OTC hair regrowth products?A growing trend

April 1, 2002

Propecia and other products for hair regrowth

 

OTC hair regrowth products—A growing trend

The Hamacher Resource Group provided the information for this article. The Milwaukee company provides marketing services and business intelligence to the healthcare industry. Wholesalers, manufacturers, and retailers partner with Hamacher Resource Group to improve their profitability. For more information, visit www.hamacher.com .

More than 50% of all men suffer apparent hair loss by age 50. And as more and more male baby boomers pass the half-century mark, they strengthen the outlook for the hair regrowth category (HRC). There’s also a second strong reason to believe in the tremendous untapped potential of HRC. Pharmacia Corp., the maker of Rogaine, estimates that 40 million males have suffered hair loss but that only 1.3 million have tried HRC products. Research indicates that 5.7 million men would try HRC products, provided they can be given three assurances:

• New hair would amount to more than "peach fuzz"

• Results can be achieved in a relatively short time

• Hair regrowth products would work for them

Pharmacia believes that Rogaine Extra Strength, a former prescription product, meets all the criteria. Rogaine Extra Strength stops hair loss or regrows hair in four out of five men. And it produces results in as little as two months—half the time of the regular strength product.

OTC and Rx regrowth products

After Rogaine Extra Strength was introduced as an over-the-counter item in 1998, HRC sales soared to $150 million. The number dropped to $113 million in the 52-week period ending Jan. 2, 2000, however. The main reason: the rise of the prescription hair regrowth drug, Propecia. Approved in December 1997—about the time Rogaine Extra Strength was converted to OTC status—Propecia produced worldwide sales totaling $83 million in 1998.

The growth of Propecia isn’t exactly bad news for drugstores. Propecia is supported by massive direct-to-consumer advertising. And although profit margins are low to moderate, for the most part, the drug is a cash prescription. Research by Hamacher shows that gross margins range from 0% to 20% above average wholesale price (AWP). The national median price for Propecia 1-mg tablet in chain drugstores is $52.09, and the median gross margin is 10%.

To shore up Rogaine sales, Pharmacia is using advertising that targets younger men and focuses on stabilization. The message, "You can keep the hair you have," recommends daily use of Rogaine.

A second company tactic is to educate potential users with regard to proper application and realistic expectations. The company believes that improving the compliance of first-time users will achieve better hair regrowth. To this end, Pharmacia introduced starter packs that include a free videotape explaining how to correctly apply Rogaine plus a sample of Progaine shampoo. Starter packs are being offered at the same price as the 2-oz. sizes of Rogaine and Rogaine Extra Strength. Pharmacia has a strong incentive to fight for its Rogaine franchise. The brand controls about 75% of the subcategory.

Rogaine for Men Extra Strength62%
Private-label minoxidil22%
Rogaine for Women7%
Rogaine for Men Regular6%
All others3%

A growth opportunity for drugstores

Drugstores, too, have a vested interest in rooting for the success of OTC hair regrowth products: The subcategory is a strong drugstore niche. Consider this fact—drugstores control only 29% of the overall hair care business but own more than a 58% share of hair regrowth sales. In addition, HRC is a very space-efficient subcategory. The products occupy only 2%-3% of the hair care department’s space but produce 5% of hair care sales. An adequate selection can be merchandised in only 2 linear feet of shelf space, so it’s important that retailers stock the right items. The trend is to extra-strength products, especially twin-packs. Category analysts at Hamacher merchandise hair regrowth products at eye level in the medicated shampoo section. In some drugstores, Rogaine Extra Strength also is cross-merchandised in the men’s grooming area.

To make the most of the entire hair regrowth opportunity, retailers can’t neglect the OTC side of the business. Although sales of Rogaine Regular and private-label minoxidil have fallen, Rogaine For Men Extra-Strength is showing increases. In fact, according to Hamacher figures, Rogaine for Men Extra Strength 2 x 2 oz. is the most productive item in the entire hair care category.

A trend that will continue

In addition to stocking the most productive items, drugstore retailers can build their HRC business through judicious promotion. For example, be sure to advertise Rogaine in January to take advantage of the seasonal peak caused by New Year’s resolutions. The same interest that drives people to "finally take that weight off" also motivates men to try to improve their personal appearance.

As we said earlier, Rogaine’s "Twin Pack," a two-month supply of Extra Strength Rogaine, is the most productive item in the overall hair care department. Its popularity is revealing and implies a trend: Consumers are satisfied with HRC results and are making HRC products part of their daily grooming regimen. This is good news for drugstores.

 

HAIR REGROWTH CATEGORY SUMMARY

 Large Dept.Medium Dept.Small Dept.
Number of linear feet32.52
Estimated number of SKUs1086
Estimated sales per year$1,490$1,465$1,285
Estimated inventory-retail$475$410$290
Estimated turnover3.13.64.4

 

HAIR REGROWTH NEW ITEMS

ProductManufacturer
Rogaine Men Extra Strength Starter Kit 2 oz.Pharmacia Corp.
Rogaine Men Extra Strength Starter Kit Ckp 2 oz.Pharmacia Corp.
Rogaine Men Extra Strength Starter Kit Sns 2 oz.Pharmacia Corp.

 

HAIR REGROWTH NEVER OUT LIST

Use this never out list to monitor your in-stock condition. The items listed account for more than 50% of the dollar sales in the hair regrowth department. An out-of-stock on any of these items represents a significant loss of sales.

____ Progaine Shampoo/Conditioner 10 oz.

____ Rogaine Men 2 oz.

____ Rogaine Men Extra Strength 2 oz.

____ Rogaine Men Extra Strength 2x2 oz.

____ Rogaine Women 2 oz.

HAIR REGROWTH COMPETITIVE SHOP LIST

This list includes the most popular and price-sensitive SKUs in the hair regrowth department. Use it to check that your prices on these key items fall within the average everyday retail range.

ItemEveryday price range
Progaine Shampoo/Conditioner 10 oz.$3.99 — $4.99
Rogaine Men 2 oz.$23.09 — $24.99
Rogaine Men 2x2 oz.$35.29 — $38.19
Rogaine Men Extra Strength 2 oz.$28.99 — $31.33
Rogaine Men Extra Strength 2x2 oz.$45.23 — $48.99

 



Sandra Levy. OTC hair regrowth products—A growing trend.

Drug Topics

Apr. 1, 2002;146.