O-T-C Health Care Shaped by Shift Toward Naturals.
For this segment, the panel was joined by five leaders of companies that sell natural products that may have a personal care component to them, but that exist to largely help consumers manage or cope with something they need "medicine" for.
In this roundtable, a number of themes are consistent with the previous one. There are a number of important contrasts between these products that are fundamentally aimed at health vs. the products in the previous section whose primary role is in beauty or wellness.
The participants were:
* Kimberly Weld, vice president at PharmaCare.
* John Matise, CEO of Eclair Naturals.
* Kate Solomon, founder and CEO of Babo Botanicals.
* Jonathan Groves, president of Lanes Brands.
* Amy Gordinier-Regan, CEO of Skinfix.
Q: As the naturals market matures, are consumers changing their expectations from a natural product? If so, how? If not, what are those expectations?
GROVES: Consumers are continuing to learn more about natural options. Many are moving from natural products experimenters to adopting a natural way of life. We are seeing new generations of natural consumers raised to seek out natural products. For younger consumers, natural is already a way of life.
GORDINIER-REGAN: Yes, natural is the new normal, meaning that brands coming to market in 2017 and beyond should be natural. However, they also need to be more than just natural. Natural brands can no longer survive by being "full of" natural ingredients and/or "free from" harmful synthetics. Natural brands need to be both "full of" and "free-from," yet also stand for something beyond both designations.
MATISE: And the list of "free from" ingredients continues to grow. In addition to demanding paraben free, sulphate free, phthalate free, and synthetic fragrance free products, there is a new trend toward vegan products--even if the consumer does not adhere to a vegan/vegetarian diet. We do many private label programs at Eclair Naturals. I have been pleasantly surprised to see the retailer specifications becoming much tighter on natural products and their growing list of "free from" ingredients. Retailers and buyers are becoming very knowledgeable of natural trends.
SOLOMON: New mothers are constantly seeking pure product for their newborn and children. When a woman becomes pregnant, those maternal instincts kick in immediately. With so much education now available on ingredients, mother's are doing far more research than ever before.
GORDINIER-REGAN: This gets to a key question--what is a brand's positioning? Being natural is now an expectation--but no longer necessarily a point of difference for a brand. Consumers increasingly want natural choices in all categories of beauty (i.e., sensitive skin and problem-solution).
WELD: I think consumers expect natural products to be both more affordable and more available. Cone are the days of taking a special trip to purchase complementary items.
MATISE: Consumers are also demanding performance from natural products more than ever before. They are requiring natural products that perform to the same levels as their traditional products. They are willing to pay a little more (10%-20%) for a natural version of a product, but only if the product performs.
Q: What is the biggest change you've seen in the last 12 months as far as natural products being sold in-store?
MATISE: The biggest debate that I see in stores is where to merchandise natural products. Do you create a natural "island" in the store, do you merchandise them in line with your traditional brands or do you create an adjacent in line section dedicated to naturals within your traditional set? My advice to retailers depends on their overall chain marketing and strategy. If you want to make a statement that your chain carries natural products, the natural island is best. If you do not need/want to make a statement on natural products, then you should merchandise them in the same area as traditional products--either as an adjacent in line section or fully integrated with the traditional brands. Long term, as natural options become mainstream, the products will be integrated into the traditional set as simply an additional option for any consumer to consider.
SOLOMON: Conventional grocery, specialty and mass outlets are carving out much larger retail spaces for natural products. It has become a strategic push across the board.
GORDINIER-REGAN: In the last 12 months, the quantity of natural beauty products in the North American market has exploded. Natural ingredient technology has evolved dramatically--and consumers believe that naturals can be luxurious and effective. "Prestige skin care brands ... that promote wellness or natural ingredients have grown +13% in the 12 months ending July 2017, outpacing the overall market, which grew +5%" (source NPD Beauty Insider).
Q: Brick-and-mortar retail is going through what is perceived to be a difficult time--what should those retailers be looking for naturals to do for them?
SOLOMON: The natural customer wants to be educated. They are very savvy when it comes to ingredients. The more education a store (or brand) can offer, the better.
MATISE: I think traditional retailers should view natural products as a differentiator for them. While more and more people are willing to buy products online that they would only buy previously in stores, traditional retailers can still differentiate themselves with merchandising new and innovative products. I am more likely to try a new and innovative product that I can physically see, touch and inspect the quality of than one on an etailer site. This is particularly true of natural products, where there are wide variances in quality levels between manufacturers.
