H1N1 Impact & Implications

From Nielsen Wire

Jim Mansfield, Customer Development, The Nielsen Company
Contributors: Todd Hale, Tom Pirovano, Heather Grantham, Tony Gleicher, Melissa Herrel, Melissa Conner, Kelly Melanitis, Liz Yurkevicz, Dale Norton, Melissa Davies and Robert Buckeldee

SUMMARY: Consumers worldwide are plagued with the new H1N1 influenza according to the World Health Organization. The H1N1 influenza (swine flu) has a higher rate of infection and has caused the flu season to begin earlier than prior years. Fearful consumers raced to understand how to protect themselves online and also purchase preventative products. The increased rates of infection have caused spikes and declines in selected categories.

In April 2009, confirmed reports from the U.S. Centers for Disease Control revealed a new strain of the flu virus—known as H1N1 (swine flu). By June 2009, the World Health Organization declared a global pandemic alert as more than 70 countries worldwide were infected. By the first week of November 2009, most developed countries reported widespread infection.

The rapid transmission of the virus translated into swift consumer reaction…

Viral reaction
The rapid transmission of the virus translated into swift consumer reaction. Consumers reacted immediately and took the quickest and most readily-available route to information—the Internet. The first online conversations about swine flu took off with over 500,000 messages posted in April 2009 when initial news of the first diagnoses spread. Although, there is a continued upward trend in online swine flu conversation today, the volume has declined five-fold to just over 100,000 messages in November.

While initial Twitter discussions were a bit slower on the conversation uptake than prominent discussions boards like WebMD and iVillage, Twitter discussions remained elevated for several weeks after chatter among forums dropped off significantly after the first week. Twitter actually remained the top source for discussion of swine flu through the summer and into the start of flu season.
Today, as the flu season is back in full swing, the volume of swine flu buzz on discussion boards, blogs and forums is just now moving ahead of Twitter volume again. The fact that Twitter is just one source and there are thousands of online discussion boards validates the impact and intensity of Twitter followers.

Sales of hand sanitizers increased significantly…

Healthy response
Concerned and infected U.S. consumers stocked up on preventative, treatment and sanitizing products at an increased rate. Sales of hand sanitizers in particular increased significantly in April 2009 and then again in October, corresponding to the height of online chatter. From September to October 2009, consumers increased spending per trip on the category 181% compared to the same time period in 2008 and the percent of households buying hand sanitizing products increased 132%.

Similarly, consumers increased purchases in categories that offered a treatment or prevention benefit. Thermometers, vitamins, cough and cold remedies, orange juice, cleaning products, tea and soup all reported year-over-year increases. Spending on thermometers and cough and cold remedies increased 88% and 10% respectively from September to October 2009 vs. 2008 and the penetration for thermometers increased 80%. Overall, more consumers spent more per trip and purchased more frequently compared to last year. Essentially, a household with a child infected with H1N1 spent on average of $23 if they purchased a cold remedy, thermometer, and hand sanitizer—an increase of 6% vs. prior year.
Conversely, it appears that references to “swine” negatively impacted sales of pork products as the category reported a 6% decline in dollars, equating to approximately $930,000, in October 2009 compared to last year.

The expanded flu season could bring about shortages…

Meeting demand
While it appears that sufficient quantities of cough and cold products are available at retail, there is a growing concern that the expanded flu season could bring about shortages. To stay ahead of the curve, Nielsen developed a forecast demand distribution model to help manufacturers appropriately distribute products to meet consumer demand. An analysis of the U.S. cough and cold category is illustrated as an approach to plan ahead to meet demand.
To understand and isolate the true impact of H1N1, growth in the cough and cold category was decomposed to account for concurrent market events, as significant consumer promotion is occurring in parallel. Nielsen reports $772M was spent on media promotion for over-the-counter cough cold products in the year ending September 2009 and one-fifth of products were sold on promotion.
The sales impact on the cough and cold category was determined by using a statistical method (multiple linear regression model) of 160 weeks ending 10/31/2009 including promoted dollars, percent of promoted dollars, total promotion expenditures, and estimated average influenza like illness (ILI source CDC) if H1N1 did not occur. Historical, influenza rates are available from the CDC and were analyzed from 1999 to date.

The H1N1 flu virus boosted cough and cold category units by 14%…

Nielsen determined that the introduction of the H1N1 flu virus boosted cough and cold category units by 14% and increased dollars by 4% from week ending September 5, 2009. In the most recent four weeks ending 10/31/2009, units and dollars are up 21% and 1% respectively. The variance in dollars to units is due to the ongoing promotion occurring in the market. Essentially, the approach can forecast anticipated influenza rates for H1N1 and seasonal flu to determine the impact to units and dollars by taking into account all promotion activities. Additionally, ongoing analysis that factors in the significant media outreach and resulting consumer reaction is vital.

Weather the storm
Historically, the flu season peaks from December to January. When comparing current Centers for Disease Control influenza-like illness rates to historic trends, the U.S. is now currently reaching or has already reached a peak. Since most of the flu activity reported to date is for the H1N1 flu, it is likely that the regular seasonal flu (which is still on the horizon) will prolong these trends through February or March 2010, when the seasonal flu typically begins to decrease. Retailers and manufacturers can better anticipate and meet peaks in demand by understanding potential infection rates. And now is the time to take advantage of sales opportunities to partner with other manufacturers with combined offers. With heightened consumer awareness, many will race to purchase preventative, diagnostic and treatment products at the first sign of a sniffle.