.S. adults The number of consumers suffering from sleeping disorders continues to grow, and quality sleep is a major issue for many Americans.
ing apps, which posted 50% sales growth to help them sleep.
• Sales of OTC sleep aids such as Unisom, ZzzQuil, and • 75.0% of surveyed consumers indicate they have Simply Sleep expanded by 3.4% in 2019. trouble falling asleep. • Sales of natural and herbal sleep aids that contain • Many use OTC sleep aids, combination OTC pain re- melatonin or valerian rose 18.0%. lievers and sleep aids; natural and herbal remedies; or sleep devices such as smart watches and sleep track- • Sleep devices grew over 50.0%.
Most common sleep issues for consumers Trouble falling asleep is the most common sleep issue
Daytime sleepiness, 5% Interrupted sleep/not sleeping soundly, 18%
Sleep walking, or other activity while asleep, 2%
Trouble falling asleep, 49%
Waking up in the middle of the night and not being able to go back to sleep, 27%
Some alarming statistics about sleep include:
by chronic long-term sleep disorders every year.
• According to the National Center for Sleep Disorders Research at the National Institutes of Health, 30% to 40% of adults have some symptoms of insomnia within a given year, and 10% to 15% of adults claim to have chronic insomnia.
• The National Sleep Foundation estimates that 43.0% of Americans between the ages of 13 and 64 rarely or never get a good night’s sleep on weeknights, and 60% experience disruptions in their sleep every night or al most every night.
• People over the age of 65 years are 1.5 times more • Insomnia is considered a serious ailment, as it can likely to suffer from insomnia compared to younger lead to several other health-related problems such as people. depression and heart disease. • According to the American Sleep Association, approximately 40 million Americans, if not more, are afflicted www.Klinegroup.com
Independent companies As part of Kline’s recent assessment of more than 70 large-brand management and are now applying that independent OTC companies, several common growth experience to the growth of smaller brands, building themes emerged among them. them from the ground up. a. The growth this group of executives are responsible 1. Natural, clean and organic, when applied to an OTC for goes beyond the application of their collective maror supplement brand, usually equates to very strong keting and merchandising knowledge. Many of them growth, well above market average growth rates. are active in their respective industry associations and a. As a subset theme within natural, the digestive have a deep network among retail colleagues, ingrehealth category is also growing rapidly, driven by new dient manufacturers, and marketing experts, and they strains of probiotics and prebiotics but also as more possess a deep knowledge of their brand, competing consumers gravitate toward consuming products that brands, and respective categories. improve their overall health as a strategy to staying well. 3. The importance behind digital marketing for OTC b. Nutritional supplements aimed at specific health brands. concerns such as sleep, brain health, and joint health a. Often, digital marketing represents a great equalizer are also growing rapidly. because it is an efficient marketing strategy to reach broad target demographics and, when done well, can 2. The stewards behind many rapidly growing brands take on a life of its own by going viral. include management teams that are comprised of self-care thought leaders who may have experience in
Fast-Growing OTC Indie Companies
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Get Ahead of the Curve with Kline’s Healthcare Reports We focus on healthcare products sold through all channels of distribution, including OTC pharmaceuticals, vitamins/nutritional supplements, and more.
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