2020 Vision: Industry experts weigh in on what the new decade holds
Thought the last decade brought about some dramatic changes in the way consumers shopped and retailers went to market?
Well, hold on to your hats. The last 10 years will look like a cakewalk compared with what the next decade has in store, according to industry experts. The bottom line is that dramatic change now is an important part of retailing, and there are no signs that it is slowing down. Conversely, change just is going to speed up.
As we enter a new year and a new decade, DSN asked a range of experts, including retailers, analysts, officials at CPG companies, wholesalers and industry associations, to prognosticate about the year ahead, as well as about developments they expect to unfurl over the course of the next decade. The consensus is that the environment will be as challenging as ever, but smart and innovative companies will find ways to prevail.
On the pharmacy side, the industry sees a continuing evolution toward pharmacists offering a broader range of healthcare services and working more closely with other professionals in the healthcare system. This will be aided by advances in technology that facilitate the sharing of patient information to improve outcomes.
Technology also will help consumers play an increasingly active role in their own care, as they monitor their own health with wearable devices and leverage information available online.
“Because of all the information that is out there, consumers are going to make decisions in an informed way,” said Jocelyn Konrad, chief pharmacy officer at Camp Hill, Pa.-based Rite Aid. “When they recognize that they may have to pay more for some of the unfortunate things that come with chronic illness, whether that’s surgery or additional medications, I think people will start to make better decisions, and we’ll be right there partnering with them to provide some of the solutions to help them stay healthier longer.”
Technology also will continue to impact other areas of the store as consumers continue to gravitate toward online shopping, and retailers seek to create better omnichannel experiences that keep consumers engaged.
Consumer interest in health and wellness only will increase in importance throughout the store as shoppers seek out functional foods and beverages and other products that address both their physical and emotional well-being.
Retailers and their supplier partners that address these consumer needs effectively will be well-positioned for the year ahead and beyond.
Colin Stewart, executive vice president of business intelligence, Acosta
Self-care, the expansion of CBD assortments and the growth of functional foods are among the trends that will impact food and drug retailing in the year ahead, according to Colin Stewart, executive vice president of business intelligence at Acosta.
About 88% of consumers say that self-care is important to them, and the average American already spends $199 a month (22% of their disposable income) on nonessential items to “treat themselves” by taking a more proactive role in their healthcare needs, Stewart said, citing Acosta research.
“With 62% of consumers reporting they want to treat themselves even more than they currently do, we predict the $9.9 billion self-care industry will only continue to grow in the year ahead,” he said.
The grocery channel, in particular, has significant untapped potential for the HBC segment, according to Stewart. Nearly 90% of consumers want retailers to be more involved in their health care, and 80% of U.S. households shop for HBC items in grocery stores, yet they spend 77% of their HBC dollars in other channels, he said.
Functional foods and beverages also are poised for growth in 2020 and beyond. Nearly two-thirds of U.S. adults agree that “healthfulness” has a significant impact on their food and beverage purchase decisions, and 70% of millennials said they’re taking a more holistic approach to their health, Stewart said.
“Given this shopper mentality, projected sales of functional foods with added nutritional benefits are expected to reach $275 billion by 2025,” he said.
Products containing CBD have been a hot category in food and drug retailing, a trend that is expected to continue in 2020 and beyond. Stewart said he also expects to see an expansion of CBD product solutions in various forms.
“As the variety of CBD products expands into other categories, retailers will need to determine if CBD products are best merchandised together or aligned with product type or usage occasion,” Stewart said. “Consumers are hungry for information, and education will be critically important to expand trial.”
Steve Moore, owner, Condo Pharmacy
Steve Moore, owner of Condo Pharmacy in Plattsburgh, N.Y., has an optimistic outlook for the industry in 2020 — with a caveat.
“I’m excited about the future for pharmacists,” said Moore, who recently was named the National Community Pharmacy Association’s 2019 Willard B. Simmons Independent Pharmacist of the Year. “But that’s predicated on payer provider status.”
Recognizing the important role that pharmacists play in the healthcare system by compensating them for the work they do beyond dispensing drugs will remain an important area of focus in the year ahead, he said.
Community pharmacy should not have to lose money on dispensing prescriptions, which increasingly is the reality in today’s environment, according to Moore.
