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September 26, 2013
Winning the Battle for Consumer Healthcare
Consumer Health Products Canada – The Health Driven Consumer
2
Discussion Topics
1) The Consumer Healthcare Market
2) The Battle for Consumer Healthcare
3) Convergence of Food and Medicine
4) Preparing to Win
3
Discussion Topics
1) The Consumer Healthcare Market
2) The Battle for Consumer Healthcare
3) Convergence of Food and Medicine
4) Preparing to Win
4
The market for consumer healthcare is defined by broad boundaries - „consumer needs‟ and the „quality of the claim‟
Pharma active
Disease Aspiration Preventative
Scientific claims
Perceived benefits
Herbal Remedies
Analgesics
Anti-aging creams
Energy drinks
Health nutrition
“Therapeutic” toothpaste
Probiotic yogurt
Quality of
claim
Consumer Need
Map of Consumer Needs vs. Quality of Claim
Vitamins/ Minerals
“ ”
Source: A.T. Kearney analysis
5
Consumers are moving increasingly towards early preventative and aspirational treatments
With these headwinds, we expect Consumer Healthcare will become a Mass Market, impacting all aspects of consumer products and services
Spending trends of an
aging population
Increased focus
on prevention
Governments and payers
are investing in public
health to change behaviors
and begin
early treatment
Increased
consumer spending on
healthcare
Consumer
spending is filling the “gap”
left by challenged health
systems
Older population have a
wide range of
self-medication options
and aspirational treatments
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Despite the attention on some emerging countries, the largest growth is expected to come from emerging markets
1. Estimated Sales Data (Retail Value MSP/US$ million/ Historic Constant 2012 Prices, Forecast Constant 2012 Prices/ Historic Fixed 2012
Exchange Rates, Forecast Fixed 2012 Exchange Rates)
Sources: Euromonitor, 2012: Consumer Health, Passport database; A.T. Kearney analysis
$250B
$198B
$149B
2007 2012
CAGR +5.3%
2017E
Global Consumer Healthcare Market
USD billion, MSP¹
50
30
10
0
90
70
2017E 2012 2007
CAGR 2007-2017
7.8%
6.5%
6.0%
7.4%
7.1%
4.4%
1.1%
North America
Middle East and Africa
Latin America Western Europe
N. America (non-vitamins) Eastern Europe
Australasia
Asia Pacific
Consumer Healthcare Growth By Region
3.3%
7
The Canadian market is expected to see growth rates slightly below the global average
Sources: Euromonitor, 2012: Consumer Health, Passport database; A.T. Kearney analysis
Canadian Market Growth by Category
USD billion, MSP¹
0.5
1.0
1.5
2017 2012 2007
Dermatologicals
Analgesics
Cough, Cold and Allergy Remedies
Paediatric Consumer Health
Weight Management
Digestive Remedies Herbal/Traditional Products
Vitamins/Dietary Supplements
CAGR 2007-2017
4.7%
3.%
3.7%
1.4%
3.1%
3.2%
3.8%
1.9%
Canadian Market Growth
2007 2017E 2012
$5.2B
$4.5B
$3.6B
CAGR +3.8%
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„Sweetspots‟ emerge at the intersection of markets and categories
Consumer Healthcare – Finding the sweet spots
1. Sales Data (Retail Value MSP/US$ million/ Historic Constant 2012 Prices, Forecast Constant 2012 Prices/ Historic Fixed 2012 Exchange Rates, Forecast Fixed 2012 Exchange Rates)
Sources: Euromonitor, 2012: Consumer Health, Passport database; A.T. Kearney analysis
Top 25 segment opportunities, 2012 – 2017
USD million, MSP¹ Canada
North America
Western Europe
