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This article was originally published in The Tan Sheet

Executive Summary

OTC CATEGORIES RESISTANT TO PRIVATE LABEL COMPETITION reflect areas with a "real need for high consumer confidence," Towne-Oller VP-Marketing Kenneth Gurin suggested at an Oct. 18-19 Institute for International Research conference in New York City. Citing data compiled by the Information Resources, Inc. subsidiary Towne- Oller, Gurin suggested that "the marketplace really isn't ready for President's Choice condoms and A&P diagnostic kits." Listing OTC categories with "the highest branded share," Gurin noted that OTC asthma remedies and female contraceptives have virtually no private label competition while branded male contraceptives and OTC diagnostic kits dominate their markets with 99.9% and 99.5% respective shares. A person "suffering an asthma attack is probably not going to risk any kind of failure in the product even though the quality and efficacy are there" in private labels, Gurin observed. He estimated the OTC asthma remedy market at $ 93 mil. during the 12 months from June 1992 to June 1993. Gurin put the size of the female contraceptive products at over $ 62 mil. during the same period while male contraceptives was a $ 240.8 mil. market in food and drug stores during the 12 months. While the very small market for private label male contraceptives declined 22% in 1993, according to Towne-Oller data, sales of private label diagnostic kits increased 9% in dollar volume since 1992 in a market estimated at more than $ 500 mil. On the other end of the spectrum, low price, narrow profit margin items also continue to be dominated by brand manufacturers, Gurin said. Pointing to lip medications as an example, he cited data that show that brands controlled 99.1% of that $ 130.3 mil. market and that private label sales actually have declined 37% since 1992. "By the pure nature of the [low-end] business, it just doesn't lend itself to private label," Gurin explained. Gurin emphasized throughout his presentation the growing impact of RX-OTC switch products in the OTC drug market, noting that "many of today's top selling brands have an Rx heritage." The three biggest-selling switch products today are Whitehall's Advil, Ortho's Monistat 7 and Warner-Lambert's Benadryl, with June 1992- June 1993 sales of $ 292.4 mil., $ 156.8 mil. and $ 119 mil., respectively, according to Towne-Oller data. Other top-selling switch products include J&J's Imodium A-D with $ 100.2 mil. in sales, Upjohn's Motrin IB with $ 85.8 mil. in sales, and Sandoz' Tavist, with $ 76.1 mil. in the 12 months ended June 30. "It will be interesting to see how quickly" private label penetrates this market, Gurin observed. Gurin noted, however, that although private labels "have been growing pretty steadily over the past couple of years, . . . [theyl do not always capitalize on switched ingredients upon patent expiration." As examples, Gurin presented data on two recently switched ingredients, loperamide and miconazole, that illustrate private label's lag in the switch market. Private label dollar shares for loperamide have grown to only 5.2% since the ingredient switched in 1988, according to the data. For miconazole, switched in 1990, "[the] first private label, coming out in 1993, only captur[ed] 2%" of the dollar share, Gurin said.

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