Jefferies survey highlights OTC private label strength

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Jefferies survey highlights OTC private label strength

By David Salazar - 03/26/2020

Equity research firm Jefferies has taken a look at shopper behavior around OTC products in light of the COVID-19 pandemic. The company’s survey of more than 1,200 shoppers found that a sizeable amount of shoppers — many of whom said they or a household member were experiencing flu-like symptoms — turned first to the OTC aisle. It also found a good amount of loyalty for private label. 

Roughly 45% of survey respondents said they bought OTC products in response to or in anticipation of COVID-19 and a quarter of them said that they or someone in their house was exhibiting cough-cold and flu-like symptoms. The report notes that besides COVID-19, the Centers for Disease Control and Prevention has reported a late-season surge in influenza-like illnesses. 

Perhaps unsurprisingly, 77% of respondents sought OTC products at grocers, drug stores and mass retailers, with 38% buying pain remedies and 32% purchasing allergy products. The category also held strong in brick-and-mortar, with 88% saying that they buy less than half of their OTC products online. Jefferies analysts noted that this may change with the uptick in COVID-19 cases, particularly as retailers like Amazon prioritize essentials, but it is an open question as to whether this behavior will keep up past the pandemic. 

When asked which they choose when buying OTC products, 49% of respondents said that they chose private label or store brand products. Thirty-eight percent said they chose national brands and 13% said both were among their choices. Further, roughly 91% signaled that more than half of their OTC purchases are private-label products — up from 81% three years ago. In particular, the survey found millennial and Gen Z shoppers to be more open to shopping for national brands and private-label products — two times more open than older age groups. 

Private label preference was found not to be affected by household income, with Jefferies noting that the data from respondents with household income of more than $100,000 looking almost the same as that from a group with income of $50,000 or less. “This suggests to us that, while cost is an important attribute, affordability is second to perceived value,” the survey analysis says. 

The analysis, using survey data as well as Nielsen figures, pegs its penetration at roughly 22.5%, holding steady from the prior-year period. However, among individual segments, the analysis noted penetration of 37% in GI, 29% in pain relief and 27% in cough-cold. 

When looking at the OTC category overall, among the pain relief, upper respiratory and GI discomfort segments, Jefferies noted that year-over-year growth performance has seen a tenfold increase in velocity for all three categories for the week ended March 7, when compared with the more normalized date for the weeks ended Jan. 4-Feb. 15.