-By Dan Alaimo

Sometimes, less is more. But in the cough-and-cold category, that depends on one's perspective. From the scan data and industry research, it appears healthy. The top-line numbers are trending up for the overall category and its biggest segments.

For consumers, or someone in-store advising a consumer, it is a different matter. Various regulations have forced many products behind the pharmacy counter, and the drumfire of bad news has consumers worried about the remaining products. Besides the drug abuse questions raised with some ingredients, there's a wide consensus that products still out on the shelves are not as effective as the old ones.

Most chain retailers have implemented systems where cards are displayed in place of the products, and they are brought to the counter where they can be exchanged for the product after ID is presented and paperwork is signed.

In another "less-is-more" scenario, private label over-the-counter cough-and-cold products are gaining in the recession as consumers realize they can pay less for, and perhaps buy more of, items that contain exactly the same active ingredients as national brands.

So, even with its ups and downs, demand in the cough-and-cold category remains steady, mainly because when people get sick, they need to buy something, and they need it right away.

Seasonal Sales

Another factor in the category's sales trends is the severity of the cough-cold season, which is difficult to predict for a chain in six states like Asheville, N.C.-based Ingles Markets. "It may hit different areas at different times," says Dan Spears, director of HBC and GM. "So, we just try to be ready and respond as quickly as we can. We make sure we have an adequate supply on the shelf because, when sickness hits, people are going to buy something. If they can't find the old pseudoephedrine product, they are going to buy something else for themselves, or for their children," he continues.

"The cough-and-cold category is a mainstay in the grocery store HBC aisle and will continue to be even in these difficult economic times," notes a Western GM and HBC executive, who asked not to be identified. "But grocery retailers must be aggressive with respect to placement of new items, everyday retails, promotional activity to maintain market share," he adds.

"In this economy, consumers need to save money. They will be more conscious of lower-priced alternatives, more willing to practice self-medication, and will be trying to stay healthier to avoid having to go to the doctor. This can be a very good opportunity for the grocery retailer if they are aggressive," says the executive.

Products with the ingredient pseudoephedrine (PSE) were the first to be pulled behind the counter, starting in late 2005. As a cough-cold remedy, pseudoephedrine is well regarded, but when it became known that it was used in the making of illegal methamphetamines, lawmakers and retailers reacted swiftly. Next came concerns about teen abuse of dextromethorphan (DXM), and then recommendations from the Food and Drug Administration (FDA) that young children not use cough and cold medicines.

Most of the remaining products are made with phenylephrine (PE). This is an older ingredient that many consumers and pharmacy professionals are dissatisfied with. "The products don't work as well, to put it simply," says Jim Wisner, president of Libertyville, Ill.-based Wisner Marketing Group. Industry executives expect a better alternative to come along eventually, but this depends on the testing and approval process at the FDA.

Instead of PSE product, many retailers put out cards with the package image for shoppers to take to the pharmacy counter. "Finally, everybody is starting to get the hang of that," Wisner says. "The pharmacists are a little bit better at it, so there is a resurgence now."

"Many pharmacists comment about how patients say the new products aren't as effective as the old products," according to John Fegan, VP of pharmacy at Jacksonville, Fla.-based Winn-Dixie Stores.

"We are still selling a lot of the new products, but there is going to be a segment of the population that is going to want the old products. That's okay because the pharmacist is there to answer questions, to monitor the situation, and to make sure we follow guidelines," Fegan observes.

The cough-and-cold category is going to continue to be reviewed by manufacturers, he adds. "I think there will be new products coming out in the future that will be deemed to be as effective as the old ones, but with no harm associated with them," he says.

"It also is an opportunity for pharmacists to continue to be educated and aware of these new products, and to help the public, which is more restricted in what they are buying. It gives pharmacists the opportunity to interact a little more frequently with the patients and the doctors," Fegan notes.

Higher Sales Predicted

Earlier this year, Chicago-based Mintel International Group revised its 2009 sales forecast for the cough-and-cold category in the food, drug and mass channels. Mintel had originally predicted flat category sales, with a 2009 increase of 0.1 percent, but changed it to a 1.9 percent growth rate. "The more optimistic forecast is based on strong performance in 2008 for cough drops and cough syrups, and abundant anecdotal evidence that consumers are relying on over-the-counter medications to weather cold and flu symptoms," Mintel wrote. This was before news of the recently announced swine flu pandemic.

