Private Label’s Healthy Potential for BoomersJanuary 3, 2018
Winsight Grocery Business | January 3, 2018 – The health problems of baby boomers may turn out to be benefits for retailers who cater to them with private label products.
While the buying habits of millennials have received a great deal of attention, the other end of the age spectrum has plenty of influence on the market for consumer goods in general. This influence will grow, thanks to sheer numbers: According to census data, the portion of the U.S. population older than 65 will increase from 15% in 2015 to 24% in 2060 (from 48 million to 98 million, in raw numbers).
When it comes to health-related products, the boomer segment is even better represented. According to a survey by the U.S. Bureau of Labor Statistics, consumers older than 50 account for more than half of all over-the-counter(OTC) medicine purchases; 65 and older, for one-third. In addition, 70% of boomers regularly use vitamins and other nutritional supplements, compared with 51% of millennials, according to a study by Accent Health.
These trends are an important aspect of an increasingly significant product segment. Sales of OTCs and natural supplements reached $45.8 billion in 2016, a record and an increase of 4.1% over 2005. OTC medications often are the first choice to treat minor health problems; according to the Consumer Healthcare Products Association, when beset by minor injuries and ailments, 81% of consumers overall will self-treat with OTCs as the first option, while only 27% will go to the doctor immediately. The CHPA claims OTCs save consumers $102 billion a year over more expensive options.
For health products that treat problems suffered disproportionately by older consumers, growth rates are even more pronounced. Sales of incontinence- related products rose from $1.4 billion through most of 2014 to $1.8 billion through most of 2017, according to Nielsen. During the same period, sales of medicine for urinary pain relief rose from $49.3 million to $74.7 million.
National brands are still on top in heath care. In a sales analysis of healthcare products with special appeal to older consumers, compiled for Winsight Grocery Business by Nielsen, sales in almost all categories are dominated by national brands.
The Cost of Hype
Marketing private label healthcare products to older consumers presents a unique set of challenges. Many of them are looking to control spending, especially health-related. In healthcare even more than in other products, private brands afford them the opportunity to do so. Nielsen estimates that, for the top 20 national brands of healthcare products, conventional media advertising accounts for 22% of the cost. Savvy consumers are well aware of this fact. A 2014 research paper from the National Bureau of Economic Research was titled “Do Pharmacists Buy Bayer?” The answer was overwhelmingly “no”: Mindful that Bayer cost more than twice as much as store brand aspirin, pharmacists bought Bayer and other national-brand headache remedies only 9% of the time, compared with 26% for consumers in general.
But a countervailing pressure is that boomers generally tend to be more brand-loyal than younger consumers, having grown up in a world where national brands were often the best or only option. That is especially true in healthcare products, where the stakes are higher, says Dianne Galang, director of client services for health, beauty and baby for Daymon Worldwide, a consultancy that specializes in private label.
“Certainly, brand loyalty is greater in these categories,” Galang says. “Baby boomers are more brand loyal across the board. If a product works, why switch?”
One aspect that might lead them to switch is how private label products compete with national brands in healthcare. In virtually every other product segment, private brands have achieved success by forging a separate identity with unique products. But when it comes to healthcare, private brands very often are copycats. They use packaging that mimics the national brand in color and shape; often their labeling will include explicit “Compare to…” claims that name the brand they compete with. Retailers often heighten this effect by merchandising their OTC medicines side by side with competing national brands.
There are a couple of reasons for this strategy. One is that drug formulations are tightly controlled by the FDA. For private label, that means following the formula of the national brands often is not a strategy; it’s compulsory.
“It’s the same as generic prescription drugs, really,” says Jim Wisner, president of the Wisner Marketing Group.“They are all defined by the FDA, and they all have to meet exactly the same standards. The drug has to perform in exactly the same way [as a national brand], and be constructed the same way and everything else—that’s by law.”
These rules are intended to help consumers by removing the necessity for them to compare active ingredients with which they may not be familiar. “The reason for doing compare-to statements is to help consumers understand exactly what it is they’re buying,” Wisner says. “They may understand what Advil is, but they may not understand the term ibuprofen.”
Alex Arango, brand manager for Topco, a leading retailer-owned distributor of private label products, says this regulatory situation helps appeal to consumers. “‘Compare to’ claims are very specific in OTC, plus shoppers are smart; they know their over-the-counter remedies are regulated by the FDA, so they approach own-brand OTC products with greater confidence,” Arango says. “For example, shoppers know that our TopCare ibuprofen has the same active ingredient as the national brand ibuprofen.”
Topco generally follows a three-tier segmentation strategy for its products: value, national brand equivalent and premium. It uses this segmentation for its health-related items, as well as other nonfood segments such as beauty/cosmetics, pet food and baby care.
“Our HBC [health, beauty and cosmetics], baby and pet programs are largely national brand equivalent, but we do have a curated offering of items for the premium and value tiers,” says Tony Harrington, Topco’s category director for HBC program management.
Store Brand Loyalty
Having private label products mimic the national brands they compete with may be a matter of necessity, but it also helps them appeal to intensely brand-loyal consumers—a category that describes many baby boomers. In addition, more savvy consumers realize that private label OTC medicines are bound by the same requirements as the national brands, and therefore must be of the same quality.
“The consumer over time begins to understand that literally, the drug is the same, because by law it has to be,” Wisner says. “So the kind of concerns about is this product going to perform as well or not as well, are somewhat less in OTC medications than it is for food products.”
On the other hand, there are ways for private label OTC products to carve out their own identities. Basically, that can be done by following the same strategy used by leading private label food brands: Concentrate on the product’s attributes and benefits, with an emphasis on uniqueness.
“Rather than do the ‘Compare to,’ they can establish claims and communications to baby boomers based on the relevance of the product set,” says Karen Strauss, principal at Cadent Consulting Group.“If it’s an allergy product, it’s a way to say how this brand is a brand unto itself: ‘I want to talk about the allergy benefits and relief that this product can deliver, instead of Compare to,’” Strauss says.
One such product, cited by Galang, is CVS’s single-serve K-cups of acetaminophen. Although they have a “Compare to” line for Vicks DayQuil and NyQuil, they are “brewed” in a K-cup coffee machine for a hot liquid treatment for colds or flu. “Others are leading the way by removing additives, which allows them to claim sugar-free, gluten free, dye-free, etc.” Galang says, citing as an example the Day-Clear line of allergy relief products from GM Pharmaceuticals.
Pharmacists as Salespeople
One of the most important ways for grocery stores to establish private label OTC products is to have an in-store pharmacy. “I think having a pharmacy in-store has become almost an expectation of shoppers today,” Strauss says.
Pharmacies not only give stores more credibility with regard to private label OTC products, but they also provide an important sales conduit: the pharmacist. “Pharmacists play a key role in the decision-making process for consumers with OTC products,” Galang says. “They have the ability to influence with authority and help consumers shift from a branded item to the same FDA-regulated store brand product.”
However, she goes on to say, “Consumers today are more educated about OTC products, and it is not imperative to have a pharmacy in the store in order to carry a line of private branded items.” She gives the example of Dollar General, which has a successful private label OTC line without any in-store pharmacies.
Retailers and private label manufacturers should also pay attention to certain basics in selling to older consumers.“Retailers should also be moving toward relevant packaging, such as easy-to-open caps, and clear messaging on shelf to allow the consumer to make smart purchasing decisions,” Galang says. “It is also important to note that caretakers are also potentially the ones purchasing on behalf of the baby-boomer generation. Messaging on certain products, like incontinence, should appeal to the idea of taking care of your loved ones in order to reassure that they are buying quality products for the ones they are caring for.”