Trends in 2020: What to Watch for in the OTC Industry

The over-the-counter Industry has been very dynamic in recent years. Much of this increased activity can be explained by underlying industry trends. Inspecting the global OTC industry, we can identify four consistent trends that transcend geographical and regulatory barriers. Changing customer preferences, a dichotomy of target customers, sales growth of natural health products, and pharmacists as a point of care are trends which are shaping the OTC industry and which should be top-of-mind for executive management. Each of these trends provides a key opportunity for decision-makers and brands.

1. Change in Consumer Preference: Dosage Forms and New Technologies

Customer preference for different dosage forms or new technologies has changed considerably. Topical products, for example, have experienced outstanding growth in recent years as consumer preference for this dosage form has increased. The ageing population appears to have an affinity for topicals and — as this consumer segment increases in size — drives the growth we see globally. As topical applications for pain are a viable – and often preferred – option for the ageing consumer, underlying economic fundamentals would indicate this trend is here to stay. 

2. The Onset of a New Generation of Consumers: Targeting and Re-Targeting for New Demographics and Market Segments

As the ageing consumer segment remains a big focus for OTC companies, the search for new customers has shifted to younger generations. Companies are searching for ways to engage Millennials with their brand, and capture revenue from a group with perceived disloyalty and a propensity for digital interaction. In our upcoming episode of The Platform, Nicholas Hall states that successful communication strategies are delivering product benefits and not its features to their Millennial target consumer. We are seeing a dichotomy of customers between ageing customers who interact with products at a brick-and-mortar retailer and younger customers whose brand interaction and point-of-sale is typically through online channels. The digital sales channel constitutes 10% of global sales, which Nicholas Hall expects to increase to 20% by 2030. The ability to digitize a brand, and effectively communicate to target customers will be major determinants of success in the OTC industry going forward. As e-commerce has allowed companies to reduce overhead and digital marketing has allowed for more direct interaction with a growing customer-base, it is not surprising that companies strive to become more virtual as competition within the industry increases.

3. Growth in Emerging OTC Categories: An Increasing Demand for Natural Health Products

There is a definite trend towards natural health products in the global OTC industry. The most successful natural product companies are those which understand and embrace changing societal values. The modern customer self-diagnoses, self-medicates, and is better educated on the source of ingredients and the methods used to manufacture the products they consume. It is the job of OTC companies to ensure that a socially responsible supply chain exists within their organizations. Transparency of supply is a major differentiating factor between companies looking to capitalize on increased NHP sales. This global trend is self-fulfilling as the inter-relationship between sales and transparency with consumers is highly correlated. 

4. New Cornerstones: Pharmacists as Key Stakeholders

Pharmacists are becoming increasingly important stakeholders in the health and well-being of patients globally. As consumer education improves and self-diagnosis increases, pharmacists can play an important role in the act of purchase between competitive — especially at the retail point-of-sale. In our upcoming episode of The Platform, Nicholas Hall explains that this trend is validated by increased SG&A budgets to establish sales forces for pharmacists around the world. 

Final Thoughts

Interestingly, global growth is being driven by ex-North American and ex-EU markets as price depression, lack of OTC confidence, and an absence of Rx-OTC switches are plaguing these two large and critically important regions. The Chinese and Latin American markets are boosting global OTC sales due to a growing middle class, access to retail and digital sales channels, and a willingness to increase share-of-wallet for higher quality goods. Our team at Sosna has found that trends can be reaffirmed by the actions of major industry players. In the case of the OTC industry, the trends we have discussed have the potential to create uncertainty and disruption for market share leaders, whose natural response (both literally and figuratively) is good, old fashioned M&A. Over the past few years we have seen large pharma amalgamating OTC portfolios, acquiring NHP assets, and shifting budgets towards marketing to invigorate their established brands and maintain their dominance. 

The OTC industry has undergone a considerable transformation in recent years. Companies must be mindful of underlying trends in the OTC industry and utilize this market intelligence to create proactive strategies for their business. 

About Sosna + Co

Sosna + Co is a boutique, outsourced business development team in place to help companies execute business transactions and drive business growth. We are at the forefront of innovative technologies, representing biotechnology, devices, digital therapeutics, pharma, and generics. From M&As and licensing deals with Fortune 500 companies to uncover the potential of savvy, new start-ups, the principal is simple: we work meticulously to uncover new opportunities that grow your business.

For more information or to learn about new opportunities with Sosna + Co, email us at info@sosnaco.com.