Consumer
Health in Australia
EXECUTIVE SUMMARY
Consumer health maintained steady
growth
Despite the tight economic
conditions, consumers continued to regard their state of health and wellness as
a key priority, which resulted in continued growth in current value sales in
consumer health. Strong performances were recorded by slimming products and NRT
smoking cessation aids, which were facilitated by successful new product
launches. Vitamins and dietary supplements, topical germicidals/antiseptics in
medicated skin care and herbal/traditional cough, cold and allergy (hay fever)
remedies were affected positively by the spread of swine flu in Australia as
consumers looked for ways to minimise the risk of infection.
H1N1 influenza rapidly developed
during the 2009 winter
As the spread of H1N1 influenza
unfolded in Mexico and the United States, Australia recorded its first
confirmed infection in May 2009, followed by a rapid contagion to over 1,200
cases in the following month. The unknown morbidity levels associated with the
influenza drew strong concerns from government agencies and alarm from the public.
Towards the end of the review period, the federal government embarked on a
nationwide vaccination against H1N1 influenza, which was administered free to
Australians.
Sanofi-Aventis Healthcare Pty Ltd
gained leadership in consumer health
Through the acquisition of Symbion
Health Ltd’s consumer health product division, Sanofi-Aventis Healthcare Pty
Ltd attained top position in overall consumer health sales in 2009. The
acquisition resulted in Sanofi-Aventis holding leading brands in vitamins and
dietary supplements as well as a presence in analgesics, digestive remedies,
medicated skin care and adult mouth care. Sanofi-Aventis was followed by
Johnson & Johnson Pacific Pty Ltd, which was dominant in cough, cold and
allergy (hay fever) remedies, medicated skin care and digestive remedies.
Blackmores Ltd, the only domestic player within the top five companies,
continued to grow slightly in value share at the third overall position.
Grocery retailers and direct selling
gained distribution share
The convenience presented by
supermarkets continued to be a point of attraction for consumers, resulting in
slight gains in the distribution share for the grocery retailers channel during
2009. The competition presented by grocery retailers was reflected in the slight
declines experienced by chemists/pharmacies and healthfood shops. Direct
sellers also recorded a similar increase in 2009 as the industry benefited from
the ease of recruitment and retention of direct selling agents during tight
employment conditions.
Consumer health sales growth
expected to hold steady over the forecast period
Sales growth in consumer health is
expected to be steady over the forecast period, with strong performances
expected in slimming products and NRT smoking cessation aids, resulting from
the spotlight on obesity as well as the government’s goal to drive down smoking
prevalence. Adult mouth care is also expected to record moderate growth,
resulting from the poor state of oral health in Australia, which has been found
to be the second worst amongst OECD countries. Consumers’ interests in natural
products and preventative health are likely to drive interest in
herbal/traditional products and vitamins and dietary supplements.
KEY TRENDS AND DEVELOPMENTS
Consumer health spending unabated by economic downturn
Unlike
other forms of discretionary spending, consumers have not extensively held back
expenditure on consumer health products during the economic downturn.
Australians continued to place high priority on their states of health and wellness
and did not consider sacrificing OTC medications despite the tight financial
environment.
Australian
consumers are also receptive to self-medication for the management of mild or
recurring illnesses. Consumption of vitamins and dietary supplements and
herbal/traditional products, is fairly entrenched in the routines of many
consumers. During the review period, which was fraught with financial and
employment uncertainty, consumers were observed to be relatively brand loyal to
products that are perceived to be effective and of high quality, and were not
inclined to trade down to products at lower price points.
Current Impact
In
2009, growth in overall consumer health was 5% in current value terms, which
was similar to the preceding year. Categories such as vitamins and dietary
supplements and slimming products generally maintained level growth during the
review period, which contributed to the overall stability in consumer health
sales. Amongst the larger medication categories, medicated skin care reached 5%
growth in current value sales whilst analgesics maintained a 3% current value
growth.
Branded
products in consumer health are still preferred by consumers, resulting in the
value share of private label remaining stagnant at less than 3%. Slight declines
in the value share of private label were observed in digestive remedies and
medicated skin care, partly as a consequence of the marketing activities by
leading brands within these product categories.