Asia Pacific
Latin America
Eastern Europe
Middle East and Africa
Vitamins and dietary
supplements 104 7,965 1,128 11,430 1,256 1,549 792
Herbal and traditional
products 32 855 7,016 755
Digestive Remedies 73 743 672 514
Cough, cold and allergy 137 1,231 2,663 1,473 1,009 660
Analgesics 155 797 1,338 1,148 576
Sport nutrition 31 2,532
Pediatric consumer health 10 1,215
Dermatologicals 61 1,108
Weight management 35 707 1,827 626
Higher growth ($1B-$5B) High growth ($500M-$1B) Highest growth (>$5B) <$500M not represented
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Discussion Topics
1) The Consumer Healthcare Market
2) The Battle for Consumer Healthcare
3) Convergence of Food and Medicine
4) Preparing to Win
10
A large mass market has develop midway between pharmaceuticals and consumer goods companies
Product
Market /
Population
Niche
market
Mass
market
Consumer
Healthcare: Growing
mass market linked to
growing health risk
factors
Disease Aspiration At risk
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Consumer
Healthcare
Both industries are already trying to address similar needs by leveraging their historical positions
Example – Cholesterol-lowering Products
Consumer
Goods
Major
Pharmaceutical
Niche Consumer
Healthcare players
Sources: A.T. Kearney estimates
12
Scientific Research Patented
New Science Customer
needs
Product innovation Customization
Targeting New solutions to
old problems
Distributions/ Logistics Mass market and specialist
Specialist
Marketing Consumer demand
Consumers and HCPs
As CPG and Pharma companies continue to converge towards the new battleground, they must navigate how to compete
Consumer Good capabilities
Pharmaceutical company capabilities
Low High
Consumer Goods
Pharma
Regulations/ Compliance Demonstrated
benefit Claims
compliance
Sales Shelf space maximizing
Professional recommendation
Flexible Manufacturing Low Cost Secure
Source: A.T. Kearney estimates
Relative organizational capabilities
13
We have identified four potential go-to-market strategies for companies looking to own this space
Product
Niche
market
Mass
market
Disease Aspiration At risk
Market /
Population
Category and Channel Champions
Discovery Driven
Disruptors
Mass Market Maximizers
Scientific Leadership
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What are winning Go-to-Market strategies for different players?
Product
Niche
market
Mass
market
Disease Aspiration At risk
CPG Winning Strategy
Mass Market Maximizer
• New products to the mass market
– Brand led consumer marketing
– Mass market distribution
– Line extensions, offers
– Increased clinical results
Market /
Population
15
What are winning Go-to-Market strategies for different players?
Product
Niche
market
Mass
market
Disease Aspiration At risk
CPG Winning Strategy
Category and Channel Champions
• Owning the customer need
– Segmented products and needs
– Professional endorsement
– Build relationships with specialists
Market /
Population
16
What are winning Go-to-Market strategies for different players?
Product
Niche
market
Mass
market
Disease Aspiration At risk
Pharma Winning Strategy
Discovery-Driven Disruptors
• Consumer solution to medical problems
– Growing disease-market
– Rx-to-OTC switches
– Extend brands that “own” the disease
– Lobby for “Behind the Counter”
Market /
Population
17
What are winning Go-to-Market strategies for different players?
