The latest buzzy skin-care subcategory is over-the-counter.
OTC products, such as those addressing rosacea, psoriasis and eczema, are earning more attention from non-traditional OTC skin-care brands. They’re now seeing an opportunity to innovate a large category dominated by legacy brands like Eucerin, CeraVe and Aveeno. Prestige and masstige brands like Josie Maran, The Inkey List, Bubble, and lip care brand Eos have all expanded into the OTC space since 2020. OTC refers to non-prescriptive medicines, such as Tylenol and Benedryl, which contain a certain percentage of an active ingredient that targets a condition. In the case of some eczema topicals, that’s 1% colloidal oatmeal. Brands newly expanding to the category assert that they have better, cleaner and more innovative formulations than existing treatments, even though the active ingredients tackling skin conditions are the same across the board. As the traditional beauty market becomes more crowded, beauty brands are seeking new ways to grow sales without oversaturating existing categories and product assortments. According to research company Insight Partners, the dermatology OTC medications market is expected to grow from $15.5 billion in 2021 to $21.3 billion by 2028.
In September, The Inkey List launched five OTC products under a new category called Supersolutions. The products, all under $25, focus on acne, eczema, psoriasis and rosacea. Supersolutions is sold online and in-store at Sephora, and on The Inkey List’s e-commerce site. A selling point marketed by the brand is that all the products can easily be used with other skin care and under makeup.
Mark Curry, co-founder and lead chemist of The Inkey List, said the brand opted to develop Supersolutions based on customers’ questions during consultations with AskInkey, a 24/7 chat service.
“Healthcare companies [making OTC products] don’t necessarily think about other aspects of a consumer’s life that brands, like us, do,” said Curry. “We want to ensure that using treatment products is an experience that they understand and is good. Whether it’s OTC skin care or any skin care, what matters is compliance, in that people use it frequently and consistently.” Curry said The Inkey List expects Supersolution to soon account for 10-20% of brand sales.
The resulting opportunities for The Inkey List, in terms of product and sales opportunities, are significant. The Inkey List can debut different ingredients and product formats as regulations change and can “unlock” other ingredients into the OTC space, said Curry. One example is when the Food and Drug Administration approved Differin Gel 0.1% for OTC treatment of acne in 2016. It was initially a prescription-only product approved for acne in 1996.
For its part, Codex Beauty recently rebranded to Codex Labs Corporation as it seeks to focus more on OTC skin conditions such as acne, eczema, psoriasis and rosacea. This decision emerged as the brand conducted clinical trials on its acne products. Dr. Barb Paldus, founder and CEO, said the brand was evolving into a dermatology brand. Its first OTC products, launching in March 2023, will focus on acne.
“When we looked at our [product launch] roadmap, we saw that the next OTC products will be for eczema, psoriasis and rosacea. It no longer made sense to be called a beauty company,” said Paldus. “We also got the seals [for our products] from the National Psoriasis Foundation and National Eczema Association; that’s our community now.”
That community is large and serves as a ripe opportunity for brands to grow their bottom line. According to the American Academy of Dermatology Association, 7.5 million people in the U.S. have psoriasis, while rosacea affects 16 million, and 10% of people will develop eczema during their lifetime. Eczema affects up to 25% of children and around 3% of adults. First Aid Beauty, which developed products for eczema when it launched in 2009, successfully sold to large conglomerate P&G. As more companies look to dermatology and clinical brands to grow their portfolios, this group of new OTC brands could be a viable target.
Meanwhile, Josie Maran has established a collection called Argan Apothecary to house its OTC products. It launched its first product, a body butter for eczema, in 2022 for $46. A second, undisclosed product initially set to launch in August is on hold and in further development, but two new products will launch in 2023. So far, the OTC body butter has been a bestseller and driven new customer acquisition for the brand, according to Josie Maran, founder and CEO of her eponymous brand. Approximately 40% of customers purchasing the body butter are new to JosieMaran.com, and it is the No. 2 best-selling product on the brand’s e-commerce site. The body butter is also sold at Sephora, where it ranks in the top-five of best-selling Josie Maran products.
Maran said the eczema-relief body butter is based on the brand’s best-selling Whipped Argan Oil Body Butter, but with the benefit of being for sensitive skin. Because of this association, customer education has been relatively straightforward, she said.
“We have credibility in creating beautiful, sensorial formulas, so you’re not sacrificing the beauty and yumminess of a product to get next-level results,” said Maran. “We’re filling a hole that people want. People are now educated on healthy and clean ingredients; [OTC] is the next frontier.”
Eos, which has sold two OTC lip products since 2020, declined to share any sales data related to its own OTC efforts. But the market opportunity for OTC lip products is vast, per previous Glossy reporting. OTC products account for 40% of overall sales in the lip category and drive nearly $500 million in annual sales, said Soyoung Kang, Eos CMO, citing Nielsen research.
To be clear, prestige brands addressing skin condition needs like rosacea and eczema have existed for many years and are sold through a variety of retailers like Sephora, Ulta Beauty, Bluemercury and QVC. But the encroachment upon this space by brands not founded in the category is newer, as is their focus on more novel formulations. Examples include Maran’s clean beauty approach and Codex’s focus on plant-based and vegan formulas that support the microbiome.
“Brands are looking at the category because the traditional beauty category is incredibly crowded,” said Paldus. “There is a higher barrier to entry to bring out an OTC product than there is to bring out a regular cosmetic product. Brands with strong technology are looking to differentiate and move into a less noisy whitespace.”
Codex has seen a 40% repeat customer rate on products that carry the seal from the National Psoriasis Foundation and National Eczema Association. Additionally, emails specifically for people who came to the brand’s website from those entities have an open rate of 60%, versus the rest of Codex’s subscriber base, at 20%.
“There’s an appreciation by the customer with skin conditions [for our products] and a loyalty from people with these skin conditions that we’ve never seen in beauty,” said Paldus.
Dr. Rachael Cayce, M.D., a dermatologist and member of Physicians Formula’s Physicians Coalition advisory board, said many existing OTC products address a skin condition that can aggravate another condition. Rosacea patients, for example, can still have dry or oily skin, so it benefits them to have many products to choose from that won’t be irritating, she said. However, she said she does not see much additional benefit for people as products become more available in specialty beauty retailers. She finds that the education necessary for addressing medical skin conditions is lacking.
Curry, meanwhile, does see a benefit in more specialty and prestige retailers selling skin condition-focused products. And Maran said she hopes to see more specific merchandising categories, so customers can more easily navigate and find such products.
“The more [this product category] is found in settings like [Sephora], the more it normalizes [these skin conditions],” said Curry. “Historically, people kept these products in locked drawers or their bathroom cabinets. But the more you bump into it in a prestige environment, the better.”
With the additional focus by the beauty industry on skin conditions like eczema and psoriasis, other skin conditions like Hidradenitis Suppurativa, a chronic inflammatory skin disease, could receive more long overdue attention, said Cayce. Estimates in the U.S. and Europe show that about one out of every 100 people has H.S. Another skin condition could be seborrheic dermatitis, which can cause stubborn dandruff. Indeed, many hair-care brands such as Jupiter, Living Proof, Headquarters and Ouai have already debuted dandruff-focused products in the last two years, nipping at the heels of heritage brands Blue Selsun and Head & Shoulders.