Patrick Goss
Pondering OTC Possibilities
Taking compliance up to 100%?!?
Jul 21st
A small population study is in progress that is working determine if packaging can increase patient compliance (actually taking medication once you get it home). This is a key for not only pharma items and could also lift the usage of vitamins and supplements. I’m awaiting the final results because the interim control compliance is very high at this point at 71% (I’m basing this on other studies I’ve seen where compliance is around 50%).
The packaging used is described as “The bottles, called GlowCaps and produced by Cambridge, Mass.-based Vitality, alert patients with light and sound when it’s time to take their medicine. The bottles also generate missed-dose reminder phone calls and refill reminders. Automated progress reports also are sent to the patients’ physicians, family or caregivers.” And they are getting compliance of 98% so far!!!
We’ll check back at the end of the year to see if there are any options for bringing some of the key features of this packaging to OTC options.
What happens to non-OTC companies when they dapple
Jul 20th
The FTC cracked down on Nestle’s claims for its BOOST Kid Essentials claims, specifically:
- prevents upper respiratory tract infections in children
- protects against colds and flu by strengthening the immune system
- reduces absences from daycare or school due to illness
For anyone who has been a copy approval process at the large OTC manufacturer, you’d notice that these claims are very definitive for supplements. Nestle was pushing the envelope with their claims and I’m surprised the regulatory lawyer or someone similar allowed them to go out with prevention and protection claims all based on the combination of:
- 25 essential vitamins and minerals
- 7 grams of muscle-building protein
- 244 energy-packed calories - such a difference appealing to parents of picky eaters and adults looking to save calories
- A good source of antioxidants (Vitamins C and E, as well as Selenium) - I’m assuming these are included in the 1st bullet
One of the keys to the claims is that “containsLactobacillus reuteri Protectis, delivered through the straw”, i.e. the straw is full of probiotics. When basing your probiotic claims on general scientific literature, you should either have a no question human clinical study (which Nestle doesn’t) or use the softening words like “help”. There is always internal arguments around how strong your claim is and the potential benefit of going out strong and pulling back (the public won’t actually know the FTC did anything – look at Airborne still doing well). I believe better to be honest and claim something like “helps build the immune system to tackle colds and flu” better than either misleading claims or saying nothing.
How will McNeil’s other brands recover?
Jul 12th
Today BNet published an interesting article, basically calling for J&J to fire someone over the recent McNeil issues (read it here). I actually think the more interesting question raised in the post was – “Can Motrin, Benadryl and Zyrtec ever recover?” When the FDA comes out and says you can purchase the generic offerings (here for the kids products) instead of the branded versions, this is a big blow to all the work that CPG companies put into creating brands and differentiating them from private label. I agree with Jim Edwards, who authored the article – McNeil will invest to get Tylenol back on track, it is the headline brand at McNeil and one of the keys within J&J (from a “face of J&J to consumers” POV).
So, once the FDA has blown the cover off your brands, what can you do?
Zyrtec – In general, I don’t think that the Zyrtec brand will suffer too much, as it was only the children’s that was recalled, and most of the sales (~90%, thanks Euromonitor) are adult based.
The children’s options, Motrin and Benadryl – Motrin is a horse for the children’s franchise and they’ll need to figure out how to regain parent’s trust across the the Tylenol/Motrin/Benadryl line-up. Motrin is as big as Tylenol, and Benadryl will just come along for the ride. McNeil will spend here to regain the trust, no doubt.
For adult Motrin, which has always been a secondary concern behind Tylenol, I think it is on a downward slide that it won’t recover from due to three reasons:
- No money – Tylenol and the kids franchise will take all the investment McNeil can muster
- Branded competition – Motrin trails Advil in the category, and there is no reason to think that Advil won’t get more aggressive in capitalizing on the recall
- Private label – who wouldn’t have a field day with the FDA saying to buy private label instead of brands, and this is an easy one to push over the edge. Retailers may decide to reduce facings for Motrin, increasing both PL and Advil
I’ll definitely be watching to see how McNeil approaches rehabbing the brands, as it will be a fascinating case study if done well.
Really, this is a mission?
Jul 8th
Wal-Mart: love them or hate them, it is hard to make really serious money in CPG without them. Bill Simon, newly appointed CEO, put out a standard re-org memo that had an interesting paragraph. The 2nd paragraph states:
As I said earlier this week, our mandate is clear: increase customer traffic, make sure our products are relevant to our customer and never give an inch on price leadership. These areas matter most for the continued growth of our business. They require strong leadership and a sense of urgency. Today, I’d like to tell you about the Walmart US senior leadership team that will move us forward.
Wal-Mart’s mandate is clear:
- Increase customer traffic
- Make sure our products are relevant to our customer
- Never give an inch on price leadership
And this is why shopping at Wal-Mart just plan sucks – it isn’t about the customer experience, ease of shopping or loyalty – it is price and pushing more people through the store. This is the mandate that lead to a -1.4% decline in US same-store sales in Q1, whereas Target saw sales increases.