Outlook
Economic
conditions are likely to improve during the forecast period, as observed
through a slight growth in the country’s gross domestic production index and
the stabilising of unemployment in the latter half of 2009. Whilst economic
conditions have not significantly impacted consumer health sales, other
sociological factors which are likely to have an impact are the ageing
population, the slight increase in birth rates and the high prevalence of
obesity and overweight in Australia.
Self-medication
will continue to feature prominently with Australian consumers over the
forecast period as government and health agencies focus on chemists/pharmacies
as the first line of defence for common illnesses to ease the burden on the
general practitioners and hospitals. The consumption of nutritional products
will also benefit from the spotlight on preventative health as well as the baby
boomers’ interest in maintaining their quality of life as they age.
Future Impact
Sales
in consumer health are expected to grow at over a 1% CAGR in constant value
terms during the forecast period. OTC product categories are expected to
continue to track positive growth as Australians become more confident of
self-care. Slimming products and sports nutrition are expected to grow at 3% and
2% constant value CAGRs respectively during the forecast period.
The
movement towards self-care could result in further downscheduling of medicines
from prescription to OTC status for the management of chronic conditions such
as high cholesterol and diabetes. This position is strongly advocated by
several lobbying groups such as the Australian Self Medications Industry. The
addition of new product categories in OTC medicines would provide more value
growth opportunities in consumer health.
Fear of H1N1 influenza pandemic facilitated sales
Australia
experienced a rapid development of the H1N1 influenza, also known as swine flu,
during the winter season of 2009, which saw the spread of infection to over a
thousand cases within one month. The little-known aspects of the influenza,
such as the morbidity rates and uniqueness in symptoms which differentiated it
from more common strains of flu, resulted in heightened concerns from
government agencies and fear amongst the Australian public.
Seasonal
outbreaks of winter influenzas are not unusual in Australia, with a cycle in
2007 resulting in 2,623 known deaths as reported by the Australian Bureau of
Statistics. With the exceptionally severe winter influenza in 2009, many
Australians paid more attention to the onset of cough and cold symptoms, and
were more willing to seek health advice and remedies for flu conditions than in
the previous year.
Current Impact
In
addition to seeking advice from general practitioners and requesting Tamiflu
antiviral medications for more severe infections, many consumers looked to OTC
medications to manage mild flu symptoms and to circumvent the onset of the
infection. This resulted in stronger current value growth for certain cough,
cold and allergy (hay fever) remedies such as combination products and
herbal/traditional remedies during 2009. The rapid spread of the infection also
propelled sales in topical germicidals/antiseptics, which saw a current value
growth of 12%, as well as face masks.
Consumers
also turned to vitamins and dietary supplements targeted to enhance immunity
and combat cough and cold symptoms. Products in herbal supplements such as
echinacea and garlic, as well as vitamin C, recorded stronger performance in
2009 as compared to the preceding year.
Outlook
As
the understanding of the H1N1 influenza has grown, especially with regards to
the relatively low morbidity rates, the fear of future flu outbreaks is
unlikely to result in as much concern and alarm with health agencies and the
Australia public as during the 2009 winter. Furthermore, a national vaccination
programme for the H1N1 influenza strain was rolled out in October 2009, which
has the capacity to cover up to 21 million people.
Nonetheless,
mutation of the virus could result in higher morbidity in future outbreaks as
well as resistance to antiviral medications and vaccination during the forecast
period.
Future Impact
Unless
the H1N1 virus strain mutates to a more severe and deadly type of influenza,
future outbreaks are unlikely to be a key driver in value growth of cough, cold
and allergy (hay fever) products, topical germicidals/antiseptics and vitamins
and dietary supplements, which benefited from the 2009 winter flu cycle. As
Australians have experienced severe seasonal influenza outbreaks, they are not
likely to be particularly fearful of future H1N1 influenza waves and
extensively seek out OTC medications, especially for the management of mild flu
conditions.
Should
the development of future outbreaks result in higher fatalities or become
resistant to antiviral medications and vaccination, consumers are then more
likely to turn to consumer health products as well as seeking out professional
health advice to alleviate flu conditions and circumvent the risk of infection.