GORDINIER-REGAN: In skin care, natural brands should be an engine of growth. A recent Harris Poll survey stated that 73% of Millennials plan to purchase natural beauty products. Naturals often drive more revenue online than conventional brands as they appeal to Millennial and Z consumers who are native e-commerce shoppers. Also brand pages on .corns can help tell a new brand's story in a way that product on shelf cannot do without merchandising real estate. Retailers can partner with brands to develop comprehensive brand pages and robust online promotional calendars--to leverage a natural brand's valuable Millennial/Y appeal to drive online sales. Many retailers are able to build strong sales of new, natural brands first online before migrating them to store to fully exploit their greater potential.
Q: How can retailers help naturals gain therapeutic credibility?
WELD: By educating themselves, taking the time to learn about the products, and designing the assortment accordingly. Everyone is crunched for time, and needs to make their numbers, and sometimes that means discussions are more about margins and profit than about formulas and quality.
GORDINIER-REGAN: But I would argue that it's incumbent upon the brands, first and foremost, to establish therapeutic credibility via proven clinical efficacy. Retailers can support truly efficacious naturals by giving them the space at retail to tell their story and illustrate their efficacy via merchandising.
MATISE: I think the best way for naturals to gain therapeutic credibility is to highlight some of the key ingredients used in products. There are some truly amazing natural ingredients that have wonderful healing and therapeutic properties. Educating consumers about these ingredients will definitely help. One interesting concept I have considered before would be a helpful ingredient monthly end cap featuring a particular ingredient and highlighting products that contain that particular ingredient.
WELD: Sambucol, for example, has a very unique story, an abundance of scientific backing, and the quality that comes from a European pharmaceutical plant. We also contract with farmers in Austria for the elderberry crop each year. Understanding that story, the vertical integration, commitment to quality, and eye toward regulatory compliance gives retailers confidence in our brand and in what they are selecting for their customers.
SOLOMON: I believe retailers are actually quite in tune with today's trends. When I started my brand 10 years ago, most retailers were not open to natural. I would often hear, "My customer isn't looking for natural."
WELD: Retailers also need to give brands access to their in-store specialists/pharmacists to adequately train them re the brand/products. These experts are highly influential in establishing product credibility and stimulating purchase. Additionally, offering cost-effective ways for companies like ours to share data with the in-store pharmacists.
Q: How do you think the Amazon acquisition of Whole Foods is going to disrupt the naturals ecosystem?
GORDINIER-REGAN: I suspect, as many have conjectured, that Amazon will make naturals more accessible (both in terms of availability and price). This evolution further underscores the point that natural is the new normal --and brands will need to have a strong point of difference to break through.
SOLOMON: I think it will accelerate the trend further. Natural is becoming accessible to all--and there is probably great overlap between the amazon and Whole Foods customer.
MATISE: Long term I believe this is good for both Amazon and Whole Foods. Unfortunately, in the short term there will be many local and regional brands and companies that are displaced with the new direction. One of the strengths and weaknesses of Whole Foods was there decentralized business model and the ability for stores to make individual decisions about products and to bring in local vendors. Under Amazon's control and the need to be more cost competitive with traditional retailers that have a growing presence with natural products, this decentralized business model was no longer feasible.
Q: How significant is Amazon to your business (either as a distribution outlet or as a competitor to your core retailers or both)?
MATISE: Amazon is a growing segment of our business and cannot be ignored. Their acquisition of Whole Foods will strongly position them as a leading retailer of natural products.
SOLOMON: We treat all our retailers and business partners with significant importance. We are very careful where we distribute babo and hold each account with tremendous significance.
GORDINIER-REGAN: We are in the process of launching with Amazon. We expect Amazon to be an extremely significant retail partner both in terms of generating awareness and revenue.
Q: There are so many brands out there with a "natural" proposition attached to them ... How does your brand most effectively cut through the clutter and connect?
SOLOMON: I launched babo botanicals in 2010. It was one of the very few clean brands. We have built a trust with moms through this journey. Babo products solve skin concerns and are very solution based. I take the best of mass and make them more natural. I develop products for my three children, and as they grow up, the products are growing up (my son is 10 and now needs a natural deodorant!).
GROVES: I think being authentic is very important. Our Jakemans Throat & Chest brand has been around for 110 years. It was natural from the beginning, so the brand's heritage is authentic. It wasn't created to fill a market gap. We've always wanted to make products that are effective even when compared to non-natural, chemical-based options.
MATISE: It is a challenge in the market place with many products claiming to be natural with no consistent definition of natural. What is natural to someone else may not be natural to me. Our brand differentiates itself in two ways. First, we have a very strict brand promise that every one of our products adheres to. Second, we have our NeverAny seal which clearly defines our "free from" ingredients list.
GORDINIER-REGAN: Skinfix is a clinically proven, dermatologist-recommended skin care brand. The fact that our products are natural is the icing on the cake. Skinfix has created a new category of skin care as the first natural brand that dermatologists believe in.
