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Alternate Distribution Channels Claim Opportunities for OTC Drug Sales in the United States, Finds
Kline

PARSIPPANY, NJ, JULY 30, 2012 –

Manufacturers’ sales of over-the-counter (OTC) medicine through alternate retail channels have grown by a compound annual growth rate (CAGR) of 9.4% from 2006 through 2011, far exceeding the 2.4% overall growth rate through all retail outlets. Retail sales online saw the highest increase with a CAGR of 16.1%, according to the recently published OTC Retailing: U.S. Alternate Channel Analyses and Opportunities report by global consulting and research firm Kline & Company. Expanding sales through alternate retail channels is viewed as an opportunity for OTC drug manufacturers to increase their revenues.

Although among the eight alternate retail channels profiled in this study, sales of OTC drugs—estimated at just 2.2% of total corporate sales in 2011—are relatively small, total corporate sales in these alternate channels have experienced strong growth of 13.3% in 2011.

The U.S. retail industry remains highly consolidated with a fairly small number of large retail chains that continue to dominate OTC distribution. The three main retail outlets consisting of drug stores, mass merchandisers, and food stores combined account for about 84% of OTC sales; however, other outlets such as the Internet, convenience stores, dollar stores, and warehouse clubs are offering noteworthy competition across several categories and account for nearly 15% of the OTC retail market.

The Internet is increasingly becoming a popular distribution outlet driven by convenience, as online shopping through websites allows consumers to quickly compare prices of products and offers direct and discreet shipping to the consumer’s home. As a reflection of the Internet’s ever growing importance and to expand its online reach, Walgreens acquires Drugstore.com in 2011.

Online sales of OTC drugs are growing at a rapid pace, but not equally for all OTC categories. For example, vitamins, minerals, herbal products, and OTCs such as pain relievers—products that consumers like to stock in their medicine cabinets—have a high rate of online purchase. However, OTC products for an immediate need, such as allergy relief, cough and cold preparations, and digestive products, tend to be purchased more often at brick-and-mortar stores.

Kline’s Healthcare practice Industry Manager Laura Mahecha cautions that, “Growth opportunities within the retail environment should be explored on individual channel and category bases. While some of the alternate channels, such as warehouse clubs, dollar stores, convenience stores, and online, can offer opportunity for growth in select categories and for certain brands, several other alternate retail channels ostensibly aren't prime candidates for an increase of branded OTC sales.”

REGISTER for a free webinar on this subject, taking place on Wednesday, September 12, 2012, at 10:00 AM US EDT. http://bit.ly/NPDRet

Kline’s new report OTC Retailing: U.S. Alternate Channel Analyses and Opportunities is an astute assessment of both growth opportunities and the relative importance of alternate retail channels for OTC sales. Approximately 21 key retailers are profiled within the report with specific discussions pertaining to OTC sales with these retailers.

About Kline
Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit www.KlineGroup.com.

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