New Consumer Health 2017 Edition – State of the Industry in 2016 and Beyond

The consumer health industry remains as a strong hub for investment and development in 2016. More than ever, health systems around the world have been under significant stress to lessen the financial burden in the delivery of healthcare services.

As a consequence, an important push to switch drugs from prescription (Rx) to over-the-counter (OTC) or non-prescription drugs continues to bring new market expansion opportunities for firms, especially in the therapeutic areas of respiratory and digestive health through the switch of corticosteroids for the treatment of allergies, and esomeprazole for the treatment of gastroesophageal reflux disease (GERD). Along the same lines, other therapeutic drugs with long-proven safety and efficacy appropriate for self-care practices will benefit from the advent of digital and medical tracking and monitoring technologies set to widen the horizon for the industry. Hence, the new proposition for consumer health in 2016 is founded on a formidable shift toward lifestyle and wellness programmes supported by a holistic approach to self-care merging nutrition, fitness, medical records, healthcare practitioner advice, easier access to OTC and prescription (Rx) drugs, biomarker diagnostics, pharmacogenetics, and life coaching. All these factors will create a unique window of opportunity based on the personalization of consumer health.

The extreme merger, acquisition and business alliance activities seen since 2011 have slowed down in 2016 as global economic and political uncertainties have cast a dark cloud on financial investments. The most significant merger between Sanofi and the consumer health business unit of Boehringer-Ingelheim is expected to shake up the competitive landscape by potentially making Sanofi one of the top three contenders in consumer health when the transaction is finalised in the last quarter of 2016. Alternatively, giant generics company Mylan has put its feet in consumer health with the finalisation of Meda’s acquisition in the summer of 2016.

As firms try to find new ways of increasing revenue, they are engaging with start-ups that are generating ideas, technologies, or solutions for the next big thing. For example, Pfizer partnered with the Galvanize incubator to support start-ups offering innovative solutions in the consumer health space. Similarly, Johnson & Johnson – under their Janssen division, have partnered with incubator CircleUp to gauge business opportunities with a promising proposition on health, wellness and discovery of new products and ideas. Boeringher-Inhelheim has been an avid supporter of disruptive ideas by sponsoring trade content highlighting interesting medical developments and technologies for the past five years. From the strategic point of view, this approach makes total sense. On one side, there are many younger entrepreneurs eager to start an innovative business with the goal to disrupt the industry. On the other, there are big corporations wanting to save in-house costs of product development by scooping fast growing businesses that can help them expand in the marketplace with novel products and solutions. Similarly, smaller established companies offering unique products or health solutions have taken advantage of the power of the internet and social media to build brand loyalty and revenue that is eroding shares from the largest players.

For the remainder of 2016 the market prospects for the consumer health industry reveal an optimistic outlook that will support future growth in spite of recent turbulence in the economics and politics of many countries. After all, people still need to take medicines when sick, or in any case, take supplements for preventive health no matter the state of the economy. Yet, recent political upheavals may pose challenges in the sales of consumer health products as supply chains based on international trade agreements may be disrupted, and efforts of regional harmonized drug switches from prescription (Rx) to OTC may be hindered. Euromonitor International’s earliest and rough market estimates for 2016 reveal that the industry is growing at a pace of 3.1% in constant/real terms, though this growth is one percentage point below from the previous year mostly due to the strengthening of the US dollar across the world. The industry is expected to reach an estimated US$217 billion in retail value in 2016, with a potential cumulative average growth rate (CAGR) of 3.1% in the forecast 2016-2021.

Chart – World, Consumer Health Retail Value (RSP), 2011-2021

CH2017 - CH Retail Value 2011-2021 Rev

Note: Figures in constant/real terms, fixed exchange rates 2015 US$

The spike in growth in 2015 came in part from an expansion in allergy care and proton pump inhibitors with new OTC switches. In contrast, 2016 shows a slight deceleration due to market contractions in Brazil and Russia, along with global uncertainty in the economy leading consumers to reallocate their incomes toward selective purchases.

The largest consumer health categories of dietary supplements, cough, cold and allergy remedies, vitamins, and analgesics represent 62% of global retail value in 2016, whereas weight management and wellbeing, herbal/traditional products and sports nutrition are anticipated to grow at the fastest rates throughout 2021. There is s rising consumer interest in the prevention of diseases and overall health maintenance that allows for this fastest growth.

Chart – Consumer Health by Main Category, Retail Value (RSP), 2006-2021

CH2017 - CH by Main Category Retail Value 2006-2021

Note: Figures in constant/real terms, fixed exchange rates 2015 US$

The United States (US) still dominates the consumer health industry with an impressive share of 31% of global retail value. Moreover, only five countries – the US, China, Japan, Germany and Italy comprise 61% of global sales, thus confirming an industry mainly driven by developments in a few geographies. This finding also signals an opportunity for market expansion in other countries where their global consumer health share hovers around 1% to 2% in 2016. These include South Korea, France, India, Mexico, Indonesia, Thailand and Poland amongst others.

Chart – Leading Countries in Consumer Health, Retail Value (RSP), % Split 2016

CH2017 - CH by Leading Countries Retail Value 2016

Note: Figures in constant/real terms, fixed exchange rates 2015 US$

On retailing trends, the largest channels in global retail value share are chemists/pharmacies (28%), drugstores/parapharmacies (19%), grocery retailers (18%), direct selling (12%), and internet retailing (9%). The biggest story comes from internet retailing as the fastest growing channel at a rate of 15% in 2016 from 2015. Unsurprisingly, the nutritional categories of vitamins, dietary supplements, sports nutrition, and weight management and wellbeing account for 88% of internet sales based on planned purchases in a convenient manner.

Chart – World, Evolution of Retail Channels by Type (RSP), % Split 2011-2016

CH2017 - CH by Retail Channel Evolution 2011-2016

Note: Figures in current/nominal terms, fixed exchange rates 2015 US$

Moving forward, consumer health remains a shining star within the fast moving consumer goods (FMCG) space, not only from the positive prospects of growth with a stronger focus on health maintenance but also from the point of innovation as switches, formulations, delivery forms, packaging, retailing, etc.