1. Convenience opportunity
2. Squeezed middle
3. Branded versus Private Label
4. Don’t create a barrier to purchase
5. Pharmacies closing creates a need for information
6. Gut health opportunity
1. Convenience opportunity
Money is tight but should watching the pennies come at the expense of our health?
It’s clear that the British public don’t think so, with Circana data showing that the healthcare sector continues to out-perform the market in total, with value sales up 4.5% in latest 12 month (L12M) to Aug 03 2024 vs last year (LY) and 6.4% in the latest 13 weeks vs LY.
Breaking it down by sub-category, the adult analgesics category is showing good growth, up 2.7% in L12M vs LY and 4.8% in the L13W vs LY while the OTC cough, cold and allergy market is growing strongly, well ahead of healthcare in more recent time periods, with the medicated confectionery category in particular performing strongly, up 19.9% in the L13W vs LY.
It’s when it gets to convenience, that things get a bit bunged up. Circana states that he Symbols and Independents have a big under-trade in the Healthcare market with just 4.1% value share in the L12M, which it attributes to “stiff competition from the chemist channel”.
Despite this, Circana’s senior strategic insight director Alex Lawrence believes “there is a good opportunity for Symbols and Independents in the OTC cough, cold and allergy market notably in medicated confectionery”.
“Its value share is so far behind unit share in the sector suggests, there is a mix, price and/or pack size opportunity for symbol and independent retailers, but with cost-of- living pressure likely to persist over the winter months, symbol and independent retailers, will have to strike a difficult balance to ensure they remain price competitive versus the competition.”
Fisherman’s Friend Regional Business Manager, Jon R White says shoppers are still buying in the category but are more discerning.
“Despite inflation finally slowing, we’re still in a cost of living crisis so shoppers are continuing to pull back spending where they can whilst seeking out value for money when they do have to make purchases,” he says.
2. Squeezed middle
Customers seeking value while others are willing to pay whatever they need to feel better, means that something has to give. White warns that middle tier lines could be in for a cold winter.
“At the moment, shoppers are clearly dividing into two very distinct camps at either end of the premium v value scale, so it’s the brands sitting in the middle that are likely to feel the greatest pinch this coming winter, “ he says. “For example, sales of super premium healthcare products (priced at an average of £8.58) are growing by +8.6%, and the only other products in growth (+1.2%) carry an average price of 91p, similar to the RRP on our core 25g packs.“In the squeezed middle, it’s a very different picture with premium (average price £6.28), standard (£4.63) and value (£2.71) healthcare products, all in decline by -0.9%, -3.4% and -7.4% respectively.”
3. Branded versus Private Label
According to Circana, private label is a “big player” in healthcare and the OTC cough, cold and allergy categories but branded lines still win when it comes to medicated confectionery.
Private label has been winning share in both markets up by 2.7PP unit share in the L12M vs LY in adult analgesics and +2.3PP unit share in the L12M vs LY in OTC cough, cold and allergy sector, indicating that although the healthcare sector has been pretty resilient during cost-of-living pressure, there does look to be significant trade down,” explains Circana’s Lawrence. “In contrast, Private Label is losing value sale share in Medicated Confectionery in more recent time periods.”
Stanton says that while price continues to be a key driver in purchasing decisions for this category, medicines shoppers who are ill and in distress are looking for a product they can trust to do the job. “These shoppers are generally less price-sensitive, they trust brands as the experts, and they will buy from you if you have the top-selling products in your range.
“Medicines shoppers are extremely brand loyal because shoppers see brands as the experts, who produce products that can be trusted to get the job done. Whereas other grocery categories are seeing shoppers trading down to cheaper private label products, shoppers are less likely to do this on medicines.”
He advises retailers to stock own-label paracetamol and ibuprofen products alongside the leading brands (Nurofen, Anadin and Panadol), especially those looking to attract larger top-up missions.
Fisherman’s Friend regional business manager Jon R White says it comes down to trust.
“Focusing on heritage brands that shoppers know and trust is important now more than ever – especially within categories such as Winter Remedies. This is because as a nation, we’re dealing with less disposable income than we’re used to, so many of us are thinking twice about what we’re spending our hard-earned cash on. In addition, shoppers tend to feel that little bit more vulnerable when sick, so they want to be 100% certain that the remedy products they’re investing in will deliver the relief they’re looking for.”
4. Don’t create a barrier to purchase
Retail crime is rarely out of the headlines and while store owners may be tempted to keep this category under lock and key, DCS Group’s Mark Stanton warns that “visibility is key” to its success.
“We usually recommend medicines are displayed on the main shop floor wherever possible, rather than behind the counter, as this makes them easier for shoppers to find, although we would make exceptions for stores with particularly high levels of shoplifting,” he explains. “Stocking medicines behind the till creates a barrier to purchase. If there is no option to display medicines on the shop floor, then you should at last make sure they are very visible behind the till and make sure the prices are easy for shoppers to read from a distance. Having to ask the price creates a barrier for some shoppers. It’s also worth having POS that directs shoppers to the till point from relevant shop floor categories, such as toiletries or baby care, to make sure they know where to look.”
Stanton offers up the best locations for OTC medicines: “Off-shelf/feature display – these areas can deliver up to 40% of total winter medicines sales. But if off-shelf display isn’t possible, locate near to the toiletries category. Remember also that there is a strong link between baby care (nappies, wipes, baby milk, baby food) and children’s medicines (Calpol, Nurofen for Children), so this should be located nearby too.”
For those concerned about theft, “Locating on the main shop floor near to the till point, or in the queueing system where relevant, will help to minimise the risk of theft”.
5. Pharmacies closing creates a need for information
With pharmacies closing across the country, convenience stores have to step up. According to the Christie & Co Pharmacy Market Review, in the year to 31 March 2024, the UK pharmacy market saw a decline of 3.5%, with 505 pharmacies removed from the register, taking the total number of pharmacies across England, Scotland, Wales and Northern Ireland to 13,822.
Stanton says that retailers should be ready to offer advice when they can. “Convenience stores are seen by shoppers as an essential local service, and interaction with store staff is important for many. The ability to confidently answer basic questions about key products, for example the difference between chesty cough and tickly cough remedies, is likely to be helpful to shoppers and therefore improve shopper loyalty. That said, it’s also important that more complicated questions are signposted to medical experts.”
6. Gut health opportunity
While not necessarily a winter-specific issue, unless you’re planning a big Christmas Day feast, DCS Group suggests bearing in mind digestive health. According to Nielsen data, the sub-category is worth £17.7m, up 6.3% year-on-year.
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