Regulations, aging population boost category sales
Martha Stewart, who is launching her own line of supplements at NACDS Total Store Expo, couched the aging of America as a "silver tsunami" that will have older Americans streaming toward all things health and wellness.
In addition to a swell of seniors, the overall tone in the media has turned more positive when it comes to supplements — and with good reason. Both the Food and Drug Administration and the industry at large have worked toward better regulating and vetting the supplement space.
"The industry is continuing to grow," Steve Mister, CRN’s president and CEO, told DSN. "Even through the recession of 2008-2009, we were seeing [upward of] 8% growth. We’re seeing a lot of interest from outside the industry, whether it’s equity capital coming into existing companies, or whether it’s other companies buying into the industry." The public companies that entered the category through acquisition in the past year include Church & Dwight (L’il Critters/ VitaFusion), Procter & Gamble (New Chapter) and Reckitt Benckiser (Schiff/Airborne).
"First of all, … 57% of adults use nutritional supplements, and it’s going to just stay very strong going forward — very steady growth between 5% and 10%," said James Craigie, C&D’s chairman, CEO and interim president. The opportunity, he said, is in gummies — 58% of kids’ vitamins are gummies, but gummies comprise only 3% of adult SKUs.
That’s changing, however, as both Pfizer Consumer and Bayer Healthcare have entered with Centrum and One-A-Day launches, respectively. Bayer’s One-A-Day VitaCraves has been one of the fastest-growing vitamins this year.
Innovation drives brands’ competition
Despite significant challenges coming from private label, Procter & Gamble is still attempting to innovate the No. 1 brand in all of digestives — Prilosec OTC. The company launched a wildberry-flavored Prilosec OTC earlier this year, not to be chewed, but to improve the experience in taking a Prilosec OTC tablet versus an unflavored, generic equivalent.
But Prilosec’s biggest challenge to its digestive dominance is still on the horizon. There is still one proton-pump inhibitor to be switched — Pfizer bought the rights to Nexium from AstraZeneca last year for a whopping $250 million. Nexium prescription sales dwarfed those of Prilosec, and Prilosec OTC reached upward of $700 million in total sales its first year. "Just the magnitude of what Pfizer spent to acquire the [Nexium] rights, it tells you that it’s a big opportunity," Perrigo chairman, president and CEO Joe Papa told analysts after the deal was announced.
Tums may be better equipped to handle a Nexium introduction. To put it simply, GlaxoSmith-Kline’s Tums is still cheaper than its H2-blocker and PPI cousins, and it works much faster. That may explain why other marketers are moving into that tried-but-true calcium carbonate space. Bayer Consumer recently launched Alka Seltzer Fruit Chews, and Chattem is planning a relaunch of the venerable Rolaids brand later this year.
The No. 2 brand in the digestives space is Merck’s MiraLax laxative, which continues to sell well. The company is currently driving trial through its MiraLax Pledge campaign that offers a $1-off coupon up front and a $5 reward after purchase.
Product intros, promotions amp up competition
DSN estimates that annualized sales of cold and allergy products through mid-June were up 7.9%, representing almost $570 million in incremental dollars.
What are the chances of that happening again?
The coming cough-cold season is difficult to project. On one hand, this year’s cough-cold incidence will be going against very strong illness rate numbers from last year. In addition, with both McNeil Consumer and Novartis Consumer supporting the relaunch of a number of cough-cold products, the category is expected to be very promotional this season, a factor that could squeeze margins.
But fighting marketing dollar against marketing dollar isn’t the only cold-cough-allergy card suppliers will be playing this year — expect the introduction of a number of new products. "We often talk internally about the fact that our No. 1 marketing tool is product and the fact that product really is king," Matthew Mannelly, president and CEO at Prestige Brands Holdings, told analysts recently. "As you look into the first few quarters of fiscal year 2014, you’re going to see some other major new product launches from Prestige," he said. He added that the challenge is clear: "to manage pediatrics and cough-cold in the marketplace in light of the returning brands and the heavy investments that we believe those returning brands will make."
Among allergy remedies, there is a potential new switch on the horizon that, if approved, would place the first OTC nasal steroid Nasacort AQ into the hands of Chattem marketing executives. The Food and Drug Administration held a public meeting considering that Rx-to-OTC switch July 31.
That switch could open the door to a new class of allergy medicines. "Whatever happens to one of the nasal steroids will happen to all eventually," suggested David Seltzer, chairman, CEO and president of Hi-Tech Pharmacal, which manages a generic version of a competing nasal steroid.