Product
Niche
market
Mass
market
Disease Aspiration At risk
Pharma Winning Strategy
Scientific Specialists
• Non-reimbursed medical products
– Professional recommendation
– Scientific proof and patents… especially targeting slowing disease
– Increase RPh scope of responsibility
Market /
Population
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Discussion Topics
1) The Consumer Healthcare Market
2) The Battle for Consumer Healthcare
3) Convergence of Food and Medicine
4) Preparing to Win
19
Nutraceuticals is one example of an emerging category that is being defined by the battleground in Consumer Healthcare
Replace a Traditional Rx
Therapy
Complement a Traditional Rx
Therapy
Fill Whitespace where there is no
Traditional Rx Therapy
Nutraceutical Spectrum
• Products can support the treatment of the condition or enhance the effects of traditional Rx therapy
• Product can provide new mechanisms of delivery or address issues traditional Rx therapies do not currently address
• Products can be used in place of traditional Rx products
20
There are products already emerging globally, each experiencing varying degrees of success
Lessons Learned from Convergence
Company Condition Treated
Early Lessons Learned
Primus Pharma-ceuticals
Osteoarthritis
• Focused marketing on medical benefits to gain recognition
• Demonstrated lower treatment costs to gain reimbursement
• Unable to widely reach physicians and grow awareness
Nutricia (Danone)
Early Alzheimer’s Symptoms
• Struggling with regulatory positioning
• Evidence not yet strong enough to gain experts‟ support; Alzheimer‟s Society says it is costly and may have no long-term benefits
Targeted Medical Pharma
Fatigue & sleep
disorders
• Leverages the success of Sentra (AM/PM) brand to push additional OTC products with less medical claims
Abbott Laboratories
Several, including:
muscle and bone
deterioration
• Rebranded itself as a nutritional supplement
• Shifted focus from prescription medical food to an OTC product targeted at a broader audience
1. Note: Of the products listed, Ensure is the only one with presence in Canada at the present time
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Strategic investments and non-traditional partnerships are driving innovation and changing the game
Nestlé has invested over $500M to create a standalone health
science business to help prevent and treat various medical
conditions such as heart disease and diabetes
Danone acquired Nutricia staking out a position as the leader in
healthcare nutrition products for elderly and pediatric care
Non-Traditional Partnerships
Strategic Investments
Sanofi recently partnered with Coca-Cola to launch a
line of beauty drinks in France called Beautific
Oenobiol
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Discussion Topics
1) The Consumer Healthcare Market
2) The Battle for Consumer Healthcare
3) Convergence of Food and Medicine
4) Preparing to Win
23
To compete in this battleground, companies need to be
proactive in 3 key areas
Regulation Collaboration Market Approach
Shape Regulatory
Environment
Identify Collaboration Opportunities across
CPG and Pharma
Create the
Market
Key Focus Areas
24
With regulation in a state of constant change, it is imperative to proactively shape regulations
Regulation Still Developing
Increasingly Stringent Approval Processes
Growing Safety Concerns
Regulation Issues and Mitigation
1. Source: Bourne Partners Nutraceuticals Report 2013
The industry is still developing and it is crucial for product developers take an active role in influencing regulation
Approach all approvals with substantial scientific backing and track safety data before and after approvals to minimize regulatory roadblocks
Concerns with counterfeits and false medical claims enables those with true scientific backing to leverage their data to capture market share and/or justify premium pricing
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Collaboration can unlock unique strategic advantages
Collaboration Across Industries
CPG / Pharma
Retailer
New Product Development
Supply / Manufacturing
Planning
Distribution
Merchandizing / Store Operations
• Leverage joint insights and resources to drive breakthrough
innovation
How could we jointly …
• Optimize the assets across distribution network to reduce total
delivered cost
• Pool resources and share best practices in procurement and
production planning to reduce total product cost
• Use collaborative in-store execution to drive improvement in
merchandizing programs/new launches
• Use Collaborative Business Planning (CBP) to link strategy with
execution across organizations
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Consumers and providers lack the necessary understanding of newer products
Companies need to find ways to educate and create demand
CP
G
Ph
arm
a
Consumer-centric marketing to raise awareness and
adoption
Education of doctors on product benefits, when to prescribe, and
how to influence patients
27
1. Does your team have the right capabilities to play in an
increasingly complex and regulated market?
2. Does your company have the right product portfolio to
address evolving consumer needs and win in this new
market?
3. Does your organization have the right go-to-market
strategy and operating model to lead the development of
the Consumer Healthcare market?
Questions for discussion
28
Articles
Science Versus the Marketers in Consumer Healthcare
Mobilizing for Action in Consumer Healthcare
www.atkearney.com