The U.S. market for OTCs has shown a compound annual growth rate of only 2.6% from 2011 through 2016. Most years during that five-year period the market have shown 3.0% or less year-over-year growth, with the exception of 2014 to 2015, when the market was up nearly 5.0%. This was largely driven by the return to market of previously recalled brands. By comparison, natural OTCs (which refers to non-drug, non-monograph, plant- or supplement-based, or homeopathic products that often make claims of support, prevention, maintenance, and/or treatment of minor conditions or ailments) have grown strongly by double digit gains over the same timeframe. Major marketers of traditional OTC brands have certainly invested heavily in brand marketing and innovations over this timeframe, so what is causing such low dollar growth of traditional OTCs? Could the popularity of natural OTCs be partly to blame?
Many U.S. consumers are turning away from synthetic products and seeking natural alternatives in nearly every facet of their lives. This is seen broadly in sales trends of foods, beverages, beauty and personal care products, cleaning products, and nonprescription medications. Some of the fastest growing retailers include stores where the whole philosophy is centered on natural products, such as Whole Foods and Sprouts. Traditional retailers have also dedicated large sections of stores to more natural products and feature natural, organic, and non-GMO products prominently. In fact, in Kline’s most recent Natural OTCs analysis, over 60.0% of sales of natural OTCs were sold via traditional drug stores, mass merchandisers, and food/grocery stores.
Kline conducted extensive A+U consumer research in 2011 and 2016 related to natural OTCs and what impact that had on traditional OTCs. The findings indicate increased usage, with 62.0% of consumers indicating they used natural OTCs more in 2016 than they did the prior year and a whopping 74.0% noted they used natural OTCs more in 2016 than they did in 2011. Natural OTCs that provide immune system support either for upper respiratory or digestive ailments are very popular with U.S. consumers, as are natural sleeping aids. These products also have widespread appeal with 49.0% of consumers indicating they use natural OTCs equally for both the adults and children in their households.
In general, U.S. consumers are satisfied with the efficacy of natural OTCs and are willing to pay a premium for them. Forty-three percent of consumers surveyed indicate they use natural OTCs because they are effective, 38.0% of consumers use natural OTCs based on a friend or relative’s recommendation, and 31.0% are using natural OTCs based on a health care professional’s recommendation. As they relate to traditional OTCs, 34.0% of consumers perceive natural OTCs to be safer than traditional OTCs, 28.0% believe natural OTCs are more gentle/less harsh on the body than their traditional counterparts, 23.0% prefer to not take medications if possible, and 22.0% believe that natural OTCs keep them healthy.
These trends are expected to continue, and OTC marketers need to keep their pulse on consumers’ perceptions of natural OTCs compared to traditional OTCs and how those perceptions may be shifting over time. The third edition of Kline’s Natural OTCs: Impact of Non-drug Products on the U.S. OTC Market is to be published in the summer of 2018. OTC companies have the opportunity to subscribe now and, as charter subscribers, can weigh in on the consumer survey and questions to be asked. Contact us to find out more about this research study.