Grocery retailers channel intensifies competition for retail distribution share
During
2009, the New South Wales Supreme Court ruled against the plans of Coles
supermarket, the grocery retailer owned by Wesfarmers Ltd, to own and operate
Pharmacy Direct, which is an Internet retailer in consumer health. The ruling
demonstrated the resolve of the government and other lobby groups such as the
Pharmacy Guild in preventing nonspecialised companies, such as grocery
retailers, from entering into chemists/pharmacies. The ruling resulted in the
sale of the online business by Wesfarmers Ltd to Zuellig Australia Pharmacy
Services Pty Ltd.
Nonetheless,
grocery retailers remains as an attractive channel for consumers in the
purchase of consumer health products, due to the convenience of picking up
items during grocery shopping and the longer retailing hours by supermarkets as
compared to chemists/pharmacies. This is especially apparent for OTC
medications and nutritionals, which the consumers are familiar with and do not
require the advice of healthcare specialists.
Current Impact
In
overall distribution of consumer health products, grocery retailers posted a
slight increase over the review period to reach a share of 23% in 2009. In
contrast, chemists/pharmacies saw a slight decline in distribution share of
approximately the same proportion during the review period.
Analgesics,
digestive remedies and vitamins and dietary supplements were amongst the
product categories which attained value growth in distribution share in grocery
retailers. As these consumer health products tend to be regularly taken by
Australians, consumers are confident in seeking out product types and brands
which are able to meet their needs. NRT smoking cessation aids grew by nearly
half a percentage point in distribution share as a result of the aggressive
promotion of Nicabate products in leading supermarket chains.
Outlook
Australian
legislation is unlikely to be amended to allow retailing in chemists/pharmacies
by nonspecialised companies such as supermarket operators. The current view was
further endorsed by the Pharmaceutical Society of Australia in February 2009
and is not due for review until 2014. The key reason outlined by the society
was the premise that grocery retailers are not likely to be able to provide a
suitable environment which focuses on patient care as well as provides
opportunities for multi-agency and disciplinary collaboration.
Manufacturers
nonetheless recognise the growth potential that exists in the grocery retailers
channel. During 2009, Sanofi-Aventis Australia Pty Ltd proposed to the National
Drugs and Poisons Schedule Committee (NDPSC) for the OTC version of Telfast to
be made available in supermarkets at a lower dosage and smaller pack size.
Future Impact
Despite
the legislative moves to prevent grocery retailers from owning or operating
chemists/pharmacies, the highly competitive channel will look to other means of
growing distribution share in consumer health sales. Supermarkets, especially
the leading chains of Woolworths and Coles, have been focusing on higher-value
products such as vitamins and dietary supplements and NRT smoking cessation
aids. These retailers also engage in aggressive price discounting to attract
consumers.
The
main attraction with supermarkets to consumers is convenience, especially for
many Australians who are becoming increasingly time poor. Should more leading
brands in important product categories, such as Telfast, be approved for
distribution in grocery retailers, the channel is likely to continue to grow in
the overall distribution of consumer health sales.
National Preventative Health Strategy
In
2008, the federal government set up a National Preventative Taskforce to review
the lifestyle factors and issues associated with chronic diseases and to
propose a strategic roadmap to reduce the prevalence of such health conditions.
With an ageing population in the country, government agencies are concerned
about the capacity of the national health care system to support the costs and
long-term care of patients with chronic health conditions.
A
National Preventative Health Strategy was released during 2009 which delineated
a roadmap for Australia to become the healthiest country by 2020. The three key
lifestyle issues to be addressed in the strategic roadmap are reducing smoking
prevalence, halting and reversing the trend of rising obesity and overweight
levels and reducing the consumption of alcohol.
Current Impact
With
a target to reduce smoking prevalence from 19% in 2009 to 9% by 2020, the
proposed strategy includes subsidising the use of NRT smoking cessation aids to
low-income earners as well as maximising the use of Quitline, the national
helpline in smoking cessation support. A prescription smoking cessation
medications, Champix, is already being subsidised by the Pharmaceutical
Benefits Scheme. The wider use of NRT smoking cessation products with less
adverse side effects as compared to prescription-only medicines is suggested to
further improve the quitting rates amongst smokers.