As a part of its ongoing effort to shore up profitability, Moore said he’s getting out of insurance plans that are inadequate. “We’re trying to stop the bleeding,” he said. “If that means we are in fewer plans, then we are in fewer plans. We can’t be in every plan that we would like to be in.”
At Condo Pharmacy, Moore has embraced the concept of the pharmacy as a provider of a range of wellness services, and he plans to continue to expand on those efforts in 2020. Condo Pharmacy specializes in compounding, clinical care services and long-term care, and is part of the Community Pharmacy Enhanced Services Networks, or CPESN, USA network of integrated pharmacies.
“Pharmacists need to be able to practice at the top of their license,” Moore said. “Pharmacists are, in many ways, an untapped resource.”
In the year ahead, Moore said one of the areas he plans to continue to focus on is the need to document the services that Condo Pharmacy provides in a way that will facilitate reimbursement. “I am really excited about what pharmacy is going to be able to bring,” he said. “I think with the scope of practice and with states allowing pharmacists to practice at the top of their licenses, there will be tremendous opportunity for community pharmacy.”
Brian Nightengale, president of Good Neighbor Pharmacy at AmerisourceBergen
2020 could be a pivotal year for pharmacy, said Brian Nightengale, president of Good Neighbor Pharmacy, AmerisourceBergen’s independent community pharmacy network.
“Next year, we expect that reimbursement pressures and DIR fees will continue to intensify and create a more visible impact across all pharmacies, not just independents,” he said. “Those who have pushed to diversify their businesses and worked to develop new solutions beyond dispensing will benefit from that decision and see opportunities for continued growth. At the same time, pharmacies that have stayed with the status quo and haven’t found other ways to engage consumers and patients may have an even harder year.”
Nightengale said he is optimistic about the future of pharmacy and the evolving role of pharmacists in health care, but pharmacy owners will have to push to diversify their businesses through expanded services and opportunities to support patient health and wellness, “potentially beyond the four walls of their pharmacy.”
Meanwhile, demand for healthcare services will continue to grow as the nation faces an aging population without enough doctors to care for them, Nightengale said, citing data from the Association of American Medical Colleges’ “New Findings Confirm Predictions on Physician Shortage,” projecting a shortage of 122,000 physicians by 2032 and a 48% increase in the 65-plus age range population.
“Pharmacies have become one of the most accessible forms of health care,” he said. “In fact, the typical patient sees a pharmacist 10 times more often than a medical provider, making the pharmacy extremely well positioned to provide care through clinical services, such as immunizations, diabetes and nutrition counseling, and other wellness and medication adherence programs. We will continue to see growth in these areas in 2020 and beyond.”
Over the next decade, Nightengale said he anticipates technological advances that will “drive efficiency to new heights.”
These advances will include:
- Connectivity that will ease the transfer of patient data from various healthcare settings to the pharmacy;
- Social media platforms and mobile apps that will enable patients to connect directly with their pharmacy, creating an improved patient experience and the potential for improved adherence and medication management, along with self-reported health data and other metrics that are valuable to healthcare providers; and
- Consumers will continue to embrace wearable devices for their functionality around health and wellness.
Tony True, chief customer officer, Charlotte’s Web
Perhaps no category saw as much activity in 2019 as CBD as new brands and products proliferated online and on retail shelves.
In the year ahead, retailers will take a holistic look at the category and rethink how they target the millions of CBD consumers in the market, said Tony True, chief customer officer at Boulder, Colo.-based Charlotte’s Web, one of the leading suppliers of products derived from hemp extracts.
“We’d predict more strategy and discipline to take over in the CBD category, with retail buyers taking a deeper look at roles of brands and product segments,” he said. “A big unlock will be around how retailers reach the core CBD shopper, while offering appropriate product availability and education to the CBD-curious shopper.
“If done correctly,” he said, “all of these behaviors help the category capture more new users that transition into core and frequent users over time.”
True said he expects to see more order come into the space, “with most retailers aligning strategy against a few core brands and segments, and then holding those brands accountable to a disciplined approach to product quality and innovation strategy.”
Charlotte’s Web plans to expand its retail presence in the year ahead, as well as grow its current product portfolio with its existing retail partners. The company’s product assortment currently includes a wide range of solutions — CBD oils, capsules, gummies, topicals and CBD isolate, as well as CBD for pets. It is the No. 1 CBD hemp extract brand in the country by market share, and is currently available in 9,000 retail locations across the United States.