People ran to Wal-Mart when the economy tanked, but with a little more cash in the pocket or hope in the heart, they didn’t want to spend time in these stores and went back to Target et al. And Wal-Mart does not plan on focusing on the customer experience, because back in January 2010, then COO Billy Simon put out a memo saying “Our customers tell us that our stores have never been better..” so they are pretty content with the current situation. As one of my favorite bosses used to say (thanks Lynne) “don’t benchmark off failure” – and telling yourself that you’re stores are better than ever is just that.
What can we learn here – focus on the customer needs and benefits will bring in more dough in the long run. Customers aren’t just walking wallets that make decisions only on price – they want a good experience/product along with value.
A long way to go for GSK
Jul 6th
I find watching GSKs consumer moves very interesting. Most of the ways that I end up looking at the consumer healthcare market, GSK is #2 to #1 J&J and GSK has stated that they want to be the #1, so their moves should be on the path to this goal. When I see GSK consumer announcements I first think about how these will eventually help GSK get to number 1.
Cold sore seems to be in the news for GSK recently. In a follow up to the licensing agreement with NanoBio to use their Phase 3 ingredient (if it passes) for cold sores in December, 2009, GSK has two more cold sore focused announcements:
1. A deal with Medivir for a non-Rx cold sore treatment [Xerclear™ (acyclovir and hydrocortisone)] clinically proven to help prevent cold sore lesions appearing
2. A deal with Labtec GmbH for the exclusive marketing rights to their topical patch for cold sores
This is a lot of activity within the cold sore arena, which is about $450M OTC and another $500M Rx (very rough estimate on the Rx side), so in total ~$1B category. The thing is that GSK already has 50% of the OTC market and about 30% of the Rx market. So this is a lot of time and investment in an OTC market that they essentially own especially when they are about ~$4B behind their goal of catching J&J.
Chasing growth
Mar 22nd
We do a lot of market landscapes (“tell me about category X, we’re thinking of entering it”). In some cases the request is across a variety of countries, especially BRIC. During the presentation of the market sizes and growth rates, everyone always focuses in on the high growth rate categories/countries. For example, here is an example of category data from Euromonitor:
| Country | 2009 Sales (M) | 04-09 CAGR | |
| 1 | USA | $ 4,481.5 | 1.8% |
| 2 | Brazil | $ 1,354.0 | 13.8% |
| 3 | Germany | $ 1,127.5 | 1.1% |
| 4 | United Kingdom | $ 835.1 | 1.5% |
| 5 | Italy | $ 760.9 | 3.6% |
| 6 | China | $ 675.3 | 10.1% |
| 7 | France | $ 584.4 | 0.0% |
| 8 | Russia | $ 417.4 | 18.5% |
| 9 | Spain | $ 394.5 | 2.5% |
| 10 | India | $ 352.7 | 7.0% |
| 11 | Sweden | $ 177.7 | 8.4% |
| 12 | Norway | $ 80.2 | 9.9% |
And then we take 10 minutes to discuss how the client needs to ramp up efforts in Brazil, Russia and China to capture some of that growth. One thing that always seems to get discounted of course is the actual size of the market. Now let’s have some fun with math to show why the best choices are both the USA and Brazil.
Using the following assumptions, we’ll benchmark against the US opportunity:
- 1% share grab
- Growth over the next 5 years = the ‘04’-09 CAGR
For the US, it looks like this:
| Share | 2009 Sales | 04-09 CAGR | 2010 | 2011 | 2012 | 2013 | 2014 |
| 1% | $ 44.82 | 1.8% | $45.61 | $46.42 | $47.25 | $48.09 | $48.94 |
In plain English – grab 1% share now, in 5 years it is worth $48.9M, just growing along with the category.
The way I chose to compare across countries is to answer this question – “To match this level of sales in 5 years, what share do you need to capture now?”
| Country | 2009 Share needed to Equal USA at 1% in 2014 Sales (M) | |
| 1 | USA | 1.0% |
| 2 | Brazil | 1.9% |
| 3 | Germany | 4.1% |
| 4 | China | 4.5% |
| 5 | Russia | 5.0% |
| 6 | United Kingdom | 5.4% |
| 7 | Italy | 5.4% |
| 8 | France | 8.4% |
| 9 | India | 9.9% |
| 10 | Spain | 11.0% |
| 11 | Sweden | 18.4% |
| 12 | Norway | 38.1% |
All the normal caveats apply – i.e. Past performance not an indicated of future performance, the category dynamics could easily change, cost to capture the initial share may not be equal across all the countries, yada yada yada.
That is all well and good, but this quick check shows that if you’re trying to maximize your revenue in the next 5 years, the USA and Brazil would be two of your best bets. Following on is a key EU country, then China and Russia.
