OTC Consumer Brand Loyalty Falters in Wake of Branded Recalls, Change in FSA Law, and Recession – Finds Kline
PARSIPPANY, NJ, JULY 24, 2012–Significant product recalls and the ongoing recession have seen consumer behavior change when it comes to their OTC drug purchases, according to Nonprescription Drugs USA – Consumer Research recently published by global consulting and research firm Kline & Company. Consumers admit to seeking out lower cost nonprescription drug brands either by choosing the least expensive alternative, often private-label or store brand OTCs, or by shopping at value-focused retailers more often.
Since the FDA mandated plant shutdowns, product recalls, and oversight, Johnson & Johnson's market withdrawal from major OTC drug categories has affected purchasing patterns and crimped the company’s market share. The vacuum left by the absence of the industry giant's popular brands from the market, including Tylenol, Motrin, Benadryl, and Sudafed, coupled with Novartis' recent Excedrin recall, have left consumers with fewer branded choices, particularly in the pain relief category.
Laura Mahecha, Kline’s Healthcare Industry Manager, notes, “The impact and profound magnitude of ongoing economic uncertainty is borne out by more than half of respondents in Kline’s survey disclosing that they’ve changed how they purchase OTC drugs. Specifically, nearly a quarter of those surveyed choose private-label OTC drugs whenever possible because of their perceived cost advantage.” Other consumers note they are using coupons and stocking up on OTC drugs when they are on sale, regardless of need, as a result of the recession.
This shift is illustrated by private-label adult acetaminophen enjoying a near 14% sales increase over 2010, as the largest direct beneficiary of Johnson & Johnson’s flagship brand Tylenol’s being out-of-stock for extended periods in 2010 and 2011. Similarly, in the children’s pain-control segment, sales of private-label acetaminophen saw a telling increase of over 30% compared to 2010. Competing brands Advil (Pfizer), Aleve (Bayer), and Bayer Aspirin (Bayer) have also enjoyed substantial sales increases in 2011, up 7.3%, 6.0%, and 8.9%, respectively, over 2010 sales numbers.
Mahecha continues, “The analysis suggests that consumers, challenged by the recession and the fragility of brand loyalty, have been able to replace the recalled brands adequately over the past two years. At the relaunch of recalled brands, Johnson & Johnson will need to invest heavily in brand marketing and even after doing so it may take several years to regain a fraction of the brand’s previous sales and market shares.”
Approximately one in five respondents have used Flexible Spending Accounts (FSA) to purchase OTC drugs or nutritional supplements in the past. Effective January 1, 2011, changes in FSA eligibility coverage have affected the OTC drugs market, with the consequence that a doctor’s prescription is now needed for many OTC medicines and nutritional supplements to be purchased using FSAs. Consumers have thus incurred an inherent additional cost and inconvenience. The Consumer Healthcare Products Association (CHPA) is endeavoring to have this change repealed as it ostensibly contravenes the act’s goals of healthcare cost reduction and minimizing unnecessary visits to the doctor. Feedback from consumers on their use of FSAs to buy OTC drugs in light of the change in the law is also included in the study.
As part of Kline’s 33rd edition of Nonprescription Drugs USA, the consumer research section consists of pertinent and actionable data collected online from over 300 consumers during Winter 2012. As part of this research, consumers were asked a series of questions on their OTC drug retail preferences, FSAs, reactions to branded OTC recalls, Rx-to-OTC switches, and online purchase behavior for OTC drugs.
Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit www.KlineGroup.com.