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Sales of animal health products have traditionally been routed via a small number of different retail channels, limited by the regulatory classification of each specific product. Products classified by the regulatory authority of an individual country as being suitable for “over-the-counter” (OTC) sales are widely available across all outlets (such as supermarkets, pet superstores, garden centres, pet shops, pharmacies and veterinary clinics), while those restricted to being only available with a prescription are limited to distribution through the so-called “ethical” channel of either a vet clinic or a pharmacy, and require a prescription to be issued by an examining veterinarian. This report discusses the differences in the regulatory environment applicable to the OTC classification in different countries.
In marketing terms, the different retail outlets represent separate marketing channels, and historically certain companies have been predominantly active in the OTC market through specific channels, e.g. through pet shops or via supermarkets. Company reputations are forged over time and once established these commercial relationships can make it very difficult for a new entrant to achieve sales penetration, as illustrated by the difficulty of gaining shelf-space in a supermarket. Companies active in the different channels tend to have different competencies and for companies entering the OTC market for the first time, the chances of success are improved through partnership with a company that has an established market presence. The different sectors generally sell product to different groups of customers, with different expectations and purchasing behaviour. Thus, it is possible for the same active to be available under one brand through veterinary clinics, and through one or several different brands through the OTC channels, without customers making product or price comparisons. The report evaluates the financial worth of animal health sales through the OTC channel and demonstrates the increasing value of this market sector, with growth in animal health products, associated pet products and pet food sales. It also reviews the major companies actively involved in retailing animal health products within the OTC sector.
All companies are continually seeking new product opportunities. For the OTC market an expansion of the number of pharmaceutical products available is a potential opportunity not only for a dramatic increase in sales but also to provide a distinct competitive advantage. Since the development of a new compound is in many cases prohibitively expensive, the simplest route is to attempt to reclassify an existing pharmaceutical available on prescription as suitable for OTC sales. If it can be achieved, this simple regulatory change would allow a much greater distribution across the range of retail outlets. For the manufacturer this represents the potential for increased volume and for the distributor, range expansion via new product launches. However, for a pharmaceutical manufacturer the switch into the general OTC market may conflict with, or cannibalise, existing prescription sales. For example, a manufacturer may have to give some thought as to how to maintain its relationship with veterinarians who have previously supported a particular product, without them losing confidence and recommending alternative competitor products.
The concept of moving an active into the OTC sector is undoubtedly appealing, but in each country, it will be necessary to achieve the necessary regulatory approval, which requires the input of time and financial resource, without any guarantee of success. Nevertheless, for manufacturers with brands nearing the end of the product lifecycle, wider distribution via the OTC channel represents a potentially valuable method of extending profitable sales and generating revenue for re-investment into new compound development. The report uses case studies to identify market segments that are particularly suitable for OTC distribution. It also considers the nature of different types of retail premises and how customer purchase behaviour may vary between them and raises the possibility of new product areas for consideration.
The launch of retail sites on the internet has recently introduced an additional dynamic into the established market. As the general public has become more confident in the security and reliability of web purchases so internet sales have gradually increased. Sales over the “Net” may comprise OTC products, but frequently these sites represent online pharmacies advertising prescription products as well. Not only does this provide consumers with price comparisons with product available within their own country, but, since the internet does not readily recognize international boundaries, products may also be promoted that are classified differently in another country. Thus, products which actually require a prescription in a particular country may appear to be readily available from an overseas or “offshore” web-site. Policing such potentially illegal activity is notoriously difficult for regulatory authorities. The challenges provided by the presence of these internet operators may cause manufacturers and retailers to reappraise their operations and seek new opportunities, to ensure that their current market position is maintained or enhanced. Thus, products which actually require a prescription in a particular country may appear to be readily available from a website. Policing such potentially illegal activity is notoriously difficult for regulatory authorities and one of the effects of the existence of such sites is to expose price differentials between territories. The challenges provided by the presence of these Internet operators has caused manufacturers and retailers to reappraise their operations and seek new opportunities, to ensure that their current market position is maintained or enhanced.
This report examines the various market forces cting within the distribution of veterinary medicines. Factors at play in the different retail channels are explored to identify key drivers and consideration is given to the regulatory environment. In order to implement a successful strategy when considering repositioning a product from the ethical to the OTC market, it is essential that insight into successful marketing is obtained and the core elements of potentially winning tactics are recognized. Leading companies with major stakes in the OTC market are reviewed and existing products are profiled to provide historical examples of the outcomes of different strategies. As products come to the end of their patent life and generic manufacturers seek to capitalise on the commercial opportunities of supplying a newly available compound, the reclassification of an existing prescription veterinary medicine as an OTC product offers additional commercial opportunities. The interplay of the different commercial drivers within each distribution channel provides barriers to potential new entrants. The outcome of such repositioning may be optimised by adopting an appropriate marketing strategy and working in partnership with an established company. By exploring the move between distribution channels as a viable option in brand lifecycle management, this report will examine the major challenges facing managers involved in this market. Readers with responsibility for strategic planning will find this report an invaluable resource, providing both a market overview and identification of the important issues to be considered in the decision making process. To subscribe to our podcast in iTunes, key in "Animal Pharm" in the search box or subscribe to this address: |
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