TNS Superpanel's latest data shows the £795m market fell 3% in value/volume over 52 w/e 16 September 2001, dragged down by the substantial 13% value/7% volume fall in the summer quarter (12 w/e 16 September). These figures come as no surprise. The lifting of resale price maintenance on OTC medicines in May unleashed a price battle between the multiples, independent retailers and pharmacies that has hit sales values overall while boosting volumes in grocery retail. Tesco and Asda led the way, immediately slashing a number of key brands like Calpol, Rennies and Nurofen by as much as 50%. The purpose of this exercise was to gain volume share ­ from each other and high street pharmacies ­ at the expense of category value growth. The strategy has paid off, for Tesco has seen its volume share rise to 19.1% from 17.3% a year ago, while Asda's has increased to 10.4% from 9% in 2000 (TNS Superpanel). Tesco healthcare project manager Judith Robinson is thrilled by the gain. "We're now market leaders in medicines, something we wouldn't have imagined a year ago. It's also gained us a lot of extra trade." The main casualty appears to be Boots which has seen its share fall to 29.4% value/18.5% volume from 30% value/19.8% volume in 2000, in spite of the 3 for 2 offers it introduced on analgesics following the lifting of RPM. Independent chemists have also lost share, but this is a long term trend, and RPM's abolition hasn't led to the closures that were anticipated. "We thought closures would happen, but so far they haven't," says media and publications manager Fraser Woodward of the Proprietary Association of Great Britain. GlaxoSmithKline healthcare category manager Greg Bertolotti questions the success of the multiples' strategy. "They've gained volume share from pharmacies, but not to the extent they would have liked, and they haven't grown value share. Most of the gains so far have been in pain relief and hayfever remedies because this is where most of the price cutting and promotional activity has been." He expects tactical promotions on seasonal lines to become the norm from now on, the next one being cold and flu remedies for the winter season. However, he believes retailers will be making a big mistake if they introduce discounts and promotions on these products. "We don't recommend it. Research shows consumers buy these products when they're in distress and their buying decision is based purely on efficacy and brand loyalty. Price comes way down the decision tree. The only promotions we would recommend are cross-linked ones with related products such as tissues or Lucozade, which would help grow the category," says Bertolotti. It's unlikely that the multiples will take heed. Buoyed by the success of their initial price cuts, Asda and Tesco have just introduced a second round of reductions, predominantly on winter remedies. Tesco's include up to 50% off 35 key brands. Tesco's Robinson says: "The reductions are permanent and more are planned. We also have a strong promotional campaign." Recent ones include a £3.50 saving on Niquitin CQ, 25% off Nicotinell and £1 off Seven Seas Nutritaste and Multiobionta brands. Robinson says the Pharmaceutical Society's advice was sought before going down the promotions route. "They have a code of ethics for pharmacists covering product promotion which we didn't want to infringe. As a result we've stayed clear of promotions on paracetamol." RPM's abolition has given a boost to Tesco's plans to make medicines an even larger part of its business, says Robinson. The multiple already has the largest number of instore pharmacies ­ 210 ­ with a further 20 planned. "Pharmacies are a strategic part of our healthcare offering. They pull customers in and are the one feature customers always ask for," says Robinson. It's now planning to grab a piece of the complementary medicines market, following its recent 50.1% purchase of Nutri Centre, a herbal remedies mail order group. "Fifty of their products will be in 200 stores by Christmas, and their mail order operation will be available in all our stores. It's a huge opportunity for us to get into this area," says Robinson. Asda's price cuts are also permanent, according to David Miles, head of specialist businesses, and more are planned. "This is the first stage of our investment in lowering prices. But we won't be doing tactical promotions on seasonal lines," says Miles. It, too, plans more instore pharmacies. "They're a strategic development," says Miles. "We have 78 and want 130 in the next two or three years. We're modelling our developments on Wal-Mart which has over 2,500 pharmacies in the US." Not to be outdone by the multiples, smaller retailers like Budgens have gone in for their share of price cutting. Budgens health and beauty buyer David Harland says: "Our policy has been to match price cuts, which we did initially, and now we're embarking on tactical promotions for seasonal cold and flu products, with several lined up for Lemsip and the Vick's range of