Amazon's Consumer Health Expansion Comes With Prices Sliced
This article was originally published in The Pink Sheet
Executive Summary
E-commerce giant expands consumer health footprint in past six months with launches of generic OTC drug product lines at prices in some cases significantly undercutting competitors. Primary Health and SoundHealth OTC drugs range from a few dollars less to about half the cost of brand name equivalents.
[Amazon.com Inc.]'s advantages in the consumer health market include not only making its all its offerings accessible to consumers everywhere on its e-commerce platform, but also beating competitors on pricing for its own brands.
It expanded its consumer health footprint in the past six months with launches of generic OTC drug products at prices that in some cases significantly undercut competitors' pricing. The launches are Primary Health OTC drugs and SoundHealth OTCs and dietary supplements.
The OTC drug products range in price from a few dollars less to about half the cost of brand name equivalents. For example, while Reckitt Benckiser Group PLC’s Maximum Strength Mucinex DM (1,200 mg guaifenesin, 60 mg dextromethorphan HBr) retails at $24.68 for 42 tablets, the same quantity of Amazon's Primary Health brand Mucus Relief DM is priced at $21.
Similarly, Pfizer Inc.'s Nexium 24Hr (esomeprazole magnesium 20mg) costs $21.11 for 42 capsules and the same quantity of Primary Health Acid Reducer with the same formulation is priced at $10.22, and 30-count packages of Bayer AG's Claritin Redi-Tabs (loratadine 10 mg) sells for $18.89 and the same amount of Primary Health Allergy Relief Loratadine costs $12.78.
Amazon has not promoted the launches, the same approach it used in rolling out its first OTC line in November 2017, Basic Care manufactured by Perrigo Co. PLC and including an anti-diarrhea formula, a nicotine gum, allergy relief and naproxen sodium tablets. Basic Care products, which have about doubled in number since the launch, are priced about 20% less than Walgreen Boots Alliance Inc.’s Well at Walgreens brand and CVS Health Corp.’s CVS Health line. (Also see "Amazon OTCs Likely A Worry For Retailers, A Remedy For Perrigo" - Pink Sheet, 3 Jan, 2018.)
In addition to a generic of Maximum Strength Mucinex DM, the Primary Health line made for Amazon by Lawrence, N.J.-based Aurohealth LLC includes Mucus Relief DM, an equivalent of Mucinex DM (600mg dextromethorphan, 30 mg dextromethorphan HBr tablets), and Acid Reducer (omeprazole magnesium 20 mg), an equivalent of Procter & Gamble Co.’s Prilosec OTC.
Primary Health also includes Fast Maximum Cold, Flu and Sore Throat Relief (acetaminophen 650 mg; dextromethorphan 20 mg; guaifenesin 400 mg; and phenylephrine 10 mg), a copy of Mucinex Fast-Max.
Amazon also introduced SoundHealth OTC drugs and dietary supplements. The line made by BestCo. Inc., of Mooresville, N.C.., includes Heartburn and Gas Relief Chews (750 mg calcium carbonate, 80mg simethicone) in packaging that compares the products to Bayer’s Alka-Seltzer Heartburn & Gas Reliefchews; Extra Strength Antacid Chews for Heartburn Relief (750 mg calcium carbonate) comparable to Alka-Seltzer Heartburn Relief chews; and Natural Herbal cough drops (with menthol) in cherry and lemon flavors and a sugar-free version, which are generics of Mondelez International Inc.’s Halls cough drops.
The indigestion remedies significantly undercut competitors' prices. Heartburn and Gas Relief Chews retail at $6.72 for an 82-count bottle, compared to $15.99 for two 32-count bottles of the Alka-Seltzer equivalent.
SoundHealth Extra Strength Antacid Chews cost $7.59 for a 90-count bottle and Alka-Selter Reliefchews sell at $8.44 for a 90-count bottle. Natural Herbal lozenges cost from $2 for a 50-count bag to $7.19 for a 160-count bag, compared to $3.49 for a Halls 80-drop bag.
Amazon May be Helping, Not Hindering Competitors
Some analysts see Amazon’s entry as a threat to other OTC drug and supplement marketers, but digital marketing expert Phil Masiello says Amazon private label products actually have helped boost some product categories since launch.
Masiello – a founder of Hound Dog Digital Marketing Agency in Baltimore specializing in consulting consumer product companies in selling on Amazon, other e-commerce business and mobile applications – says many in the industry initially panicked when Amazon began launching health and wellness products. But sales in many categories have increased due to Amazon’s private label.
“A lot of it has to do with the money Amazon is pumping into advertising on their own site to promote those products and its brought awareness” to various categories, Masiello said during an interview.
“So, it has not disrupted, not really. Is it something to watch out for? Sure, it’s something to keep an eye on,” he said.
Masiello noted that major brands retain strong market shares. Amazon, though, is stronger in a less measurable but as important metric.
"Amazon has a direct link to the customer and Amazon has built trust with [Amazon] Prime. So could Amazon take over the market? Yes. But are customers gonna say, ‘I don’t want Advil, I’m gonna choose Amazon’s Basic Care.’ There could be some, but no, it’s not going to take over the market,” he said.
Masiello’s comments echo Christopher Durham, president of Charlotte, N.C., consultancy My Private Brand. In July, Durham said the biggest threat to most OTC brands is not Amazon or private label’s overall lower prices, but their “own lack of innovation” and if those brands fail in light of Amazon private label’s success, it is “their own fault.” (Also see "Amazon OTC Line's Impact On Pricing Grows Along With Its SKUs" - Pink Sheet, 12 Jul, 2018.)
From the editors of the Tan Sheet.