The
national focus on the rising prevalence of obesity and overweight levels
amongst the adult population has drawn further attention to products targeted
for weight loss such as meal replacements slimming, weight loss supplements and
OTC obesity. With the spotlight on the obesity and its associated chronic
health conditions, there has also been growing attention on the effectiveness
and safety of various weight loss methods and products. This has resulted in
much scrutiny by consumer groups on pharmacy-based slimming programmes, which
are reportedly fronted by poorly trained slimming specialists, and also the
efficacy of weight loss supplements.
Outlook
The
Preventative Health Agency, a formal organisation to implement the final strategic
roadmap, was expected to be set up at the start of 2010 after the government
officially passed the bill. The health agency will be the key body in providing
further reviews of action plans as well as coordinating with other government
agencies in driving initiatives such as implementing plain packaging for
tobacco products and public education programmes on healthy eating habits and
active lifestyles.
Future Impact
To
achieve the ambitious objectives set out by the taskforce, the newly formed
Preventive Health Agency is likely to partner with manufacturers and
chemists/pharmacies on community outreach and programmes. Consumer health
brands and retailers allied with the agency could be perceived as more
efficacious due to the association. As a result, joint promotional and
educational campaigns could facilitate growth in slimming products, NRT smoking
cessation aids and other related consumer health products, particularly for
partnering brands and retailers.
In
the event that the agency implements the subsidising of slimming products and
NRT smoking cessation aids, value growth for these products is likely to exceed
the initial predictions of 2% constant value CAGRs over the forecast period.
Ageing profile of Australian consumers
As
is the case in many other developed countries, the proportion of older people
in Australia is increasing. With the birth rate in Australia in steep decline
until relatively recently and life expectancy creeping upwards, the number of
pensioners in the country has been growing rapidly: Between 1995 and 2007, the
number of pensioners in Australia grew from 2.2 million to 2.8 million, an
increase of 28.3%. As a result, the proportion of the Australian population
accounted for by pensioners grew from 11.9% to 13.1%.
Current Impact
Whilst
the ageing demographic in Australia is not a new trend, manufacturers have
increasingly focused new product developments to meet the needs of this
consumer group. Blackmores Ltd has introduced an herbal/traditional analgesic,
Back Pain Formula, for sufferers of chronic pain who are concerned with the
long-term effects of taking nonsteriodal anti-inflammatory drugs (NSAIDs). In
addition to this, the company also launched products targeted for heart health
such as Blackmores Cholesterol Health.
The
priority on maintaining quality of life by the older consumers continued to
contribute to value growth in consumer health products such as digestive
remedies and eye care products. The year 2009 also saw an improvement in
performance by calcium supplements, which grew by 5% in current value terms as
concerns about osteoporosis and future mobility weighed in with the ageing
population.
Outlook
The
ageing trend is forecast to accelerate during the forecast period, driven by
the baby boom generation, those born between the end of World War II (1945) and
1960. By 2015, the number of pensioners will be approaching 3.7 million, or
15.7% of the country's population. This will represent an increase of 32.7%
since 2007.
South
Australia and Tasmania had the highest proportions of their populations aged 65
years and over in 2002 (15% and 14%, respectively). These states will continue
to have the oldest age profiles, with those aged 65 years and over projected to
make up around a third of the population of each in 2051. In the longer term,
the Australian Bureau of Statistics has forecast that the proportion of the
country's total population aged 65 and over could reach 32% by 2101.
Future Impact
As
the number of pensioners in Australia continues to grow, expenditure on
healthcare will inevitably increase, and value growth will be sustained in
products targeted for older consumers. Digestive remedies and eye care products
are expected to maintain steady constant value CAGRs of 1% during the forecast
period. Value growth in vitamins and dietary supplements will be facilitated by
eye health supplements, other fish oil, glucosamine and calcium supplements,
which help to maintain the quality of health in ageing consumers.
Manufacturers
are increasingly likely to focus on product development for the older consumer
group as the demand for such consumer health products remains steady over the
forecast period. Whilst herbal/traditional products and vitamins and dietary
supplements will be preferred by older consumers for longer-term consumption,
companies producing OTC medications need to look to innovation to minimise the
side effects of long-term usage to attract the older consumer demographic.
