1. Enhance Marketing investments
To compete successfully against FMCG-driven companies such as Nestlé SA (with Nestlé Health Sciences) or Procter & Gamble Company (with its P&G Health Care business unit), independent CHCs must go beyond the fundamental marketing investments in brand building and instead look to transform their marketing function to become the powerhouse of the business. To differentiate through marketing, there are several different areas of potential investment:
- Consumer-centric-marketing: Combine science with consumer-focused marketing for wider reach. Invest in performance marketing, social media, and strong branding. Design packaging and descriptions to be clear, engaging, and appealing to evolving consumer tastes.
- Coherent brand messaging: Maintain consistent messaging across all channels for brand engagement and differentiation. Haleon's executives adopted proactive marketing, viewing advertising and promotions as strategic investments in their top brands. This consistency in approach builds brand identity, drives repeat purchases, and boosts consumer loyalty.
- Channel-specific strategies: Understand channel-specific nuances (e.g., size, growth potential, maturity) to prioritise and optimise the channel mix; tailor investments to meet the unique requirements and growth drivers of each channel (e.g., 'Gross to Net' strategies, digital marketing, trade promotions); elevate consumer shopping experiences, foster consumer education, and facilitate product engagement.
- Data-driven models: Use big data and advanced analytics for personalised products. Brands can leverage purchased data or online assessments to customise consumer journeys and recommend products based on individual preferences. After establishing its digital foundations (Precision Marketing playbook and Center of Excellence), Sanofi CHC is aiming to increase customer-centricity through connected services and AI.
2. Adapt supply chains for efficiency and responsiveness
Expanding into non-pharmacy retail channels, both online and offline, often involves smaller, more frequent orders and quicker lead times compared to traditional prescription-based models. With the rise of preventive care, the shopping experience may shift towards long-term planning and bulk purchases. This shift necessitates efficient supply chains capable of managing inventory, optimising logistics, ensuring order accuracy, and fostering supplier collaboration to boost consumer loyalty. During the COVID-19 pandemic, Kenvue transformed its supply chain to meet surging consumer demands, initially reaching five to ten times pre-pandemic levels and sustaining two to threefold demand for certain brands. This highlighted the importance of adaptability in meeting evolving needs.
Consumer healthcare manufacturers require logistics networks meeting diverse end-user needs while upholding quality. Digitisation drives supply chain efficiency through enhanced communication, collaboration, transparency, and flexibility. By harnessing new data sources and analytical techniques, companies can:
- continuously improve demand forecasting and production planning capabilities,
- automate and accelerate replacement cycles to reduce stocks levels,
- improve visibility and control of last mile distributed inventory,
- increase accuracy and speed of invoicing while ensuring product availability,
- optimise business integration into the end-to-end patient experience (e.g., online pharmacy, direct delivery).
CHC manufacturers face the challenge of managing service and delivery experience over which they have only limited control. Independent CHCs will need to understand the partnership ecosystem and sub-tier supplier relationships to identify potential vulnerabilities. Furthermore, CHC businesses can stand out by emphasising ESG in their supply chains. Sanofi Consumer Healthcare North America led the way, becoming a certified B Corp in July 2023 and obtaining three more certifications by early 2024 in Italy, Germany and Hispanic Latin America. Prioritising sustainability boosts brand reputation and attracts eco-conscious consumers.
3. Recalibrate innovation parameters
CHC businesses must go beyond randomised classic clinical studies, review protocols, and find new and faster ways of conducting studies, generating, collecting, and analysing unbiased and standardised data (i.e., Real world data (RWD) and real-world evidence (RWE) to help understand consumer needs better. There are many ways CHCs can look to evolve their innovation approach:
- Digital trial: By utilising real-world data and digital trial platforms, decentralised and virtual clinical trials with various remote methods like telemedicine and home health care. This approach allows participants to engage from home, gather diverse data, and explore novel information such as activity patterns and sleep routines. In September 2023, Haleon initiated a "real-world evidence study on oral health quality of life" by assessing the long-term impact of a desensitising toothpaste.
- Expedited innovation: Integrating processes speeds up early development, cutting time to market and gaining competitive edges. Quick ideation, prototyping, and consumer testing, as seen in Nestlé Health Sciences' R&D Accelerator, swiftly validate innovations, adjust products, and explore new opportunities based on consumer feedback.
- Partnerships: Partnering with tech firms and digital health providers enhances internal capabilities for a consumer-centric digital transformation, exemplified by Bayer's Precision Health group. These collaborations grant CHC firms access to advanced technologies and knowledge, enabling the creation of personalised and efficient consumer health solutions.
Independent CHC businesses can become pivotal market players by focusing on three core areas: marketing, supply chain, and innovation. The talent pool within traditional prescription-centric setups often lacks the requisite skills for thriving in a standalone consumer-oriented landscape. Hence, substantial investments in cultivating essential resources and capabilities are imperative for effectively executing the aforementioned strategy.
Merely focusing on individual core areas is insufficient for maximising an organisation's potential and may lead to incomplete transformations. Shifting to a consumer-centric model requires a comprehensive, organisation-wide approach beyond traditional structures, covering governance, structure, talent, processes, technology, data, and analytics. A holistic review of the operating model can drive standalone consumer health businesses towards successful execution, uncovering operational efficiencies. A well-crafted consumer-centric operating model fosters cost-effective and sustainable operations, underpinning a strong business framework.
How L.E.K. can help
To discuss the findings in more detail or talk about strategic transformation of standalone Consumer Healthcare businesses please get in touch with us.
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