Manufacturers’ Roulette unlikely to pay a second time

Banking on pandemics is a bit like betting green at the Roulette table. It doesn’t hit often, but when it does hit, there’s a big payout.

By all accounts, it’s been a very busy first half of the season for cough-cold manufacturers, even though the 52-week comparable period is only showing a 1.9% lift in overall sales across food, drug and mass (minus Walmart) for the period ended Jan. 24, according to Information Resources Inc. data.

For the 2009-2010 season, the weekly percentage of outpatient visits for influenza-like illness peaked at the end of October 2009 at 7.7%, the Centers for Disease Control and Prevention reported. That peak was higher than the three previous influenza seasons as reported by the U.S. Outpatient ILI Surveillance Network. The percentage of outpatient visits for flu decreased to 1.8% at the beginning of January. The number of states reporting widespread influenza activity dropped from 49 at the end of October 2009 to zero at the beginning of January.

Top 10 cold/allergy/ sinus liquids/powdersSource: Information Resources Inc. for the 52 weeks ended Jan. 24 across food, drug and mass outlets (excluding Walmart) *In millions
BRANDSALES*% CHANGE
Store brand$149.414.2%
Vicks Nyquil89.72.0
Children’s Tylenol41.1-5.3
Theraflu33.033.7
Benadryl31.87.8
Tylenol Cold30.017.6
Robitussin27.7-18.0
Zyrtec26.56.4
Triaminic25.05.9
Dimetapp22.918.0
TOTAL CATEGORY$631.03.8%

Encompassing cough drops and cough syrups—as well as cough/allergy/sinus tablets, liquids and powders—sales across these four broad categories totaled $4.1 billion in that period, representing $75.8 million in incremental sales versus the prior year.

Some of the big winners across cough-cold in the past year included Reckitt Benckiser and Novartis Consumer Healthcare. Reckitt Benckiser realized $12.7 million in incremental sales across its Delsym brand for the year (sales $88.1 million, up 16.8%) and $9.4 million across Mucinex D, sold exclusively behind the pharmacy counter (sales $80.4 million, up 13.3%). And Novartis’ Theraflu brand performed exceptionally well, with $8.3 million in incremental dollars across Theraflu liquids ($33 million, up 33.7%) and $10.2 million incremental dollars across Theraflu tablets ($78.6 million, up 14.9%).

Top 10 cold/allergy/sinus tabletsSource: Information Resources Inc. for the 52 weeks ended Jan. 24 across food, drug and mass outlets (excluding Walmart) *In millions
BRANDSALES*% CHANGE
Store brand$698.113.8%
Zyrtec213.5-14.3
Claritin156.810.1
Mucinex148.7-1.4
Mucinex DM143.16.9
Benadryl125.7-3.4
Claritin D123.5-10.5
Sudafed PE91.5-4.5
Tylenol Cold91.5-3.3
Mucinex D80.413.3
TOTAL CATEGORY$2,665.60.9%

Manufacturers of homeopathic cough-cold remedies, in particular, have realized significant sales gains. Sales of Matrixx’ Zicam tablets were up 14.1% to $44.7 million. And within sales of cough syrups, both Boiron and Hyland’s cracked the top 10 list of cough syrup manufacturers, with sales of $1.8 million (up 436.3%) and $1.2 million (84.4%), respectively. Add into the mix Walmart, and he numbers become more substantial, one homeopathic manufacturer noted, as distribution was expanded from 350 Walmart locations last year to more than 3,200 this year.

Top 10 cough drop vendors (primary brand in parentheses)Source: Information Resources Inc. for the 52 weeks ended Jan. 24 across food, drug and mass outlets (excluding Walmart) *In millions
BRANDSALES*% CHANGE
Cadbury Adams (Halls)$171.80.7%
Store brand71.74.7
Ricola (Ricola)66.411.2
Quigley (Cold Eeze)23.3-13.1
McNeil Consumer (Luden’s)20.44.3
Combe (Cepacol)19.04.7
Prestige brands (Chloraseptic)13.7-9.6
Insight Pharmaceuticals (Sucrets)9.1-9.0
Lofthouse of Fleetwood (Fisherman’s Friend)4.07.6
Abkit (Zucol)2.5224.6
TOTAL CATEGORY$408.40.4%

For Boiron, some of that triple-digit growth can be traced to increased distribution, “but more of it was the fact that our lead product Oscillococcinum is indicated for the treatment of flu-like symptoms,” John Durkin, Boiron VP sales and marketing, told Drug Store News. “We had done a lot of branding on that product with an advertising and PR campaign.” Sales of Oscillo certainly were linked to incidence of H1N1, Durkin noted, as sales were very strong beginning with the initial reports of H1N1 incidence in March/April of last year through the end of the year.