Reaching a broad consumer base will be important for the company in 2020, True said.
“Charlotte’s Web will market our respected products in a way that makes them accessible to all shoppers and consumers,” he said.
Austin Deng, co-founder and head of product, Kindra
CPG healthcare products will continue to shift toward providing preventive care, overall wellness and holistic solutions that address both physical and emotional symptoms in the year ahead, said Austin Deng, co-founder and head of product at Kindra, a new direct-to-consumer OTC brand offering products that treat menopause.
Santa Monica, Calif.-based Kindra was the first brand launched by venture fund M13 in partnership with Procter & Gamble. It offers estrogen-free lotions, dietary supplements and other resources for women experiencing menopause.
Deng said health and wellness are becoming more embedded into everyday routines as exemplified by the popularity of functional foods and beverages and multi-benefit OTCs and dietary supplements. Consumers are more engaged with health issues than ever before due to awareness driven by the internet and social media.
In addition, consumers have come to expect an “experiential” relationship with healthcare brands as opposed a transactional one.
Kindra is responding to these trends with a brand that takes a holistic approach to wellness, Deng said. “Kindra aims to address the needs of the whole woman by complementing the physical products with a suite of digital products that include an online self-assessment, community forum and educational content,” he said.
He described Kindra as a digitally native brand that is “well-positioned to meet consumers where they are and to provide key information about menopause in an easily digestible way. By taking a three-pronged approach to tackling menopause with products, content and community, Kindra is reshaping what it means to be a consumer healthcare brand today,” he said.
Looking at the decade ahead, Deng cited several trends:
- The merging of health and behavioral data to enable an end-to-end approach to health care. Data will come from genomics, wearables, diagnostics, medical records and consumer behavior;
- The delivery of care will happen more and more in the home, online and at retail health clinics;
- Personalized health solutions will be enabled by one-on-one communication at the consumer’s convenience and across multiple digital and physical touchpoints; and
- More partnerships between companies to enable holistic solutions to address health and wellness.
Chris Dimos, president of retail solutions, McKesson
Chris Dimos, president of retail solutions at Irving, Texas-based healthcare products distributor McKesson, said he sees two consumer trends impacting drug stores in the year ahead.
“First, we need to consider an omnichannel experience for patients,” he said. “Our digital and in-store experience must be seamless and consistent. Second, knowledge is power for consumers. Empowered consumers have more control over their health decisions than ever before. Our job is to meet those consumers where they are and provide quality care.”
Dimos said retail pharmacies need to consider taking a holistic approach to the consumer experience “instead of thinking of a website experience, a prescription refill experience and in-store experience. We will see retailers shift to an omnichannel experience consumers can use whenever they want,” he said. “Want to text your pharmacist? That’s now a realistic expectation.”
Dimos also said that although consumers have become more empowered, they still trust their pharmacist. “The one-on-one patient interactions that take place in the pharmacy, over the phone or even through Facebook Messenger — those conversations will better patient care and, ultimately, help patients reach their goals faster,” he said.
Looking forward over the next 10 years, Dimos said he sees pharmacists playing a larger role in health care.
“Over the next decade, I predict pharmacists stepping out from behind the counter to provide necessary clinical services,” he said. “Instead of pharmacies acting as a solution center for the sick, they will be viewed as a hub for the healthy. I believe all community pharmacies will provide additional services, such as point-of-care testing, immunizations and diabetes management. These additional clinical services will shape the future for retailers, pharmacy professionals and our industry.”
Steve Anderson, president and CEO, NACDS
One of the biggest problems facing pharmacy operators has been direct and indirect remuneration, or DIR, fees and the detrimental impact they have on pharmacy reimbursement rates. National Association of Chain Drug Stores president and CEO Steve Anderson said this problem needs to be dealt with, and the trade organization is working to make that happen.
“Pharmacies face unfair and below cost reimbursement, and patients face challenges in healthcare costs and access,” he said. “The dire needs of patients and pharmacies alike need to be addressed in meaningful ways, and that is exactly what NACDS is fighting for at the federal and state levels.”
Anderson said that NACDS currently is waging various campaigns aimed at bringing about DIR fee relief, dealing with unsustainable reimbursement rates and improving the services that pharmacies can offer and be reimbursed for. He also said NACDS is working to advance pharmacy’s role as part of the solution with regard to opioid issues.
