Equity Research

Brand Matters: Consumer Health and Wellness

The sheer size and growth profile of the consumer health and wellness market render it attractive. It represents nearly one-fifth of all nonfood sales at retail and is growing rapidly and scaling in the e-commerce channel given the vast and critical range of consumer need states it addresses. And over the past five years, the segments have grown at compound annual rates in the mid- to upper single digits. In addition, product demand is recurring in nature and recession resilient. As a result, the industry offers greater visibility with fewer peaks and valleys, particularly across economic cycles.

Separately, brands matter in a market where safety and efficacy are paramount. And strong industry profitability holds merit on its own, while supporting reinvestment in innovation and marketing, which in turn further reinforce brand equity. Lastly, the industry remains relatively fragmented, which creates consolidation occasions for strategic investors and market disruption openings for emerging brands. Overall, we believe these characteristics render the consumer health and wellness market attractive for industry participants and investors, whether those be venture capital seeding promising early-stage start-ups looking for proof of concept, private equity funding growth of midstage businesses looking to scale, and public market capital allocators looking to create value for shareholders.

In our report titled Brand Matters, published periodically, we address topical issues in the consumer industry. The report seeks to illuminate demographic and lifestyle factors, purchase influences and shopping behaviors, scientific and technological developments, and go-to-market models and demand generation strategies that have the potential to sway the industry. In this volume, Brand Matters: Consumer Health and Wellness, we focus on the consumer health and wellness market in three main sections.

  1. First, we endeavor to define the market, one centered on over-the-counter (OTC) healthcare; vitamins, minerals, and supplements (VMS); and healthcare devices. Next, we make the case for industry investment, with the attraction based on market size, growth, and structure; the recurring and recession resilient nature of demand; and brand equity and industry profitability.
  2. Second, we seek to illuminate important industry trends that influence the direction and division of industry growth. These include the rise of more empowered and self-directed consumers who are paying even closer attention to their well-being and adopting measures to address their health and wellness in more holistic ways. Innovation in the form of new products allowing consumers to address more need states is enhancing consumer regimens, further encouraging self-care. And business models that are omnichannel and digital capable are enabling consumers to interact and transact with brands whenever and however they desire, with consumers practicing in the home a part of autonomy. In addition, the role of the healthcare practitioner is evolving, with a majority prioritizing a shift to prevention and as invested as their patients in the concept; healthcare is converging with other industries such as food and beverage targeting certain need states and technology such as telemedicine for program maintenance and compliance; and industry value creation efforts are driving structural changes via strategic transactions and deal activity in public and private markets.
  3. Third, we outline how industry participants may position their businesses in relation to the industry trends. The goal of each company is to find the right balance for its own business; that is, which trends to lean into and how hard. In that vein, our frameworks are illustrative in nature and meant to provide a structure for further thought and discussion.

For purposes of this report, we conducted a survey of 500 adult men and women in the United States to provide insight into their attitudes and uses of consumer health and wellness. In addition, we analyzed third-party point-of-sale data to gain visibility into market trends. This syndicated data covers measured retail channels such as food retailers, drug stores, mass merchants, and convenience stores, but excludes data from channels such as e-commerce and certain club and specialty stores. Except where otherwise noted, the true market sizes may be as much as 30% larger than many presented here, and the total market growth rates will typically be higher than those presented in this report. Still, we believe the measures contained herein provide good directional indications of important consumer health and wellness market dynamics. Lastly, our report contains insights gleaned from conversations with industry participants.

For a copy of the “Brand Matters: Consumer Health and Wellness” report mentioned in this article or information on any of the companies in Jon Andersen’s research coverage list, please contact your William Blair salesperson.

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