After three years of reactionary purchasing, consumers have shifted their focus to proactive wellness within the consumer healthcare sector, looking for nutritionals, personal care products, and services that meet their well-being needs while also seeking out brands that can provide an exceptional consumer experience. These evolving consumer preferences, coupled with an industry desire to drive further growth and innovation, are driving a number of trends, challenges, and opportunities in the space. At this year’s Consumer Healthcare Products Association (CHPA) Annual Self-Care Leadership Summit, leaders spoke of the larger macroeconomic trends shaping the consumer healthcare landscape and their influence on the market. A resilient labor market, cooling inflation, and income benefits are all contributing to increased consumer spending, yet higher CPG prices and rising consumer credit in a landscape where wage growth hasn’t kept up also pose significant headwinds.

However, amidst these market dynamics, the consumer healthcare sector is still experiencing robust growth, driven by heightened competition among various retail segments. Below, Sarah Broyd dives deeper into these trends shaping the consumer healthcare landscape and more from this year’s CHPA conference.  

Trends Shaping the Consumer Healthcare Landscape

1. Growth in traditional consumer healthcare has been limited.  

Growth in the consumer healthcare space has been seen mainly through price, but not units. Historically, Rx to over-the-counter (OTC) switches and other innovations have driven this growth, but these switches were low in 2023. The sector is anticipating some bigger switches that may increase this growth again – for example, Narcan late in 2023 and OPill in 2024. 

With growth in the industry overall being lower, a majority of the growth from the data presented can be attributed to the sector’s expansion of traditional consumer healthcare to include vitamins, supplements, and minerals – the fastest-growing categories. This past year, consumer healthcare services saw 23% growth, with mass and convenience retail leading the way. While growth can be partially attributed to the inflationary landscape and this expansion of traditional consumer healthcare services, price, however, remains the key driver. In fact, according to Circana, 90% of growth in the OTC category was due to price increase. 

M&A activity stands as an avenue to fuel investment in the OTC category and drive growth. Take Hero Cosmetics, for example, who emerged in 2017 with their popular acne patches. They were acquired by Church & Dwight in late 2022 and have now seen $116 million in growth – a leader in the OTC category. This demonstrates how smaller disruptive companies are emerging into the marketplace, primed for acquisition, and more established companies can fuel their growth trajectory, further aiding in larger industry growth. larger industry growth.  

For self-care companies to continue to drive growth within the industry, taking price will only drive growth to a certain extent. Whether through M&A or other means, companies must be looking at their product portfolios to drive innovation, which will be a key factor to overall industry growth.   

2. Product innovation (through switches or other ways) will be critical for consumer healthcare to get out of the rut and drive toward faster growth. 

Product innovation stands as a pivotal strategy for the consumer healthcare to avoid stagnation and drive accelerated growth. Merely relying on price increases is no longer enough. To foster innovation, like through OTC products or capitalizing on the burgeoning digital health sector, brands must adapt and embrace disruptive innovation to remain competitive.  

At CHPA, Circana shared that each year there are more than 200 new consumer healthcare brands on average, contributing to more than $1.7 billion in sales over the last three years alone. Consumer preferences are shifting, with 59% of shoppers actively seeking new products during their grocery shopping trips. Retail giants like Target are leveraging their platforms as incubators for these emerging brands, further fueling the innovation cycle. One example of a brand that has found success in this space is Lume, a whole-body, doctor-developed deodorant brand that began DTC and is now sold in many large retailers across the U.S. The pressure from disruptive innovators has forced established brands to adopt a challenger mindset, fostering a culture of constant evolution and adaptation. 

Despite brands’ efforts to cut prices to remain competitive, they find themselves at a tipping point. While branded products continue to outperform private labels, the gap is narrowing, with private labels gaining traction, particularly in brick-and-mortar stores. This further highlights the urgency for brands to prioritize innovation as a means of differentiation and sustained growth in today’s landscape.  

3. Building consumer trust remains critical. 

Establishing and maintaining consumer trust remains paramount for consumer healthcare companies, particularly as a sector that focuses on consumer well-being rather than solely profit generation. However, recent regulatory developments, such as the FDA’s revelation regarding the efficacy of phenylephrine in decongestants like Sudafed, challenge that notion, forcing consumers to perhaps question who/what information to trust.   

While significant effort has gone into updating the monograph, the FDA has prioritized efforts and resources on COVID-19 in recent years, which may contribute to a lack of evolving regulations and relationships with companies, further inhibiting growth and leading to greater consumer mistrust or uncertainty.  

Within an industry navigating product innovation, regulatory oversight [or recent lack thereof], and an increasingly aware and health-conscious consumer, companies in the consumer healthcare landscape will need to prioritize transparency and remain consumer-centric.  

4. Brands must navigate evolving consumer behaviors and build relationships through experiences. 

Consumers are increasingly invested in proactive wellness, perhaps more self-informed and aware of their health and well-being than ever before. As their behaviors continue to continue to evolve, the industry is being pushed to make a shift toward building and maintaining relationships through immersive experiences. This transformation is driven not only by changing demographics, including an aging population and growth through immigration, but also by the emergence of disruptive brands that are reshaping how categories connect with their consumers.  

In response to these shifts, industry players are increasingly focusing on multicultural access and coverage, recognizing the importance of catering to diverse consumer segments in an intentional, strategic way. Take Haleon’s “Believe My Pain” campaign, for example, which focuses on understanding and addressing specific healthcare needs in minority communities. For Gen Z consumers, disruptive brands are leveraging social media platforms to drive category growth, with platforms like TikTok emerging as powerful tools for building genuine connections with consumers of a particular segment.  

Regardless of the demographic, brands need to recognize the diverse needs and preferences of their consumer base in order to most effectively connect and engage with them.  

Key Takeaways for Consumer Healthcare Companies 

With a myriad of factors at play for the consumer healthcare landscape, brands must be intentional and strategic in leading with a growth mindset to drive their business forward. Leaders and panelists at this year’s conference shared that consumer healthcare manufacturers who lead with growth have the following traits in common: 

• They understand their brand relevance. 
• They effectively reach their consumers and embrace new cohorts. 
• They prioritize re-invention and expansion. 
• They leverage digital media to reconnect and build relationships with their consumers. 
• They balance profitability and promotion. 

If consumer healthcare-focused companies can continue to focus on the consumer – listening to their needs, prioritizing their well-being, and driving innovation to meet their preferences – they will find greater success in today’s landscape. To chat more about these trends and how they may impact your consumer healthcare company, reach out to us today.