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Unlocking the Consumer Health Opportunity in APAC

Head of Health & Life Sciences, Asia-Pacific at Oliver Wyman Engagement Manager, Health & Life Sciences at Oliver Wyman Partner, Retail and Consumer Goods at Oliver Wyman Associate, Health and Life Sciences at Oliver Wyman

Today’s healthy shopping carts are still dominated by modified versions of everyday goods, with lower levels of fat or sugar or higher levels of protein. But they also contain some new categories: superfoods, supplements, and serums, which often come with aspirational claims and expensive price tags. The marketing of healthy products has evolved beyond general claims, such as a product being “good for you,” toward clinical claims that are personalized, quantifiable, and targeted, whether they contribute to weight loss, improved memory, or reducing carcinogens.

The trend comes as consumers seek more care outside the clinical setting and increasingly self-diagnose, self-medicate, and self-monitor. This has also facilitated the rise of a new industry segment in consumer wearables, apps, and other means of digital engagement in health. All of these movements have resulted in a new paradigm that Oliver Wyman calls “the proactive consumer.” These consumers are willing to spend on health benefits and technology and are looking for complements and even alternatives to prescription drugs and over-the-counter (OTC) medicines.

Consumer Health Landscape in APAC

The result is renewed interest in the health and wellness business, which generates worldwide sales of more than $700 billion annually. The Asia-Pacific share grew from 19 percent in 2007 to over 30 percent in 2017 as the region’s population and purchasing power increased.

Asia is both a source of raw materials and an inspiration for new product lines such as herbal tonics and drinks based on traditional Chinese medicine (TCM). TCM sales have grown 25 percent over the last six years, and the category has expanded out of Chinese medicine halls and into modern supermarkets and pharmacies in its home markets of China and Singapore.

Numerous Asian companies have also entered the market for vitamins and herbal and mineral nutritional supplements (VHMS), creating new brands or exporting them to Asia from established markets such as Australia and the U.S. This steady growth and increasing activity provide a chance to re-evaluate the opportunity in the Asia-Pacific region.

Growth and Opportunity in Consumer Health in Asia

These trends make the Asia-Pacific region ready for entry and expansion. Its health and wellness market is expected to grow at an average of 8 percent a year between 2016 and 2020, and key markets such as China and Indonesia show promising potential in both OTC and VHMS products.

Source: Oliver Wyman analysis

The opportunity is not uniform across Asia, and there is variation in the competitive and accessibility challenges—including regulatory barriers and route-to-market setup—to new entrants and small players looking to grow. China has loosened regulations for online selling, fueling demand for VHMS, particularly from Australia. This has attracted foreign investors—for example, Australia’s Swisse brand is now Chinese-owned. India, despite a population almost as large as China’s, has lagged in overall value, but the market is expected to grow. In particular, a trend for self-medication is beginning to take hold, boosting OTC market growth to double digits. The popularity of traditional products, such as Ayurveda, has attracted global and regional investors eyeing them for export, even as local price ceilings may hinder margin growth in India. In both China and India, digital infrastructure investment is increasing, and e-commerce has become a key channel of consumer health distribution. Accessing rural populations through localized, lower-cost products is already a key strategy in food and personal care for many consumer-packaged goods (CPG) companies and is now being used for pharmaceuticals in consumer health as well.

Asia is also home to many local conglomerates and domestic CPG companies that have stronger and deeper penetration and footprints than multinational (MNC) players. Furthermore, traditional medicines in Asia have become mainstream opportunities for CPGs and MNCs.

However, there is often no clear winner in consumer health categories. In China, for example, research has shown limited brand awareness and loyalty for VHMS, though there are signs that these factors are increasing as companies delve further into direct selling and marketing. Considerations for new market entry opportunities—based on current size, projected growth, competitive landscape, and regulatory environment—are summarized below:

Source: Oliver Wyman analysis

Key to Success in Consumer Health

The growth opportunity in consumer health in the Asia-Pacific region is considerable and is attracting both local players and multinational pharmaceutical and CPG companies. Consumer health companies need to re-evaluate their organizational capabilities and form new partnerships to attract the new wave of proactive health consumers.

