Spotlight on OTC Treatments

The United States is the largest global market for over-the-counter (OTC) medications, with sales expected to reach $33 billion by 2016, reports global market researcher Mintel in its July “Category Insight: Pain Relief, Decongestive, Cough, Cold, Flu & Allergy Relief” report. Vitamins and minerals drive OTC medication sales in the United States, with a 42 percent market share (in dollars) in 2011. Cold, cough and flu products represent the next largest subcategory, with a 19 percent share, followed by analgesics, with a 16 percent share.

To see what retailers are doing well and not so well to promote their store brand OTC products, we visited a Sam’s Club store (operated by Bentonville, Ark.-based Walmart Stores Inc.), a Costco store (operated by Issaquah, Wash.-based Costco Wholesale Corp.), and a Walmart store (operated by Bentonville, Ark.-based Walmart Stores Inc.). Our visits took place on a Friday afternoon in early October.

Sam’s Club

General observations: At the Sam’s Club store we visited, the entire OTC section is located in front of the pharmacy on the left-hand side of the front of the store (looking into the store from the front entrance). The headache/pain/fever tablets and allergy medicines, including nasal sprays, are located on one side of one aisle. The vitamins are located two aisles down and take up one side of the aisle. And the heartburn medication, laxatives and probiotics are located in the next aisle down and take up only half of one side of the aisle.

All of the retailer’s own-brand OTC products are sold under the Simply Right name. During our visit, we counted 12 SKUs of store brand pain/fever/headache medicines, nine SKUs of store brand allergy-relief products, 38 SKUs of store brand vitamins/supplements/probiotics, six SKUs of store brand antacids, and two SKUs of store brand cough and cold products. We did not see any store brand sleep aids. Foot traffic was light during our visit, with only a few customers entering the aisles while we were browsing.

The upside:

• ■ The section was clean, well-stocked and organized.
• ■ In one section of the vitamins and supplements aisle, the retailer limited national brands to one, leaving two national brand SKUs and 12 SKUs of Simply Right products on the shelf, resulting in a brand-blocking effect for the store brand.
• ■ We found two shipper displays, one directly in front of the OTC aisles and one in front of the checkout aisles, that housed store brand OTC products. One shipper display showcased three national brands and the store brand version of Zyrtec. The other display promoted the store brand versions of Extra Strength Tylenol, Advil and Prilosec RX.

The downside:

• ■ We noticed that the Sam’s Club store put a blue “Special Buy” sign next to its display of Prilosec OTC but did not draw attention to the store brand version of this product, which was $6.31 cheaper.
• ■ All of the end-aisle shipper displays housed national brand products.

Costco

General observations: The OTC products are located in multiple aisles at the back right-hand side of the Costco store in front of the pharmacy (looking into the store from the front entrance). All of the retailer’s OTC products are sold under the Kirkland Signature store brand name.

During our visit, we counted eight SKUs of store brand pain/fever/headache medicines, six SKUs of store brand allergy relief products, 19 SKUs of store brand cough and cold products, one SKU of store brand sleep aids and five SKUs of store brand fiber/laxative products. We did not see any store brand probiotics.

Foot traffic was moderate to heavy, with many customers entering the aisles we were browsing.

The upside:

• ■ The section was well-stocked, clean and organized.
• ■ There was a very large allergy medication shipper display prominently placed in front of the OTC section. Half of the products on it were store brand products. Above the store brand products were signs advertising additional significant instant savings as an added incentive to buy the store brand products.
• ■ The Costco store we visited used end-cap/shipper displays effectively to promote store brand products. Each display had at least one store brand product, and in most cases both products were store brand items.

The downside:

• ■ The retailer was advertising a $4 off instant savings coupon for the 400-count Nature Made Fish Oil. However, it did not draw attention to the fact that the Kirkland Signature 400-count Fish Oil was still the better value at its regular price.

Walmart

General observations: The OTC products at the Walmart store we visited are located in two aisles three-quarters of the way to the back of the store (looking into the store from the front entrance). The pharmacy is located to the left of the OTC section.

All of the retailer’s own-brand OTC products — except for its vitamins — are sold under the Equate brand. Its vitamins are sold under the Spring Valley brand.

Walmart offers the most variety of store brand OTC products by far. We found that almost every national brand SKU has a store brand equivalent. During our visit, we counted 23 SKUs of store brand pain/fever/headache medicines, 19 SKUs of store brand allergy-relief products, 150-plus SKUs of vitamins/supplements/probiotics, 53 SKUs of store brand antacids, 56 SKUs of store brand adult cough and cold products, 30 SKUs of store brand infant and children’s cough/cold/flu/allergy products, seven SKUs of store brand sleep aids, and SKUs of store brand fiber/laxative products.

Foot traffic was moderate to heavy, with many individuals walking through the aisles as we were browsing.

The upside:

• ■ In certain sections, the retailer uses brand blocking to promote the store brand, specifically in the smoking cessation and vitamin sections.
• ■ The Walmart store was the only store we visited that offers infant and children’s cough/cold/flu/allergy medicines.
• ■ In certain sections, the retailer used shelf tags to call attention to the value its store brand products provides compared to the national brand.

The downside:

• ■ For the most part, the OTC section was messy and not well-stocked. We found many out-of-stocks for both national and store brand products. And many items were misplaced on the shelf, likely by consumers.
• ■ We saw four end caps, as well as some shelf-extenders. None of them merchandised store brand products.

Fill a consumer need

While 35 percent of U.S. consumers agree that private label remedies are just as effective as name brands, brand loyalty remains strong; 38 percent of consumers say they would choose products based on a brand name that they recognize, global market research firm Mintel reports. These findings seem to suggest that consumers still want the reassurance that comes from buying a known brand.

One way retailers could combat this reality could be with specific on-package messaging. For example, endorsements from medical associations and prominent doctors on the packaging could help reassure consumers that the product is trustworthy and efficacious, Mintel says.

Additionally, packaging that is convenient and easy to use could attract consumers, Mintel reports. Seventeen percent of consumers say they would choose one product instead of another based on whether the product is easy to take on the go. This on-the-go packaging could be especially important to young consumers, aged 16 to 24. They are the most likely to suffer from cough, cold, flu and allergies but are the least likely to be prepared for it. Retailers could target this demographic with on-the-go formats to keep in purses, backpacks or pockets so as to be on hand when needed.

But if consumers are unaware of store brand products, on-pack messaging and a well-thought-out design is pointless. Thus, effective merchandising becomes vitally important.

When it comes to merchandising store brand OTC products, retailers might want to focus more on secondary displays, says Laureen Schroeder, director of health, beauty & baby for Daymon Worldwide, Stamford, Conn. End caps, dump bins, displays, four-ways and cross-selling placement with other products drive impulse and stock-up purchases and drive awareness and trial differently from the side-by-side comparison typically found at the shelf.

And retailers could use secondary displays to promote against seasonal needs, states Sean Weeks, vice president, OTC Business, PuraCap Pharmaceutical LLC, South Plainfield, N.J. For example, during cold and flu season (October through March), retailers could use “pretty darn quick” displays, side wings, power wings and other displays to help lift the category and drive awareness of store brand products.

“Endorsements from medical associations and prominent doctors on the packaging could help reassure consumers that the product is trustworthy and efficacious.”
— Mintel