Many retailers are increasingly focusing their product strategies on health, wellness, and convenience. Mark Field the CEO of Prof. Consulting Group outlines why adding nonprescription medicine to the product mix could offer retailers an attractive opportunity to drive consumer traffic and lift profitability.

With a global market value in excess of US$131 billion by 2022 and a healthy growth outlook of ~5% over the next three years, the over the counter (OTC) market is likely to appeal to an increasing number of investors and brand managers.

The Australian OTC market was valued at over US$20 billion in 2019 and was recognised for multi-billion-dollar savings through saved visits to the doctor. This outlook is forecast to continue to grow as consumer interest and confidence in OTC products builds alongside our own self-awareness with regards to our health and wellbeing.

Increases in chronic disease, growth of the aging population, and rising levels of diabetes are all key drivers for growth in the category and are creating a strong demand.

Within retail there is still a significant opportunity for range rationalisation a retailers approach to reducing those less popular lines and replacing them with customer focused innovation. This will provide selling space, allowing for the introduction of innovation. As an example, a recent review of the paracetamol category showed over 17 varieties across brands, pseudo brands and private label.

More importantly, the price per tablet ranged from $0.04 per tablet to $0.20, whilst products with innovative deliveries such as mini tablets, rapid and +flu reached up to $0.55 per tablet. Reducing the range, opening availability and easing the customer experience are all simplification techniques that help create growth in what is widely considered a complex aisle.

Taking the first aid and medical category across one of the leading retailers as an example, ~450 sku in an average store, ~90% is branded (approximately 415 skus), 6% pseudo branded (approximately 30 skus), and <4% is traditional own brand (approximately 3 skus). This suggests that current own brand penetration represents less than 10%, providing a significant growth opportunity.

The completive landscape for OTC products in Australia continues to evolve with the strong presence of the big box discount models such as Chemist Warehouse, the strong independent sector with community chemists such as Terry White, and the growing presence of online alongside traditional grocery.

With over 6500 skus on average in the health and beauty aisle across a standard grocery store and an average product spend in the region of $5 to $7.50 whats clear is the potential opportunity to drive sales, improve profitability and increase consumer traffic to a high value area of Australian retailing.

About the author: Mark Field is the Founder and CEO of Prof. Consulting Group, anaward-winning Melbourne-based consulting firm specialising across the international food and grocery supply chain.

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Could OTC products be the next strategic focus for private label - Consultancy.com.au