products." While brands have taken the brunt of RPM's abolition, the value of own label sales have also dropped, but to a lesser extent. Phil Thomson, sales and marketing director of own label supplier Wrafton Laboratories says: "In June to September, own label sales were 7% lower than in the same period last year, but compared to the overall market decline of 11% in value, own label is substantially increasing its value share." One outcome of RPM's abolition could be commercial pressure on some secondary brands owned by the major pharmaceutical companies, he predicts. Even more important, possibly, than RPM is the trend towards self-medication, which is benefiting grocery OTC sales and lies behind the multiples' focus on pharmacy development. Encouragement has come from the government-led initiative to get people to seek help from their pharmacists for minor ailments to take pressure off GPs, and is supported by the increase in products moving from pharmacy (P) listing to general sales listing (GSL) status. Budgen's Harland says: "GSL status is desirable because it makes products much more widely available. They can be offered for sale on open fixtures by self-selection rather than only across the pharmacy counter with a pharmacist present. It considerably increases consumers' awareness of them." In the coming year more products are expected to move from P to GSL status to encourage more self-medication, according to Wallis Laboratory sales and business development director Tim Barnacle. "We know from the Department of Health that up to 20 compounds are being considered, so we expect to see a cascade of products moving from prescription to P status, and from P to GSL status." Galpharm Healthcare, an own label supplier which switched Ibruprofen from P to GSL status five years ago, is one company seeking to move four of its P listed products to GSL. The big growth areas retailers should watch include cough, cold and flu remedies, one of the largest OTC sectors in grocery at £120.7m (Information Resources), its performance fuelled by consumers growing confidence in the selection of remedies, plus the high cost of prescription charges. Brand loyalty is high in this market because consumers seek the reassurance of products they trust. Reckitt Benckiser's Lemsip and GlaxoSmithKline's Beechams and Night Nurse/Day Nurse are the leading brands. Lemsip Max Strength Coflorde is RB's most successful performer, with an 8% value y-o-y rise, driven by the trend to higher strength remedies. GSK says its Beechams Flu-Plus is its strongest performer, up 7% in all outlets and 14% in grocery (Information Resources), while Beechams All in One is showing significant growth as a result of its multi-symptom positioning delivered in a popular syrup format. The brand will benefit from a £5m TV and marketing campaign this winter. One of the most successful newcomers of the last year has been Pfizer Consumer Healthcare's Sudafed Dual Relief which is now the fastest selling decongestant in grocery, where it has over 61% share (ACNielsen). In cough remedies, the leading brand is Pfizer's Benylin which has recently been extended with the launch of Benylin Active Response. Analgesics is the second largest category, with the adult oral pain relief sector worth £120.7m in grocery alone. Value growth is driven by premium products, such as maximum strength, combination and convenience products. Recent developments include GSK's Panadol ActiFast which is claimed to work twice as fast as standard paracetamol tablets and Crookes Healthcare's Nurofen Meltlets, a product that can be taken without water. Crookes says evidence of the growing consumer demand for stronger, faster acting and longer lasting analgesics is the success of its Nurofen Liquid Capsules and Nurofen Plus. It is spending £7m on a TV advertising campaign. Children's analgesics are growing 29% y-o-y in value in grocery, pushing the market to £13m. Pfizer's Calpol is the leading product with over 73% share and 50% y-o-y growth. Sachets are the big sellers in grocery, with sales up 40%, says the company. The Calpol family has recently been extended with Calpol Fast melts ­ paracetamol melt in the mouth' tablets for older children. Stomach and indigestion is worth £43m in grocery, and is growing, fuelled by self-medication and increased consumer confidence in self-selection in the grocery channel. Stressful lifestyles have created a considerable impulse market in stomach and indigestion remedies and the multiples are a key purchasing point. GSK's Zantac 75 is the fastest growing heartburn and indigestion product and is heavily supported by television advertising. With the government's recent switch of nicotine replacement therapy (NRT) products to GSL status, smoking cessation is expected to become a major OTC category in grocery. A recent survey by GSK found that making NRT more widely available through different retail outlets has substantial public support and supermarkets and c-stores came out top. {{FOCUS SPECIALS }}