Scan data from The Nielsen Company, based in Schaumburg, Ill., for food stores with $2 million or more in sales (excluding supercenters) for the 52 weeks ending March 21, 2009, showed positive trends over the same period a year ago. Total cough and cold remedies were up 1.2 percent to $1.32 billion; cold remedies were up 2.9 percent to  $818.9 million, with adult products rising 3.8 percent and children's products declining 3.4 percent.
Many private label cough-and-cold remedies showed significant single-digit growth at the end of 2008 in the food, drug and mass channels, increasing the segment's share 1.2 percent to 20 percent, Nielsen reported.

In an economic downturn, an OTC category like cough-and-cold is likely to do well because more people are likely to self-medicate than to see a doctor, says Marcia Mogelonsky, senior research analyst at Mintel. "They are buying things off the shelf that look like they are going to solve the problem instead of going to a doctor for help," she notes.

They may also seek the counsel of a pharmacist. "The supermarket that doesn't have a pharmacist, or only has its pharmacy open for limited hours, loses this kind of store traffic to a store with pharmacists there for 12 to 15 hours," according to Mogelonsky. The loss is greater if the customers are seeking the products sold from behind the pharmacy counter.

Private Label Strength

Private label is a strength for any stores selling cough-and-cold OTC products, says Mogelonsky, although "it takes a bit of education for [consumers] to learn that the same compounds in branded products are present in the private label. Price is a big deal to consumers now, but they also want the security that the product is going to work, especially when it comes to kids' cough-and-cold."

This education is a challenge for retailers, says Michelle Barry, SVP at the Hartman Group, based in Bellevue, Wash. She characterized ingredient information as "highly medicalized ... It's so very scientific and technical that it is not a space in consumers' minds where they will spend a lot of time worrying about whether the brand is important."

Nonetheless, private label will continue to grow in the coming year, Barry predicts. "And we see an increase in the use of multiple channels to shop for those products, and consumers using more information sources — doing more homework — before they even get to the store to purchase certain types of products," she says.

"Private label is doing well in these economic times," affirms the Western GM/HBC executive. "Retailers must promote private label aggressively and take advantage of the opportunity that consumers are looking for less expensive alternatives and tending more toward self-medication."

Relative to the cough-and-cold category, "the most important near-term development is the continued consumer purchasing trends toward private label products," says Roy White, VP, sales, at the Food Institute in Elmwood Park, N.J.

"As purchasers seek to maximize value during these challenging economic times, this trend will likely continue for some time, even after the end of the recession. Particularly in cough-cold, allergy and headache remedies, the ability of private label to provide substantial price differentials is a key factor in success," he says.

However, White cautions retailers to make sure private label price differentials remain substantial, "because if they narrow, a major selling point will be eroded." Also, he notes that manufacturers of branded products can be expected to continue innovating to maintain their sales levels.

Children's Challenge

Two years ago, when the FDA first recommended against using cough-and-cold products for young children, parents had many questions, which often were directed to pharmacists.

"It challenged our pharmacists to step up to the plate with good knowledge and a good understanding of alternative products for the parents of younger children," says Winn-Dixie's Fegan. If there was a significant health problem, the parents would be referred to a doctor, but in other cases, "the pharmacist was able to make the transition over to the other products and assure parents these products were available to help them."

This helped open communication lines between pharmacists and doctors, Fegan says. "Doctors were asking, 'What can I do?' and pharmacists were making sure that the patients that shouldn't use OTC products got to their doctors, so it truly became a collaborative effort."

Now, the manufacturers and the FDA have worked together to develop product labels that will help clear up confusion over what to use for children, and what not to use. "With [the] FDA's support, the makers of these medicines have begun changing the labels to include some new directions to parents for safe use," says Mimi Pappas, director, communications and outreach at the Consumer Healthcare Products Association in Washington. "These updated labels began appearing on store shelves last year."

Unlike pseudoephedrine and the children's medicines, retailers took the lead on dextromethorphan products, which teens were taking as a hallucinogen, Fegan says. Most retailers have put age restrictions on these medicines, with point-of-sale programs that prompt for identification. "So, because of the PSE issue, the pharmacy retailers took the bull by the horns to implement controls with dextromethorphan products rather than be told to do it," he notes.