While it works to alleviate some of the issues currently facing the retail pharmacy industry, Anderson said NACDS also has its eye on the future and is able to navigate the constantly changing landscape.
“This is an era of transformation in health and wellness, and of consumers’ expectations,” Anderson said. “So, while NACDS fights the immediate battles facing pharmacies and patients, we also are creating opportunities through our meetings for NACDS members to explore the future. NACDS is completely member focused. We are fighting for our members’ future.”
Doug Hoey, CEO, NCPA
Doug Hoey, CEO of the National Community Pharmacists Association, said community pharmacists will continue to fight back against what he described as “destructive PBM tactics” in the year ahead.
More than 3% of all chain and community pharmacies closed between the summer of 2018 and the summer of 2019, he said, citing data from health information research and technology company IQVIA.
“In the meantime, as we continue advocating for PBM reform, economic pressures on pharmacies continue via pharmacy DIR fees, low reimbursement rates and other PBM maneuvers like preferred pharmacy networks and forced [or incentivized] mail order,” Hoey said. “This makes it increasingly important to transform the pharmacy payment model to compensate for value and recognize pharmacists for the services they do and can provide.”
He cited the opportunity for pharmacists to participate in CPESN in order to gain recognition for practicing at their full scope.
“Many already have direct contracts with medical-side payers who see the value in independent community pharmacy’s local relationships and ability to deliver quality patient care,” Hoey said.
He said NCPA anticipates continued growth of CPESN in 2020 and beyond, and also anticipates contributions from the NCPA’s “Flip the Pharmacy” program, a joint effort with the Community Pharmacy Foundation that seeks to transform community-based pharmacy from filling prescriptions at a moment in time to caring for patients over time. Twenty “Flip the Pharmacy” grant recipients were announced as part of the program’s first cohort, with goals including targets for non-product-based reimbursement revenue, care plan submissions and various screenings.
“The overarching goal here is turning community pharmacy into a model that is integrated with other healthcare providers,” Hoey said. “I can’t wait to follow this new initiative’s progress. We really believe that for those who continue to run the race and work to innovate, their efforts will pay off.”
Chuck Cerankosky, analyst, Northcoast Research
Chuck Cerankosky, an analyst who follows several publicly traded food and drug retailers at Cleveland-based Northcoast Research, said ongoing economic growth will play a key role in the industry’s performance in the year ahead.
While the strong economy and low unemployment levels have helped drive consumer spending and have encouraged shoppers to trade up to more expensive purchases, Cerankosky said that these consumers might also be more likely to dine out, shifting their spending from retail groceries to restaurants.
“What’s interesting when you are talking about these staple retailers, such as supermarkets and drug stores, is that if consumers are making more money, I don’t know if they buy more bananas and more bandages,” he said. “You are more likely to gravitate toward dining out and big ticket discretionary merchandise, which I think has been a big challenge for some retailers.”
Such retailers as Costco have thrived amid the economic expansion, he said, because of their mix of higher ticket discretionary merchandise, offered in a treasure hunt format that encourages impulse buys among those that can afford them.
Traditional food and drug retailers, such as Kroger, meanwhile, “have been working awfully hard to get their comp-store sales to 3%, or even to 2.5%,” he said.
Looking at the decade ahead, Cerankosky said an eventual softening of the economy could lead to reduced consumer demand for home delivery — an added expense for consumers that also is costly to retailers. “In an economy where people start to part with certain luxuries, delivery could be one of them,” he said.
One potential outcome could be bifurcated pricing, he said, in which retailers, rather than calling attention to the fees that they charge for delivery, offer a discount to consumers for picking up products themselves.
In the near term, however, Cerankosky said he expects ongoing expansion of home delivery and buy online, pickup in-store services. “That has a lot of attraction for many, many people,” he said.
Brian Sharoff, president, PLMA
Mass retailers should see an increase in private-label beauty sales if they find and develop the niches that consumers want, said Brian Sharoff, the long-time president of the New York-based Private Label Manufacturers Association. And, the result will not only mean more profits for those retailers who get involved with the segment, but higher traffic from hard-to-reach millennials, a group of consumers who do not seem very interested in traditional shopping patterns.
Using Kroger’s successful launch of its Simple Truth natural and organic private label line as an example, Sharoff said that retailers have an opportunity to create their own products that cannot be found anywhere else. “These are not look-alike products,” he said. “They are unique and designed to give consumers exactly what they want.”
