It has been a “benign, stalemate year” for OTC (over the counter) consumer health products, whilst VMS (vitamin & mineral supplement) sales have rocketed, according to PharmaLinea, a Slovenia-based developer and manufacturer of private label supplements.
Citing data from Euromonitor’s Passport Consumer Health database, the company’s founder and chairman, Blaž Gorjup, highlighted the sharply contrasting performance of immune health supplements and cough & cold remedies during 2020, which he said was indicative of a dramatic shift towards “pre-emption and prevention”.
“After several years of correlation between the two sectors, this year, sales of cough & cold remedies have declined while immunity supplements have spiked. This shows a shift towards pre-emptive products and away from a curative approach to health,” said Gorjup.
Immune to downturn
It will come as no surprise that in the context of the pandemic, explosive demand for immune support offerings such as vitamins C and D and echinacea has driven the supplements market to a record year. According to Euromonitor data, sales of immune system supplements have increased by 17% since 2019; the next best performers were supplements for digestive health, joint health, eye health and mood/relaxation, all of which have seen single digit growth this year.
“What we have seen is ‘onboarding’ of new users who have been reluctant to use supplements in the past because of question marks. Now doctors and academics are backing their use. This is unprecedented in the history of the supplement industry and will have a lasting effect,” said Gorjup.
Another reason for the strong performance of VMS this year versus other consumer health categories – in particular sports nutrition – is income elasticity. PharmaLinea says vitamins and supplements are known to have low income elasticity, which means they are less sensitive to changes in consumer incomes.
Whilst immunity has propelled supplements during 2020, in the longer term, this momentum is expected to keep the entire supplements market on an upwards growth trajectory, closing the gap on OTS sales by 2025. Euromonitor forecasts that both sectors will be worth $130 bn in retail value sales by 2025.
Supplement industry shake-up
Gorjup believes that this growth will be accompanied by major changes in market dynamics, as pharmaceutical companies move into supplements territory.
“Whereas ten years ago, pharmaceutical companies were wary of the supplements sector, as the legitimacy of the industry wasn’t there, now they are seeing that not being present could be a huge mistake,” said Gorjup.
His prediction is that the migration of pharmaceutical brands into the supplements space will push the industry to up its game in terms of innovation and efficacy.
“This will mean higher barriers for entry, quality standards and expectations of supplements delivering what they are claiming,” said Gorjup.
He continued: “Ten years ago, just being present in the market and having a me-too product was enough. It won’t be enough anymore. It’s going to become a lot more competitive. Companies will need to find and justify their place in the market. They will need to compete with the ‘millennials’ with their understanding of e-commerce and the big pharma companies with their marketing budgets and brand power.”
With so much change afoot, Gorjup said that now is the time for companies to take a “serious look” at their business models for the future.
E-commerce for all?
However, as companies assess where and how to pitch themselves in this evolving market, he cautions against being swept along with the e-commerce wave.
“We are seeing an immense opportunity in the e-world. What we have seen is classic companies who until now have focused on mass retail, trying – with varying degrees of success – to get into that space. The difference in resources required and company culture shouldn’t be underestimated.”
He said that big brands looking to expand into the e-commerce channel will probably succeed by leveraging their strong market position but will never be the ones pushing the market forward.
He warns against over-egging the opportunity presented by e-commerce, pointing out that the performance spike this channel has enjoyed this year (e-commerce consumer health sales grew by 29% in 2020 according to Euromonitor) was an exaggeration of the overall curve.
“After the pandemic we will expect substantial growth to continue in e-commerce but not at the present level; to expect there will be continued growth of 20-30% after the pandemic is unrealistic. It could be up to 15% though,” said Gorjup.
“The expectation is that there is an opportunity that companies should act on, but if a company’s business model is not ready for it could be a vital mistake. It is not the end of the line for traditional channels,” he added.
Consider regional variations
In particular, he urges companies to consider the vast variations between different geographic markets. The level of e-commerce usage in the US, for example, cannot compare to the more traditional European markets or some Asia Pacific markets, according to Gorjup.
These regional variations also apply in the way that communication methods such as medical detailing and doctor-patient communication have adapted.
“There is a considerable difference between Italy, where communication has not changed much, to Spain, which went from face-to-face to emailing etc, so to say there is an overall trend in how companies are adapting would be a huge mistake. Companies need to look at their territories and business model and apply the data carefully,” said Gorjup.