This time last year, pharmacy was the stand-out channel for FMCG sales, with annualised value growth for over-the-counter (OTC) products in the order of 14.2%. A year later, channel growth has moderated substantially - to just below 1%. Despite this new low growth environment, strong performance in other, smaller pockets of the store - including infant formula and cosmetics - signals positive future growth prospects in pharmacy.
Using the combined advantage of QuintilesIMS and Nielsen data, we can better understand the key dynamics driving the stabilisation of pharmacy sales over the past year - particularly in the three biggest segments - health, beauty and personal care.
Nielsen data shows that solid growth in both the beauty (+5.9%) and personal care (+10.9%) segments has offset declines in health segment sales. Health, covering categories such as vitamins, analgesics and allergy remedies, is the pharmacy channel’s primary raison d’etre accounting for around 60% of sales. Previously the channel’s heartland and growth engine,it has become its Achilles heel, with sales down by -3.2% driven by two main developments.
Firstly, overseas demand for Australian vitamin products fuelled a windfall growth for the category starting from the second half of 2014, with a commensurate flow on for the entire pharmacy channel. However, announcements regarding changes to Chinese import regulations in April last year dramatically reversed these gains.
The second development relates to significant declines in the analgesics category. With a share of around 14% of all health care sales, analgesics has fallen by more than -13% over the last year, accounting for 63% of total health care declines.
Nielsen ScanTrack Pharmacy data shows that the delisting of Panadol Osteo from the Pharmaceutical Benefits Scheme in January 2016 contracted the brand’s sales by almost -36%. On top of this, the imminent rescheduling of codeine containing products in early 2018 has already impacted the market. The introduction of the Pharmacy Guild’s Medsassist program in response to this announcement has reduced sales of products containing codeine by around 20%. The effect of this new legislation will continue to be felt by the pharmacy channel for some time.
In spite of these key changes, there are still stories of success coming from other pockets of the store. QuintilesIMS data shows that infant formula, for example, has grown by 82% over the last year driven largely by Nutricia (+97% on year ago). And in beauty, cosmetic skincare products are starting to drive strong growth. Products such as Blackmore’s Vit E cream, a relatively new entrant to the category, is growing at 103%, while other new brands like Eaoron are also driving customer interest in the category.
Interestingly, sales of these fast-growing categories have become more concentrated over time, giving more scope to players who want a share of this growth prize. QuintilesIMS data shows that in infant formula, 17.2% of pharmacies accounted for 80% of total category value in February 2013; this has now shrunk to just 3.8% of pharmacies accounting for 80% of sales in February 2017. The situation for multivitamins and supplements is similar, with 27.1% of pharmacies accounting for 80% of category value in 2013, to 14.1% accounting for 80% in 2017.
The outlook continues to be moderate for the pharmacy channel for the rest of this year and into next. However, as the cases illustrated by cosmetic skincare and infant formula demonstrate, there are still areas where pharmacy can differentiate versus other channels to continue to drive growth. The trends also highlight that factors such as changes to government legislation, which pharmacists have a limited ability to influence, can have a profound and lasting effect on the channel.
QuintilesIMS (NYSE:Q) QuintilesIMS delivers integrated information and technology solutions to drive healthcare forward. Around the world healthcare stakeholders are working to improve real-world patient outcomes through treatment innovations, care provision and access to healthcare. For the information, technology and service solutions they need to drive new insights and approaches, they count on QuintilesIMS. With a global team of 50,000, we harness insights, commercial and scientific depth, and executional expertise to empower clients to achieve some of their most important goals: Improving clinical, scientific and commercial results. Realizing the full potential of innovations. And, ultimately, driving healthcare forward. For more information, visit www.quintilesims.com