Given the broad opportunities and the capabilities required, organizations must answer some key questions as they look to enter this space:

Where to play in consumer health?

Consumer health covers a wide range of areas, including products in frontline care (for example, OTC medicines), wellness enhancement (such as VHMS), and personal care (aesthetics and correctives). The increasing prevalence of digital solutions and the popularity of local, traditional medicines in Asia expand the range of products and services that players can offer. While players might want to aspire to a broad offering across these spaces, they need to identify specific areas of value and complementarity to effectively leverage their strengths against local competition.

How will consumer health fit into our current business?

To build a product line for the consumer health market, players need to evaluate their current offerings and understand their existing capabilities. One way to do this is to look at customer needs and existing business models. These will indicate where natural first steps might be—whether they’re variations on existing product lines or brand-new product offerings. Players will then have to consider how to build capabilities that fill outstanding gaps and build brand recognition and loyalty, in some cases with doctors and key opinion leaders. Strategic partnerships and M&A can help accelerate the development of these capabilities. For instance, CPG companies excel at brand building, while pharmaceutical companies specialize in engaging doctors—so the combination of the two could be very effective.

Once in the space, how can we build for continued growth?

An important consideration is how to sustain growth in an often-fickle market that follows health trends and fads. Leading with R&D and new product innovations is an investment-heavy approach. Doubling down on core consumer capabilities, however, also provides a path to sustained growth, by increasing consumer access and ensuring ongoing engagement. Likewise, investment in medical marketing and engagement with key opinion leaders will increase product credibility, while also opening additional distribution channels in hospitals, pharmacies, and doctors’ offices.

What is the appropriate route-to-market?

The level of local investment, the roles of different partners, legal and regulatory considerations, and brand localization—such as formats, flavors, and packaging size—will all be local-level concerns. Market access, too, will vary considerably. The recognition of certain products—foods for special medical purposes, for example—as health treatments could bring opportunities for funding and reimbursement through health care systems, especially if they are coupled with disease management or lifestyle programs.

Conclusion

Unlocking the consumer health opportunity in the Asia-Pacific region is made especially challenging by the range and diversity of markets and cultures. The proactive consumer, empowered by technology and knowledge, will take on a different form in China, India, and Southeast Asia. Tastes, preferences, beliefs and even loyalties vary largely across the region. For a company to succeed, it needs to feel the pulse of the particular market and be able to address the demands adequately, which requires a complicated balance between customization, understanding needs, and good timing.

Sumit Sharma

Head of Health & Life Sciences, Asia-Pacific at Oliver Wyman

Sumit Sharma is a partner based in Oliver Wyman’s Singapore office and leads the Health & Life Sciences practice across the Asia-Pacific region.

Matt Zafra

Engagement Manager, Health & Life Sciences at Oliver Wyman

Matt Zafra works extensively with pharmaceutical companies, payers, hospitals and clinic providers, and employers to develop new partnerships in the Asia-Pacific region. He has extensive healthcare consulting and insurance brokerage experience in Southeast Asia as well as in the U.S.

Alex Shutter

Partner, Retail and Consumer Goods at Oliver Wyman

Alex Shutter is a partner based in Shanghai with Oliver Wyman’s Greater China office. Alex’s work focuses on the retail and consumer goods industries as well as consumer facing aspects of other sectors, notably hospitality, leisure and online services.

Rajiv Suresh

Associate, Health and Life Sciences at Oliver Wyman

Rajiv Suresh is an associate in Health and Life Sciences in Oliver Wyman’s Singapore office, having also worked in the Oliver Wyman San Francisco office. Rajiv has consulting experience in healthcare, insurance, IT & operations, and banking, as well as past experience in “Internet of Things” startups and international security research.

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