Given the sheer mass of markets like the United States and Japan and the bright limelight the BRIC countries bask in, less glamorous, but nevertheless important regional markets are often overlooked. This is particularly true in consumer health, where traditional growth factors like population and disposable income can sometimes take a backseat to regulatory issues and traditions of use. Poland, a key component of the European Union’s initial push east and a major driver of Eastern European consumer health, often takes a back seat in reporting and analysis to regional heavyweight Russia. However, the market offers an outsized and increasingly vibrant consumer health market, and provides potential insight into the industry’s development across the region in whole.
Polish Consumer Health Sales by Category, 2007-2012
Source: Euromonitor International
Note: All figures in constant, fixed 2012 exchange rate US$
Poland: Outsized, but often overlooked
Home to less than 12% of Eastern Europe’s population, Poland accounts for nearly one fifth of the region’s consumer heath sales. Click to Tweet! With 2012 retail value sales (RSP) of US$2.2 billion, Poland was doubled by Russia, but equalled the region’s next four largest markets combined (Ukraine, Czech Republic, Hungary and Romania). Poland’s consumer health industry grew stably throughout the review period (2007 to 2012), posting a CAGR of 2% in constant, fixed 2012 US dollar terms.
A number of factors, including the country’s bureaucratic national health system (the National Health Fund NFZ’s quota system creates long waits for doctor visits, which has contributed to a greater willingness to self-treat minor ailments), the industry’s investments in product advertising and consumer education and the growing confidence of Poles to properly choose and utilize self-care options, are helping to drive sales. In regional terms, self-care is relatively developed in Poland. Though regulatory aspects like mandatory pricing can skew cross-border per capita consumption analysis, figures can provide some insight to how willing consumers are to self-treat. In 2012, Polish households spent US$150 on consumer health, nearly 24% more than number two Hungary. Click to Tweet!
Top Ten Eastern European Consumer Health Markets by 2012 Per Household Spending
Source: Euromonitor International
Note: All figures in constant, fixed 2012 exchange rate US$
However, Poland is still far from a mature market and has a number of issues that will need to be addressed before the industry can reach its full potential.
Retail landscape reflects relative market immaturity
Distribution of consumer health products in Poland is heavily concentrated around traditional chemists/pharmacies (a common characteristic of underdeveloped markets). In 2012, 75% of all retail value sales (and 78% of OTC sales) went through the highly fragmented channel. While self-treatment is gaining ground, recommendations and explanations from a trained professional are still highly valued.
However, the channel did not cement its role in the industry through customer service alone. The country’s distribution regulations are restrictive, particularly concerning non-herbal/traditional OTC products. While the lobbying group PASMI (Polish Association of the Self-Medication Industry) has had success liberalising distribution for vitamins and dietary supplements (VDS) and some herbal remedies, grocery retailers like supermarkets and mass merchandisers have had trouble breaking into the industry.
However, the Reimbursement Act of 2012 could be a major catalyst of change. The law –officially intended to redirect reimbursement savings into innovative drug development –a number of unintended consequences for both drug producers and chemist/pharmacies. In order to recoup prescription revenue losses, many produces increased the prices of OTC remedies. Additionally, the law banned chemists from advertising and offering loyalty programs. Combined, the new regulations undercut chemist’s ability to compete on price and seriously hindered their ability to differentiate themselves on the market. As long hospital waits and drug shortages make consumers increasingly reliant on OTC remedies and PASMI continues to push for greater access to basic drugs, traditional chemists/pharmacies could see their dominant position in the industry deteriorate in the future.
Standout categories provides insight into market developments
In Poland, OTC accounts for 63% of industry sales. Click to Tweet! Cough, cold and allergy (hayfever) remedies (CCA) are the largest constituent category of OTC, and grew 4% to US$427 million in 2012. Euromonitor’s latest Cities data shows increasing urbanization in Poland. Urbanization is often associated with increasing demand for allergy products, as more consumers come into contact with pollutants, such as smog. More common allergies and the often harsh Polish winters helped CCA sales grow from US$377 million in 2007 to US$427 million in 2012. Through 2017, the category should benefit from a comparatively favourable regulatory environment, including a
lack of restrictions on pseudoephedrine purchases (a law to restrict access was abandoned in mid-2011), Rx-to-OTC switches like Novartis’ ACC 600 brand (acetylcysteine 600mg was switched in April 2012) and new product launches like The Procter & Gamble Co’s global power brand Vicks in late 2012.
While Poland’s US$751 million VDS category still revolves largely around traditional categories (mineral supplements and multivitamins accounted for 42% of 2012 sales), increasing consumer sophistication is leading to more nuance in the market. According to Euromonitor’s latest data, the “general health” claim has been losing ground in dietary supplements, as consumers flock to products with specific health targets, like heart, eye and digestive health. For instance, the strong growth of probiotic supplements can be attributed in part to both domestic and foreign producers focusing on the specific, rather than general, health benefits. Though the European Food Safety Authority’s crackdown on health claims hit probiotic marketers particularly hard, the category ($78 million RSP in 2012) is still expected to a 4% CAGR through 2017. The category could also benefit from a seemingly eminent change in the regulatory landscape, stemming from the European Commission’s February 2013 demand that Poland alter its laws for registration of imported supplements from other European Union member states. The Commission contends that Poland’s current system is overly “burdensome” to legal imports other member states. Decreasing barriers of entry should contribute positively to future growth.
Weight management and sports nutrition combined account for less than 5% of Poland’s consumer health sales. However, both outpaced the overall market in the review period and are expected to further outperform the market in the forecast period. The weight management category, which grew 4% to US$71 million in 2012, relies heavily on weight loss supplements (WLS). Marketers often tout their herbal/traditional or botanical ingredients, which many consumers associate with low risk. While pill format products, OTC obesity, are popular, a number of recent launches have focused on multi-product systems, like Elavia from the Menarini Group, which features a pill and liquid WLS and heavily touts its social media community. While regionally important, the Polish sports nutrition market remains small (US$27 million in 2012) and underdeveloped. The health and fitness revolution is taking shape in Poland and category interest is growing in segments of the population. However, a general absence from mainstream retail channels and the industry’s over-reliance on extreme positioning (such as using bodybuilders and strongman competitors as brand ambassadors) have muted the mainstreaming effects that are propelling the industry out of the shadows in many markets. Nevertheless, rising incomes and growing concern over healthy weight and physique are expected to grow weight management and sports nutrition by 5% and 8% annually to US$90 and US$40 million, respectively, through 2017.
Polish Consumer Health Sales by Category, 2012-2017
Source: Euromonitor International
Note: All figures in constant, fixed 2012 exchange rate US$