Strong Gains for Select Brands and Companies Among U.S. OTC Market Softness in 2016

Nonprescription Drugs USA

The U.S. OTC market posted 2.2% growth overall from 2015 to 2016, according to Kline’s venerable Nonprescription Drugs USA annual market assessment study. However, topical analgesics, nasal allergy medications, herbal products, and contraceptive products posted much higher rates of dollar sales growth. The calendar year of 2016 was marked as being a weak cold and flu season, which put a damper on sales of many OTC upper respiratory brands and market segments. However, in contrast, nasal allergy sprays grew by double digits, driven by growth of newer Rx-to-OTC switch brands, Flonase Allergy Relief (GlaxoSmithKline), and the addition of Rhinocort Allergy Spray by Johnson & Johnson to the market. This rapid uptake of nasal allergy sprays resulted in a small decline in sales of oral allergy medications. 

In the pain relief category, Johnson & Johnson and GlaxoSmithKline experienced higher than average sales gains as their respective brands reaped the benefits of regular, predictable supply to retailers and marketing to consumers for the first full year in several years after product recalls and plant shutdowns. As a result, Tylenol, Motrin, and Excedrin all had strong sales gains in 2016. Strong new product activity and increased advertising of lidocaine line extensions in the topical analgesics category drove sales up over 15% in 2016.

Weight loss medications, herbal products, contraceptive products, nasal and topical decongestants, and other internal analgesics, which include OTC arthritis and menstrual pain relievers, all experienced stronger than average sales growth in 2016. Declines in vitamins, antacids, laxatives, and relatively flat performance of general pain relievers and cold medications kept overall market growth moderate in 2016. Gains of related, adjacent markets also limited OTC market gains in 2016. “Strong growth of probiotics and natural OTC remedies continue to leave OTC brands struggling to find growth opportunities,” commented Laura Mahecha, Industry Manager of the Healthcare Practice at Kline.

Johnson & Johnson and GlaxoSmithKline both experience strong years with OTC sales up by 6% and 5%, respectively, in 2016. Many other OTC majors, including Bayer, Pfizer, Procter & Gamble, Reckitt Benckiser, Prestige Brands, Church & Dwight, and Carlyle Group, all experienced flat to a declining OTC performance in 2016. Private-label OTC products were also flat overall during 2016. GlaxoSmithKline’s 2016 success was driven by the gains of Flonase, Nicorette, Excedrin, and TheraFlu. Johnson & Johnson’s gains in 2016 were driven by the gains of Tylenol, Motrin, Imodium, Pepcid, as well as the addition of Rhinocort in the nasal allergy sprays segment.

Meanwhile, small, niche companies like Matrixx Initiatives (Zicam), Hisamitsu Pharmaceutical (Salonpas), Quincy Biosciences (Prevagen), and Zarbee’s Naturals (Zarbee’s) all posted growth between 10% to 20% year-over-year. “The promise of innovative, naturally positioned brands with a point of differentiation from other, symptom-focused OTCs resonates with consumers and retailers,” states Mahecha.

Many other major competitors like Bayer, Prestige Brands, Pfizer, Sanofi, and Reckitt Benckiser have all undergone at least one, if not multiple, corporate reorganizations as a result of mergers or acquisitions over the past two years. When these happen, companies need time to find their new identity, culture, and management style. During such transitions, brands and businesses can suffer as companies work through growing pains. When widespread corporate restructuring occurs at the same time as a weak cold and flu season and few new and innovative Rx-to-OTC switches entering the market, the conditions for flat to low growth are ripe.

Kline offers a comprehensive analysis of OTC brands, companies, and categories in our annual Nonprescription Drugs USA study. Rx-to-OTC Switch Forecasts will be published in the summer of 2017 and offers objective, realistic forecasts of switch likelihood, timing, and sales across 10 therapeutic classes. Kline’s Digestive Health, Immunity, and Probiotics study is also due out this summer and will provide an in-depth assessment of prebiotics, probiotics, digestive enzymes, and probiotic beverages.

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