OTC Market Is Booming, Says Kline

Aided by the launch of Rx-to-OTC switch brand Allegra (Sanofi-Aventis) and strong growth of private labels, allergy relief products grew 16.3% in 2011 to become the fastest growing category on the U.S. OTC drug market, according to the Nonprescription Drugs USA 2011 report by international consulting and research firm Kline & Company. The U.S. OTC drug market posted a gain of 2.4% reaching $21.4 billion in 2011 at the manufacturers’ level.

Past Rx-to-OTC switch brands continued to perform well with Rogaine (Johnson & Johnson) and Plan B (Teva Pharmaceutical) both seeing strong gains in the hair regrowth products and contraceptives markets, respectively. Similarly, private-label OTCs had another stellar year in 2011, benefitting from new product launches and the sustained outages of many of Johnson & Johnson’s OTC brands from store shelves. Overall, private-label OTCs are up 8.7% and now account for over a quarter of the overall OTC market.

Johnson & Johnson’s OTC unit continued to experience steep declines as a result of its manufacturing issues with sales down 17.4% in 2011. However, most other major branded OTC companies performed well in 2011. Sanofi-Aventis’ OTC sales were up over 100% in 2011, bolstered by the launch of Allegra. Pfizer saw an increase of 5.6% based on strong sales of the Centrum, Advil, and Caltrate lines. Novartis recorded a 4.6% gain driven by growth of Excedrin, Triaminic, and Maalox. Sales gains from Nyquil, Dayquil, Metamucil, and Align helped lift Procter & Gamble’s OTC sales up 4.5%, while Bayer’s OTC sales enjoyed 4.0% growth in 2011 based on gains of One-A-Day, Aleve, Bayer Aspirin, and Alka-Seltzer.

Smaller companies also managed to post solid, above industry average gains in 2011. Prestige Brands’ OTC sales rose 15.1% in 2011 as it experienced strong growth from its Pediacare, Little Remedies and Little Tummy’s lines of children’s OTCs in addition to gains from the recently acquired cough drop brand, Luden’s.

Underperformers in the OTC market in 2011 include the weight loss medications category, where steep declines were recorded as consumer receptivity to Alli (GlaxoSmithKline) continues to wane. The antidiarrheal preparations category suffered from sales declines of the market leading brand, Johnson & Johnson’s Imodium. The arthritis pain relievers category also declined in 2011 affected by manufacturing problems for Johnson & Johnson’s Tylenol Arthritis brand, which had been the market leader.

OTC marketers are using holistic marketing approaches and promotions to drive sales of their brands. Smart advertising, coupons, social media, and in-store displays are growing in importance to drive consumer sales. For example, Pfizer markets its re-staged Robitussin line of cough syrups and cold medications in 2011 with integrated TV, digital and in store campaign, social networking, coupons and FSIs, and even smartphone apps to help consumers chose the best Robitussin brand for their symptoms.

Rx-to-OTC switch brands continue to be major game changers on the OTC market, whether promoting strong gains or causing steep declines. Traditional OTC lines are delivering growth as they have expanded to meet consumer needs with the Centrum (Pfizer) and One-A-Day (Bayer) vitamin lines. Both of these lines using broad reaching marketing campaigns have had success with new product launches.

With Johnson & Johnson relaunching Tylenol accompanied by rigorous marketing efforts, the larger analgesic brands including Advil (Pfizer), Bayer Aspirin (Bayer), Aleve (Bayer), and Excedrin (Novartis), are not expected to continue accruing high gains year over year, once Tylenol marketing resumes.