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Private label products make mark in O-T-Cs.

NEW YORK - Retailers wondering about the growth potential of private label over-the-counter drugs need look no farther than their ibuprofen products.

Store brand products now account for over 50% of ibuprofen sales, according to the latest Nielsen data cited by George Chin, vice president of sales at Pharmaceutical Formulations Inc. Aggressive and sustained merchandising support by retailers has built the equity of store brand ibuprofen and has dramatically increased the market share of private label in the entire analgesics category as well as in cough/cold and laxatives.

The chain drug industry has done better than other trade classes in marketing O-T-Cs precisely because of its continual support, he says. Drug chains have successfully leveraged their health care positioning to deliver the message of private label quality and efficacy, says Chin, whose company manufactures and markets store brand O-T-Cs.

When it comes to new nonprescription drug launches, consumer education is key, he says. Thus when the exclusivity period for Aleve - which is being comarketed by Bayer Corp. and Roche Consumer Health - expires in January retailers offering store brand versions of the naproxen sodium product should stress the bioequivalence, he says. All the marketing power that Procter & Gamble Co. put behind Aleve before selling it to Roche will only help private label versions. Now it's up to retailers to get the consumer to associate private label naproxen sodium with Aleve the way they associate ibuprofen with Advil, says Chin.

"Every store brand manufacturer wants the national advertising of the brand because it educates the consumer on the need for the product," he says. "And even if Aleve is promoted with a $1 coupon, store brand versions will still be a better value."

Aleve exemplifies the potential of private label competition for drugs switched from prescription to O-T-C status, says Chin. Smoking cessation products offer another example, as does the antacids category, he says, noting that Pharmaceutical Formulations has submitted an abbreviated new drug application for cimetadine, a private label version of SmithKline Beecham PLC's Tagamet.

He even advises drug chains to comarket store brand O-T-Cs with prescriptions. They can use databases of doctors and patients to send out promotional fliers, he says, or mail coupons for private label products along with refill reminders. And the products can be marketed as nonprescription adjuncts to the prescription, based on the patient's condition.

For their part store brand suppliers will continue to deliver tools and services to enhance and grow private label equity. Comarketing with other store brand suppliers is one strategy for that Pharmaceutical Formulations uses to create excitement, Chin notes.

Chin says store brands have gained share in the cough/cold and sinus/allergy categories because of an oversaturation of branded SKUs. Private label manufacturers have responded to consumer confusion with user-friendly packaging that clearly defines the symptoms that products relieve.

Chain drug retailers should continue to merchandise store brand O-T-Cs aggressively, taking advantage of seasonality and stressing that value means quality as well as price, he says. Shell talkers and trial sizes are integral to strategic planning that will increase private label equity at the expense of brands. "Brands bring consumers to the store, but the profitability is in store brands," he says, adding that chains should preempt "buy one get one free" brand promotions by running similar private label programs immediately beforehand.

With continual pressures for lower costs, store brand O-T-Cs can play a major role in health care, says Chin. "And drug chains don't have to give products away, which some retailers are doing," he says. "Store brands should be priced 30% to 35% less than the national brands. If you go lower than that you raise credibility questions." And even at those prices private label products offer gross margins that Chin says are, conservatively, 65% to 70%.

From the perspective of Perrigo Co. vice president of marketing Jeffrey Needham, the list of O-T-C categories open to increased store brand penetration is all-inclusive. "Almost all the segments represent tremendous opportunity for share growth," he says. "Whatever the ceiling is, it's a lot higher than what we have today. We're not close to hitting it."

While supermarkets and discounters are making advances in private label O-T-Cs, Needham stresses that drug chains still have a trump card - namely an accessible pharmacist who can recommend store brands. Perennially ranked as the most trusted professionals in America, and more closely associated with drug stores than food and discount outlets, pharmacists offer drug chains a built-in advantage when it comes to marketing house brands, says Needham.
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Title Annotation:Private Label Report; over-the-counter drugs
Publication:Chain Drug Review
Article Type:Industry Overview
Date:Nov 18, 1996
Words:752
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