Just don’t overlook the big markets because growth isn’t as fast, you can still make money there as well.
Prognosticating a new claim
Mar 18th
When you see some random news items about the same umbrella topic, you begin to wonder if they’ll intersect (not Chuck like, more Blue/White/Red Trilogy kind of thing). My two items were:
1 – McNeil has changed Tylenol’s (and Motrin’s) advertising agency from Deutsch to the Martin Agency.
2 – McNeil submitted a research paper to the Headache: The Journal of Head and Face Pain entitled A Randomized, Placebo-Controlled Trial of Acetaminophen for Treatment of Migraine Headache. The abstract states that the migraine pain was reduced in as little as 2 hours, with a win over placebo of 52% users with reduced pain using Tylenol vs. only 32% of users on placebo (at a significant level).
A great win for Tylenol, and opening up a whole new avenue of claims. Since currently the Tylenol website FAQs state:
Will Tylenol help my migraine headaches?
Tylenol (acetaminophen) is not indicated for migraine pain. It is indicated for the reduction of fever and the temporary
relief of minor aches and pains associated with:
- The common cold.
- Headache.
- Toothache.
- Muscular aches.
- Backache.
- Minor pain of arthritis.
- Menstrual cramps.
And as far as I can tell, only Advil is actively pursuing migraine as an indication and migraine is the torture test of headache pain for OTC products, so the claim is clearly desirable. Using my crystal-lite ball, I’m looking forward to see some new creative from the Tylenol brand featuring their clinically proven effective against migraines ad.
Merck’s Consumer Health Care Challenge
Mar 15th
On Feb 15, Merck announced the appointment of Bridgette Heller (formerly of J&J and Kraft) to the position of Executive Vice President and President, Consumer Health Care. This is encouraging news to someone who thinks there is value in pharma companies having a consumer division (that would be me). There are a number of challenges to overcome on the consumer front at new Merck.
Historically, Merck has limited interest in consumer business and one way this has played out is the J&J/Merck Joint Venture that markets Pepcid, Mylanta, and Mylicon (around a $300M retail business). With the SP acquisition, all of a sudden Merck has a $1.2B revenue business as part of the deal. The odds seemed stacked against the consumer division being kept at Merck:
- Merck’s limited consumer experience
- The merger was touted as helping pharma, so little time to focus on the consumer side needs
- To be a significant player in the global OTC market, company needs about $2B in sales (which is about a 4% market share of OTCs, not including VMS).
- Why would Merck invest another $1.5B to acquire/license the remaining $0.5B in revenue they probably need to be considered a significant player? [and this
So, what does Ms. Heller have to work with to growth this business unit?
- A flat business – the 2008 SP report (2009 Merck didn’t report much on consumer) showed that the business grew only #10M from 2007 to 2008, stating much of it was behind MiraLAX
- Some strong brand equities – including MiraLAX, Claritin, Dr. Scholl’s, Afrin, Coppertone
- A large, if declining allergy business. Claritin et al account for 2/3 of the global consumer revenue and 40%+ of the allergy sales are in North American. Claritin has seen declines recently due to private label and Zyrtec entry.
- A JV business that has been slowly declining since 2003.
- The upcoming Zegerid launch into the PPI segment
- A business that is over-dependent on North American (2/3 of consumer sales) and allergy
My best guess at some potential focus points for Merck’s consumer business:
- Diversify out of North America. Continue to build on strong South America business and develop more in Europe.
- Enter new categories (beyond just switching Aerius to OTC)
- consider Propecia or Fosomax or Livial switch
- look to get into other areas of medicated skincare, leveraging current knowledge to expand
- Grab back the JV brands and build out a digestive health business filling in gaps between Pepcid, MiraLAX and Zegerid
- Enter VMS both for general growth and as a base for operations in BRICI countries (the extra I is for Indonesia)
It will be interesting to watch and see how Merck embraces the consumer health care unit and the growth path that they take. Or is it just window dressing before they sell it off.
What do I do?
Mar 9th
I do research for consumer healthcare companies. No, not healthcare policy, but rather companies that market/sell OTC/personal products.
What is consumer healthcare? Well, we define it in a couple of different ways -
1- the intersection of OTCs, oral care, vitamin/supplements, and personal products thrown in.
2 – the things without a prescription that “keep you looking good to the opposite sex” or keep you from dying/feeling closer to death
3 – from a category view: oral care, analgesics, upper respiratory, VMS, medicated skin care, skin care, depilatories, digestive health, eye care, wound care, consumer devices, health and wellness, etc.
In this blog, I’ll be discussing news, insights, and general going-ons with these areas across companies big (your Taishos, J&Js, GSKs, Bayers, etc) and small (the Chattems – now sanofi-aventis, UCB, Church & Dwight, etc.)