WELD: We have found the mainstream consumer is looking for products that are effective, safe, affordable and natural, with effective being the most important. The fact that it is natural is often an added benefit.
Q: How do you see natural therapeutics tying out to a retailer's broader initiatives around health and wellness?
GORDINIER-REGAN: Natural therapeutics are critical to a retailer's broader strategy around health and wellness. Our dermatologists tell us that their patient population increasingly requests natural solutions to their skin concerns. Many consumers don't want to use steroids or antibiotics, and want alternative, but effective treatments.
Q: Which retailers are cracking the code and really getting naturals right?
MATISE: I think successful retailers are understanding that providing consumers with natural product alternatives is a wise choice as part of their planograms--it is good for their consumers, on trend, and a growing category. These retailers also understand that it is a short-term investment that will yield long-term dividends once the consumer is captured.
WELD: The retailers that have integrated natural products into their traditional sets, allowing the customer to shop a full selection of options for whatever ailment they are experiencing. We have found it to be an unreasonable ask for the general consumer to look in two places to compare products; most customers want to have the option to review everything together. Best rule of thumb--natural items are often a complement to allopathic products; not an alternative.
GROVES: Many retailers still seem to struggle with how to merchandise natural products. Natural alternatives in all categories have come a long way in terms of taste/texture, shelf life and branding. I believe many natural brands have earned the right to shelf space alongside non-natural products.
GORDINIER-REGAN: The retailers that are growing their .com businesses and exploiting the potential of naturals on line.
SOLOMON: The most stringent retailer I know is PCC in Seattle. They study every ingredient.
Q: What should the retailers that aren't doing it right do better?
MATISE: The biggest challenge retailers face is trying to plan for a trend and recognize it is an up-front investment. Their consumers are looking for an assortment, and having a natural set of options will capture additional consumers as well as catch consumers that are in transition.
GROVES: Take a chance on upstart brands. Set aside the category data and find new and upcoming natural brands that consumers are looking for. Nearly eighty percent of natural products consumers shop conventional retail channels. There are a lot of consumers who are new to natural as well. They're looking for options to get into a natural lifestyle while still shopping their favorite retailers. Follow some of the hundreds of popular bloggers on social media and see what's trending. Consider picking some of your top center store SKUs and find natural or better-for-you options.
GORDINIER-REGAN: Recognize that natural is the future and will help drive incremental revenue and attract a Millennial/Gen Z consumer demographic. Perhaps the best place to build naturals in the short term is via e-commerce --and eventually in-store when the brands have greater awareness and can meet the high turns expectations on shelf.
SOLOMON: I'm sure each retailer will define what natural means to them. This will be key as they evaluate brands.
WELD: Stop putting every natural item in the vitamin aisle!
* Even more focus on formulation and the role that retailers can/should play in enforcing standards within the category.
* A bit more of a debate around the role of a "dedicated section" vs. mainstreaming these brands into the standard category set. For therapeutics, even if in the category set it seems like these products still benefit from some sort of merchandising program that helps bring critical mass to these solutions to avoid them getting lost in broader categories with tons of different SKUs/solutions.
* The role of eCommerce here in educating consumers was called out much more specifically--either more effectively linking to the brand website or the retailers using their own .com properties to drive engagement and understanding. There's a question that could have been asked (next year!) around how a more mobile-engaged shopper can be reached in-store via apps or the mobile web for better at the shelf education in-store.
* A healthy back and forth on how therapeutic credibility is best established--yes, the retailers can and should do more, but in this category it's really incumbent on the brands themselves to manage their own credibility narrative as well.
* Amazon in general seemed to be viewed by these businesses as less of a direct opportunity than in the beauty/personal care roundtable.
* As was to be expected, but still an interesting observation--the key thing about these natural brands isn't that they're natural, but that they work. Natural is a differentiator after that but (obviously) no substitute for clinical effectiveness.
* Credibility for these brands seems rooted in two distinct places--many of these brands have a long heritage (some over 100 years!) of treating conditions and derive their credibility from consistent authenticity. Some rely heavily on the medical community to convey clinical expertise and effectiveness.
* There were fewer specific examples of retailers doing this right, and more discussion of the attributes of successful retailers.
* Some commentary at the end on the changing regulatory environment in these categories and how that may impact the development of natural therapeutic products in the future.
Caption: Kimberly Weld, PharmaCare
Caption: John Matise, Eclair Naturals
Caption: Kate Solomon, Babo Botanicals
Caption: Jonathan Groves, Lanes Brands
Caption: Amy Gordinier-Regan, Skinfix
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|Title Annotation:||VIRTUAL ROUNDTABLE|
|Publication:||Chain Drug Review|
|Date:||Oct 23, 2017|
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