Global political tensions and conflicts and international tariffs are currently placing a strain on all European economies, with significant impacts on the region’s consumer health industry.
Just last week, US president Donald Trump announced tariffs on all countries, with the EU – which he says foists a 39% rate on US goods, including currency manipulation and trade barriers – facing a 20% tariff on exports to the US.
Thanks to a charm offensive by prime minister Kier Starmer, the UK faces only the baseline tariff of 10%, much lower than countries like China (34%), but still a significant blow to any UK company exporting to the US.
Pharmaceuticals seem to be exempt for now, but any companies exporting non-medicinal products like food supplements or cosmetics will no doubt feel the pain of the US trade war.
“For yet another year,” NielsenIQ’s Alex Heffernan concludes, summarising the state of the market for UK consumer healthcare industry association, PAGB, “the only certainty is uncertainty.”
2024 Not As Hoped
With inflation finally easing and finances generally being less severe than in previous years, 2024 began with a “general optimism among shoppers and businesses,” reflected Heffernan, who is health and beauty insights manager for NielsenIQ’s Personal Care and Home division.
“However, the year did not unfold quite as smoothly as many would have liked. Climbing consumer confidence was brought to a halt by a mid-year change in government, which shone a very public spotlight on the state of the UK economy,” Heffernan explained.
“Efforts to manage expectations ahead of the Autumn budget did little for confidence, and recent months have seen inflation remain slightly, stubbornly, above the 2% target, as economic growth stagnates.”
Turning to the UK’s consumer health market in 2024, sales values were up 8% to £4.1bn ($5.3bn) compared to 2023.
In sales volume terms, the market grew by only 2%. Nevertheless, this still represented a significant improvement from 2023, during which the market shrank by 4% in volume terms, according to NielsenIQ data.
“So, this is a significant swing in momentum,” Heffernan pointed out. “The fact that this is driven by shopper demand rather than prices should spark some optimism for manufacturers and retailers.”
Growth Uneven
Cooler temperatures in June caused a steep decline in sales volume in the hay fever remedies category during its peak season, according to NielsenIQ. Nevertheless, in sales value terms, the category grew by 5% to £197m.
Cough, cold and throat medicines also saw a lower peak season in December, but steady growth throughout the rest of the year “more than offset this decline,” Heffernan noted, with sales increasing by 9% over the year to £681m.
Gut health remained a growing area of interest for UK consumers, with gastrointestinal products one of only four OTC categories that grew in sales volume last year (+1%). In value terms, however, the category grew by 6% to £418m.
Sales in the UK’s vitamins and minerals category also grew significantly by value, up 8% to £650m in the 12 months.
“A more holistic view on health elevation continues to drive growth in vitamins, with retailers launching more private label ranges to blend health with affordability,” Heffernan explained.
“The blurring of health and beauty boundaries has allowed beauty vitamins such as collagen supplements to thrive as an innovation hotspot,” he added. “This allows retailers to expand the category and generate real, sustainable volume growth.”
Pharmacy Focus
Over a quarter of the UK OTC market’s sales value is accounted for by the country’s pharmacy retail channel, according to NielsenIQ.
With larger pharmacy retailers like Lloyds and Boots closing stores across the country in an effort to consolidate their business, there has been a shift towards independent and community pharmacies, the market analyst pointed out.
This trend has been strengthened by the Pharmacy First initiative launched in January 2024, which allows UK community pharmacists to supply prescription-only medicines for common conditions including sinusitis, sore throat and uncomplicated urinary tract infections.
The move was supported by the UK consumer healthcare industry, with PAGB CEO Michelle Riddalls arguing that the “services offered under the scheme by community pharmacies will support people to better manage their own health whilst protecting the UK National Health Service from further pressures.”
With margins tight and demand increasing, smaller retailers “will be relying on the expertise of established brands to help them grow baskets, increase profitability and reduce losses,” Heffernan advises.
Online Opportunity
Pressures on the UK NHS are forcing Brits to increasingly seek medical advice online, leading to an increase in online pharmacy penetration in 2024.
Online health shopping is characterized by a desire to improve general wellbeing, NielsenIQ explained, which provides an opportunity for brands to innovate in holistic health, “finding niches in the ambiguity.”
“OTC ecommerce shoppers behave differently to those seeking medical support in pharmacies,” Heffernan added. “Shopping online indicates a lack of urgency, shifting the focus onto preventative and away from reactive.”
For example, three quarters of first aid kit value sales was accounted for by e-commerce in 2024 compared with just 13% for pain relief, according to NielsenIQ.
“This bias away from ‘typical’ OTC products steers shoppers to pureplay generalists such as Amazon,” Heffernan commented. “Even TikTok is getting in on the action, winning more share of online OTC than any other retailer in 2024.”
“Brands need to be more informed of what shoppers are buying, as well as how they are buying it.”
2025 Strategy
In the coming year, consumer health companies operating in the UK need to “dial up the basics and win more shoppers,” Heffernan advised. “Learn more about the shopper journey, identify new consumer touchpoints, and be available.”
With consumers looking more generally at their holistic health, companies have license to differentiate their brands from the competition, he continued.
“Seven in ten shoppers say private label healthcare products are as good as branded. How clear is your value proposition? Why should shoppers buy your product?”
Firms should also leverage technology to disrupt the market. “This can range from retail media advertising to social commerce strategy. Regardless of the economic backdrop, health is everywhere, which means opportunity is everywhere,” he concluded.
