Five growth drivers for the consumer healthcare products market

By Jessica Donati |

How manufacturers can capitalize on the evolution of the OTC market to remove purchase barriers and reach more consumer patients
consumer scanning products on smartphone in store

It’s no secret that the healthcare supply chain is growing increasingly complex. Consumer products are no exception. And while it may seem that the role of distributors like AmerisourceBergen in helping over-the-counter (OTC) product manufacturers find commercial success is simply to make sure product gets from our warehouse to the pharmacy shelves, we’re actually instrumental in a lot more than that. In fact, in recent years, distributors have become an essential source of market insights and customer connections.

Distributors are now an essential partner in helping manufacturers reach consumers, when just a few years ago, promotional programs for consumer products manufacturers were an uncommon offering from a wholesaler. What else has happened that could change what you, as a manufacturer, might come to expect from a distribution partner? Here are five growth drivers that are contributing to the evolution of the OTC healthcare market.

1. Changing customer channels create new opportunities

It shouldn’t be a surprise to anyone in the OTC healthcare products industry that the community pharmacy market remains the biggest area of opportunity for growth. But independent community pharmacies aren’t necessarily laser focused on their front-end business, and as a result, even top selling OTC product is only in 30-40% of stores in this channel.

As OTC sales remain somewhat flat in the community pharmacy channel, suppliers are looking to distributors’ strategic partnerships outside of retail pharmacies to explore new avenues for reaching consumers. These include large health systems’ outpatient pharmacies, pharmacy buying groups, mail order pharmacies, and even direct to consumer opportunities. In fact, this shift is evident in AmerisourceBergen’s evolving distribution business. Six years ago, the independent community pharmacy segment made up 35-40% of the company’s consumer product business; today, that number is closer to 25%.

What to expect from your distributor: The right distribution partner will unlock new opportunities for manufacturers by acting as a two-way conduit for category management expertise and downstream customer insights. There are specific instances where only your distributor can tap into mechanisms for marketing to downstream customers or the end consumer patient with a form of “outsourced category management.” An experience distribution partner with deep bench strength can activate a go-to-market plan with an OTC product manufacturer that includes planograms, item selection and more to unlock access to more customer channels and patients.

Evolution in this space means: Scale for suppliers and growth for healthcare sites as distributors layer on professional services and targeted opportunities.  

2.     Ecommerce exponentially broadens access

Platforms like Amazon also present enormous opportunities for consumer products manufacturers to sell products in a virtual shopping mall setting while shipping direct to consumers. And even when Amazon doesn’t directly sell and ship certain products, third party wholesalers present a profitable avenue for reaching consumers via the web’s largest retailers.

What to expect from your distributor: A manufacturer’s primary distributor can act as an essential partner in maximizing ecommerce opportunities, managing not only wholesale shipments to ecommerce sites and third-party vendors, but also monitoring sellers to ensure supply chain integrity. In situations where needs are dire – during the COVID-19 pandemic when paper products were in high demand, for example – the distributor can step in to source and ship specific products.

Evolution in this space means: Competing in a new space and growing your brand by reaching consumers directly.

3.     Analytics deliver unprecedented insight

The business of big data is huge – and it’s changing every day. That’s why putting resources around extracting insights from analytics is essential. How is product flowing through the distributor down to the customer? Where is product sitting on shelves for too long? What does it all mean, and what should you do about it? The ability to make data-driven business decisions will be how we all stay one step ahead of the competition.

What to expect from your distributor: The most advanced analytics solutions should layer on point-of-sale data with external data sources to provide holistic insights for promotional planning that helps grow product sales in new ways – closing distribution gaps, growing recurring sales, and connecting with customers by reaching them where they are. Your distributor can also weave forecasting, planning, and marketing analytics together to identify trends in categories, find new opportunities with customers who order competitors’ products and evaluate launch information for new item success.

Evolution in this space means: Leveraging your distributor’s customer network and category expertise for true visibility into product performance.

4.     Targeted marketing is a must

As manufacturers’ sales forces get leaner and leaner, it’s critical to do more with less¾and to concentrate resources where they’ll be most effective. Thankfully, the capabilities distributors now have to remove barriers to purchase for OTC products answer the call. Next-level analytics can help manufacturers take advantage of the marketing and promotional programs distributors can offer to downstream customers, from temporary price reduction programs that allow independent pharmacies to compete and ad buys in customer-facing print publications or ordering platforms. Many OTC manufacturers have seen success by temporarily discounting the pharmacy’s acquisition cost in independent pharmacies. Depending on the product and seasonality, these programs can increase increases by as much as 40%.

What to expect from your distributor: Today’s healthcare distributors are exploring innovative, even first-to-market promotional programs and new ways of looking at how to move product. Combined with a deep understanding of customers that comes from knowing how solutions work in the field and evolving ordering platforms and catalogs, the right partner can unlock access to new channels and consumers and put OTC products on par with prescription products in terms of promotion and visibility. Advances in reaching consumers include patient engagement programs through digital channels, online or live education sessions, and turnkey messaging at the point of purchase.

Evolution in this space means: Fewer barriers to purchase for OTC products as engagement in more targeted channels grows.

5. Nimble is the new normal

The COVID-19 pandemic has forever changed the global supply chain. Sudden spikes in demand over indefinite periods of time made seemingly simple activities, like forecasting, not so simple. Manufacturers and pharmacies alike may not be confident in where to put inventory dollars, and may find themselves making reactionary decisions about how to buy and sell.

What to expect from your distributor: A partner that has the scale and resources to minimize supply chain disruptions when products are in high demand is critical in times of uncertainty. Also essential is the expertise to anticipate ebbs and flows model different supply chain scenarios and adapt when things change. The right distribution partner can use analytics dashboards to anticipate “hot zones” where product is needed most, then move product seamlessly through its network of distribution centers to meet those needs.

Evolution in this space means: Trust between suppliers, customers, and distributors when supply chain pressures arise; confidence in distribution decisions and forecasting

What to expect as this evolution continues

While it’s an exciting time for the OTC healthcare products industry, it’s also a time to level-set what these expectations mean for distributor-supplier relationships. How will our relationships need to evolve? What solutions can we create together? And ultimately, what investments will be necessary to ensure the tools, infrastructure, and talent are in place to make the most of this transformative time?

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About the Author

Jessica Donati

Vice President, Consumer Products
Strategic Global Sourcing at AmerisourceBergen
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