Sharoff said a combination of greater creativity among private label manufacturers in the beauty category and product development is helping more retailers add the segment to their beauty assortment. Since millennials less likely are to react to advertising, they will be more likely to visit a retailer that has an affordable product. “They are interested in products that get the job done,” he said.
Sharoff expects that private label could help change consumer shopping patterns in the years ahead. Talking about the phenomenon created by Lidl and Aldi over the last decade, he said that if either or both of these companies started to add more beauty products to their mix, a large number of consumers might stop shopping at traditional mass retailers and instead go to these two private label-focused retailers.
Edward Rincón, president, Rincón & Associates
One of the biggest challenges for food and drug retailers in 2020 and beyond is consumers’ increasing aversion to cooking, said Edward Rincón, president of Rincón & Associates, a Dallas-based research firm.
Food retailers have embraced such solutions as prepared grab-and-go foods, heat-and-eat meals and other alternatives intended to simplify home cooking, but Rincon questions whether those will satisfy the millennials who have become accustomed to restaurant-level service.
Rincón, who has been studying multicultural consumer behavior for 45 years, said retailers also need to be aware of shifts in the multicultural market. While ethnic minorities make up a growing percentage of the overall consumer populace, they increasingly are second- and third-generation Americans who enjoy American foods and culture, but still feel a connection to the products of their ancestral homelands.
Importantly, these consumers, like mainstream consumers overall, are seeking out better-for-you foods at affordable prices. “People who consume multicultural foods are making smarter decisions about eating healthy foods,” Rincón said, noting that much of the food available in low-income markets tends to be less than healthy.
This also is a reflection of what he described as “redlining” by traditional supermarket companies that have avoided certain ethnic neighborhoods. Rincón recently compiled a research report on underserved “food desert” areas in the Dallas area, which he said shows that operators are not looking at the right criteria when analyzing where to build.
“The site-selection models of the supermarket companies are missing great opportunities,” he said.
Other factors that Rincón sees impacting food and drug retailers in 2020 include:
- The inability of many lower-income consumers to purchase medications. This could be exacerbated by proposed cuts in SNAP benefits, which could force some consumers to forego spending on medications in favor of food; and
- Due to these restrictions, more immigrants likely are to import needed medications from their countries of origin, which are obtained through family or friends crossing the border.
Jocelyn Konrad, chief pharmacy officer, Rite Aid
Jocelyn Konrad, chief pharmacy officer at Camp Hill, Pa.-based Rite Aid, said she expects retail pharmacy operators to reposition themselves in different ways to provide services to the communities they serve.
“We’ve been looking at having pharmacists work to the top of their license, and I do believe that that is going to be where we will all be driving,” she said.
At Rite Aid, the focus on being a healthcare organization that serves the communities where it operates will impact all decision-making throughout the year, from the front-end product assortment to the pharmacist’s interactions with patients. “It is really taking care of those customers along their journey,” Konrad said. “We want to meet those customers where they are, and based on what they need.”
She said educating consumers about the value of pharmacists also will be a focus in the year ahead, following the groundwork laid by the widespread rollout of immunizations offered in pharmacies. Additional pharmacist activities could involve such efforts as OTC recommendations and providing a “higher-touch, higher level of care to chronically ill customers or caregivers that need additional support, and can’t always get that from their current healthcare providers,” she said.
As more states allow pharmacists to perform such clinical functions as flu and strep throat testing, and grant prescriptive authority, as Idaho recently did, Rite Aid plans to incorporate those into its offerings as well.
Rite Aid also will continue to seek ways to free pharmacists from routine tasks through the implementation of such systems as central fill capabilities, creating opportunities for more “face-to-face, eyeball-to-eyeball” interactions with patients,” Konrad said.
The retailer also will continue to grow the Rite Aid brand, both through its own-brand products in the front end and through its position in the communities it serves. It also will continue to explore regional partnership opportunities with other healthcare service providers seeking to provide positive outcomes for patients.
Looking at the decade ahead, Konrad said she sees technology playing an increasingly important role throughout the healthcare industry.
“I think that we will be utilizing the omnichannel solution in many different ways to personalize the interaction with the customers,” she said, citing the potential offered by artificial intelligence and machine learning.
Telehealth solutions, through such services as Rite Aid’s RediClinic Express, also will continue to play an important role in health care, as will other emerging technologies that include delivery drones and automation.