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Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

Incontinence Aids Seize the Moment in Brazil’s Booming Drugstore Channel

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The local drugstore is normally the first port of call for Brazilians when they fall ill, not the doctor. As such, drugstores tend to operate as quasi-medical centres, and bigger outlets even have a designated space for free consultations. The ubiquity of drugstores – there are around 123,000 outlets nationwide (including health and beauty specialists) – makes them readily accessible. But, their distribution power runs deeper than sheer numbers. Owners of drugstores are trusted for their advice and confidentiality, and the small independents, in particular, have built up strong ties within local communities. These are major reasons why Brazil is bucking the emerging market trend in sales of incontinence aids.

Globally, incontinence has been the fastest growing category in retail tissue and hygiene for 10 years running, and is now a US$7 billion market. Sales have been heavily concentrated in developed countries, however. North America, Japan and Western Europe fuel collectively over three quarters of total value. Brazil is the only emerging market where the incontinence category has established a significant footprint (it is almost four times bigger in value than in China, for example). This is not because incontinence is less of a health problem in emerging markets. It has to do with barriers of price, taboo and distribution. The latter two have been broken down in Brazil by an entrenched drugstore culture.

Drugstores are big business

Brazilian spending on incontinence products grew at an average annual rate of 27% (at fixed US dollars) over the 2007-2012 period, with total sales breaking US$500 million in 2012. It is the category’s third biggest market in the world, after the US and Japan. Despite cooling economic growth, demand is forecast to remain strong this year and well into the long term.

Health and beauty retailers accounted for 74% of category sales in 2012 and participation is growing (collective selling space expanded by 64% over the last five years). Drugstores are now among the biggest targets of new retail investment in Brazil. When Raia and Drogasil merged in 2011, they created a joint revenue stream of R$4.7 billion (US$2.2 billion) and became one of the top 15 retailers in Brazil by sales. Other big chains (and possible future M&A targets) include Drogaria São Paulo (based in the São Paulo region) and Salvador-based Pague Menos.

Lifestyle changes fuel the drugstore boom

Brazil’s boom in drugstores aligns with key demographic, environmental and lifestyle changes. Brazilians are living longer, reflecting advancements in medicine. But, stronger economic confidence has brought in its wake new day-to-day ailments, most related to stress and changes in consumption culture.

A taste for fast food and snacking means that the middle-class is more prone to indigestion and heartburn than a decade ago, for example. Fuller employment has made public transport busier, and a haven for cough and cold viruses. Alcohol consumption has risen, and with it, hangovers. Professional lives are increasingly hectic, leading to more cases of muscular pain and constipation. The boom in drugstores has thus been a response to growing demand for consumer healthcare. In turn, this has created a platform for incontinence aids to flourish.

Brazil is a window into future opportunity

In Brazil, the trust that consumers have in their local drugstores has been key to incontinence products gaining market traction (by diluting the taboo, for example). Price points have also become more accessible as the middle-class has expanded. There have been fortuitous market inducements too. At the end of 2009, the National Health Surveillance Agency (ANVISA), which regulates retail healthcare, issued a ruling whereby OTC medicines had to be kept behind the counter, rather than stacked on shelves. This opened up more shelf space for personal care and hygiene products, including incontinence aids.

The ruling was overturned in the state of Rio de Janeiro in 2010, and in São Paulo in March 2012. Since July 2012, ANVISA has reversed it altogether. But, incontinence aids have shown themselves to be a strong rotation category for health and beauty retailers, thereby securing their shelf space into the long term.

Based on trends in developed markets, health and beauty retailers are key springboards for the development of incontinence aids. And this seems to be what we are seeing in Brazil today. The number of drugstores will continue to expand over the next five years, helped by a surge in new shopping malls and a mushrooming of residential real estate developments, especially in the northeast and centre-west regions.

Brazil is a window into the future opportunity of the emerging markets, perhaps. As dynamic as the incontinence category has been over the last 10 years, it needs to reduce some of its dependence on the developed markets. Brazil’s drugstore culture shows a possible way forward.

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