Top 10 cough syrup vendors (primary brand in parentheses)Source: Information Resources Inc. for the 52 weeks ended Jan. 24 across food, drug and mass outlets (excluding Walmart) *In millions
BRANDSALES*% CHANGE
Pfizer Consumer (Robitussin)$149.414.2%
Reckitt Benckiser (Delsym)89.72.0
Store brand41.1-5.3
Procter & Gamble (Vicks NyQuil)33.033.7
Novartis Consumer (Triaminic)31.87.8
Health Care Products (Diabetic Tussin)30.017.6
Qualitest Products (Cheratussin AC)27.7-18.0
Matrixx Initiatives (Zicam)26.56.4
McNiel Consumer (Zyrtec)25.05.9
Boiron (Children’s Chestal)22.918.0
TOTAL CATEGORY$320.710.3%

“Homeopathic cough-cold medicines have experienced a substantial increase in sales and market share in the last two or three years in the United States,” acknowledged Dale Nepsa, president of Hyland’s. “Much of this increase has been in the pediatric sector due to concerns for safety and efficacy of some allopathic brands. More recently, concerns surrounding the H1N1 virus, along with a shortage of vaccine, have had a positive impact on the trial and sales of homeopathic OTC offerings.”

So the question for retailers and suppliers looking forward to the 2010-2011 is, what are the chances the Roulette wheel falls into cough-cold green again?

The odds are not very likely, especially given the fact that the H1N1 vaccine might be folded into next season’s triumvirate seasonal vaccine. That suggests that even if the novel H1N1 flu does continue to make its course through America, there won’t be nearly the media attention paid to it next year that there was this year.

Such being the case, that may prompt many purveyors of cold medicines to revert back to historical inventory buys. With both SKU rationalization programs and the number of consecutive soft cold-and-flu seasons leading up to 2009-2010, that likely means a significant drop-off in supply to match an expected drop-off in demand.

That scaling back in cough-cold inventory commitments already is being realized. “As a result of retailers stocking up in anticipation of the H1N1 outbreak this past fall, inventory levels at retail are very high,” noted Bill Hemelt, Matrixx Initiatives president, CFO and COO, during an analyst call in late January. Hemelt suggested that inventory sales for the second-half of the cough-cold season—now through the end of May—will be much lower as a result.

As of press time, at least with Matrixx, retailers were carrying approximately five additional weeks of inventory as compared with late January/early February 2009. The plan right now is to sell through that excess inventory through the rest of the season, Hemelt said. “The H1N1 effect for retailers, which was really the biggest effect, was the fact that they bought so much inventory in August, September and October,” Hemelt said. “It finally caught up to them in December, and they stopped purchasing in large quantities. Their goal is to get back down to the same level they were at last March. And we think that they should be able to do that with a normal type of cold season.”

Barring a steady rate of H1N1-related illness over the summer, as there was in 2009, the other wildcard that purveyors of cough-cold medicines may want to consider as they begin planning for next year is the evolving shopping patterns thanks to a recession economy. There are two factors associated with the economy that could help boost sales of nonprescription cough-cold medicines. First, more consumers are looking for cheaper alternatives in their healthcare expenditures, a factor that may drive more consumers to seek symptomatic relief of their flu or colds before scheduling an appointment with their doctors or at the local retail clinic. In addition, more workers are declining to take off from work when they’re sick, either to recover from that cold or flu or to visit the doctor’s office (see story on page 43).

“Moms are concerned about not going to work,” Durkin confirmed, referencing Boiron’s own internal consumer research. “You have a lot of working moms, [and] we are in tough economic times and there is a lot of stress on the family.”

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