Beautiful Thinking.
This April, Nicholas Hall’s 34th European CHC Conference brought together hundreds of delegates in the centre of Rome to delve into the state of the consumer healthcare industry, its drivers, its hindrances and overall, how brands can ensure their performance is delivering what their consumers are looking for.
The focus for the opening speech at this renowned conference set the agenda for this year’s event, as the subject of growth dominated. Take a peek at some of the key takeaways…
Prior to the pandemic not a great deal occurred, whether high or low, and the market grew by 4% across all channels of distribution, ahead of what Nicholas classed as ‘paralysis’ in Europe during the pandemic, with only low levels of growth at around 3 – 4%.
In 2022, the sector witnessed a 9.6% growth, attributed to the world returning to “normal” life and the subsequent rise again of the common cold and flu, the loss of personal immunity as we stopped wearing masks and regularly using hand sanitiser.
After growth slowed again in 2023, this year is expected to be a difficult year. The market – largely in the US – will only grow via price increases made by the leading healthcare companies. In other parts of the world including Europe, and with smaller, entrepreneurial companies, there is more volume growth in new consumption.
Overall, the market has become skewed between the top healthcare companies of Europe compared with the US and the smaller (but still powerful) companies.
The prevention products sector that was experiencing growth prior to and post pandemic (with the market heading towards pure prevention pre pandemic) evolved to include immunity as the pandemic took hold.
The realm of treatment made a comeback in the last year of the pandemic and into 2023, with a return to normal life and customers seeking treatments for common colds amongst other issues.
The growth of prevention products is important due to the spending power linked with them. A customer who purchases driven by treatment for something such as the common cold, will purchase typically once or twice a year, when they get sick. However someone driven by prevention and therefore purchasing products such as multi-vitamins, will be taking these on a daily basis. These customers have much greater spending power and therefore should be a focus for brands.
The significance of this goes beyond financially-driven motivations – markets with customers purchasing proactive, preventative medicine will lead to a higher standard of public health and an overall more healthy population.
Where it was once a driver of financial success – it is becoming as tough (if not tougher) a market as physical shop fronts including pharmacies, health food shops and convenience stores.
Globally, e-commerce makes up 19% of distribution, roughly 1 in every 5 euros spent. Nicholas Hall forecasts that this will grow to 33% in the next 10 years. In Europe alone, it is 10% currently with a projected growth to 15%.
This reduced figure relates to regulations preventing the sales of products being sold online – a significant consideration for European players. Pharmacies will therefore continue to dominate. Germany however, proves to be an exception with 24% of current sales achieved through e-pharmacies.
E-commerce companies must also become much more conscious of the last mile, and the packaging in which their products are delivered. All efforts applied to branding a product to build a relationship with the consumer can be destroyed by outer and delivery packaging. Cutting corners can lead to a damaged reputation.
Despite their competitive advantage, their investment, their expertise, the top six healthcare companies’ share of the world is declining.
While the multinationals are able to scale quickly, the growth of these smaller players can be attributed to their ability to bring products to market at greater speed, also supported by them being less governed by compliance. They can be more nimble with risk than their much larger counterparts.
It is these smaller (yet growing in power) companies who are maximising on growing sectors such as CBD. It is the entrepreneurs who drive these markets, before the big players buy in.
The means by which big companies are achieving the nimble abilities of their smaller counterparts, is through spin-off companies.
A general view of this large group of consumers is that they want more natural ingredients, they want their products to be kinder to the environment, but they want it at not extra cost to them.
A small group of customers will pay double for a product that doesn’t damage the health of our planet. However the majority of consumers who are feeling the pressure of a cost of living crisis, will offset their spending and prioritise no-frills, generic products that do the job in improving their health.
Perhaps more now than in the last 20 years, customers have less money, whilst inflation is driving up costs across the board. Therefore trust becomes of prime importance.
There is a more natural affiliation between trust and purchasing power in treatment – if you have a headache, you take medicine, and it goes away. How do brands build a similar faith in preventative products in the VMS space?
We therefore see a greater number of companies investing in the realm of trusted science.
Where AI gives us a lot of information, we are left to understand what it means. AI poses the risk of confusion, as we already experience a data overload which is predicted to increase with its use.
An area which can sandwich the major markets of prevention and treatment, it has traditionally been dominated by areas such as fertility, illnesses such as diabetes, and a recent growth in understanding our internal make-up thanks to companies such as 23andMe.
All of this is paving the way for consumers to be undertaking home diagnoses, which guide them in understanding what preventative products they should purchase, as well as treatment. This is predicted to be a major sector ahead of us.
Not all products launching on to the market are earning their keep. Examples of certain sectors where we have seen the most new products per category include pre and probiotics, sleep aids and aesthetic beauty products are dominating.
Nicholas Hall’s team discovered through an analysis of the top 20 markets and in over 40,000 new products, less than 5% of those new products made a significant difference in the market.
Some were supported by the brand name of the umbrella branding of their parent company, others due to huge investment in marketing strategies. However innovation is lacking and portfolios are simply being expanded and the customer is becoming confused.
Customer confusion not only leads to brands beginning to lose their identity, it leads to a loss of sales. Confused customers do not purchase, they go home empty-handed, as demonstrated in research by Nicholas Hall.
2024 and beyond – whilst it may be a difficult year for growth – shows clear signs of potential for brands which tap into the day-to-day demands of their consumer, and provide them with a clear understanding of how their focused product range can provide what competitors cannot. Is your brand up to the challenge?
