“A condom is a barrier device commonly used during sexual intercourse to reduce the probability of pregnancy and spreading sexually transmitted diseases. It is put on a man’s erect penis and physically blocks ejaculated semen from entering the body of a sexual partner”. Condoms are therefore medical devices which are used to maintain a good health care. It is in the government’s best interest to subsidise or provide them entirely free so that consumption is not limited to those who can afford them.
This is why they can be defined as merit goods, goods which would be under provided and consequentially under consumed if left in the hands of the private sector alone. Condoms are usually made from latex, but some are made from other materials such as polyurethane or polyisoprene. There are two types of condom: male and female. However, in 2012, male condoms remain far more used than female ones. The latest official figures from the Office for National Statistics show that about 25 per cent of British women aged 16 to 49 say that the male condom is their current method of contraception.
Only 2 per cent use the female condom, so it can be considered as a minor substitute product. Hence, we will be focusing on the male condom. The condom market has been described as something that “boggles the mind”.. Within the condom market there are several major contributors; among them both for-profit businesses and philanthropic organizations, including numerous small manufacturers, and government-run manufacturing plants.
In the UK, condoms are mainly supplied through three different distribution channels: 1. retailers and wholesalers 2. ending machines 3. the NHS (National Health Service) The retail sector is the most important channel for condom distribution in the UK. The main retailers are the major national supermarket chains (which account for around 40% of total retail sales of condoms), Boots, community and independent pharmacies and drug stores. Boots is the largest seller of condoms, it alone accounts for around one in five condoms sold in the UK and over half of total pharmacy sales of condoms. Boots has its own brand of condoms, as does the high street drug store, Superdrug.
Vending is the smallest distribution channel, accounting for?less than 10% of the overall number of condoms distributed in the UK.. Vending machines are mainly located in pubs and bars and will only offer one brand of condom with a limited choice in style and size. Being located in venues which younger people attend to, vending is an important way for condom suppliers to raise awareness of their brands among the young. The NHS is the second largest distribution channel for condoms in the UK, accounting for around a third of total condoms distributed. It gives condoms free to users via NHS clinics.
There has been little change in the overall structure of supply over the past ten years. SSL International Plc, through its Durex brand condoms, has consistently had a share of supply of more than 80% and Ansell has remained its most significant competitor, through its Mates brand of condoms. Other suppliers like Pasante Healthcare Limited, Trojan and Condomania, account for only an insignificant share of supply. SSL distributes condoms through all three distribution channels in the UK and is the largest supplier in both the retail and vending sectors.
Ansell Limited (Mates) distributes through both the NHS and the vending sector, but it currently has limited vending machine operations and only a small share of supply to the NHS. Nevertheless, there has been both entry and exit in the supply of condoms to retailers and wholesalers in the UK. Perhaps the most notable of these has been the entry of Church & Dwight with its Trojan brand. Trojan is the biggest selling brand of condom in the US although it has not managed to gain a consistent share of supply in the UK. A number of fashion related brands (for example, FCUK and United Colors of Benetton) have also entered the market.
Fashion related brands however have principally been interested in enriching their brand image rather than attempting to gain a significant proportion of retail condom distribution. These brands have received limited distribution probably because of the entry barriers to the business which include: * The cost of obtaining the quality certification (BSE Kitemark). In order for condoms to be supplied to users in the UK they have to meet a minimum quality level. Because condoms are classified as a high risk product they have to comply strictly with a range of rigorous product classifications.
There are currently two principal certifications of quality, the compulsory European standard (the CE mark) and the British Standards Institute’s kitemark. * The cost of establishing a brand image. * Getting listed with wholesalers and retailers. * The possible reactions from incumbents once entry has occurred. The image of the brand is considered the most important issue given the intimate nature of this product. Durex is considered a ‘must stock’ brand and survey information provided to the Office of Fair Trading (OFT) also indicates that consumer awareness of the Durex brand name is stronger than that of its major competitors.
Moreover, the brand of the condom appears to be the most important factor to consumers in determining their choice of condom, only followed by quality and price. Reactions from incumbents could impact on the decisions to enter the market. Threatened with competitors’ entry, they might lower prices to protect their market share, making entry less profitable and therefore less appealing. Retail prices and wholesales prices have, on average, fallen over the past few years. This trend however does not indicate that prices are at competitive levels or that incumbents have set predatory prices, but simply that they have been decreasing.
This because, even though the british condom market is definable as an oligopoly, in which only a few firms dominate the industry, sharing among them a big portion of its output, the main firms behave like monopolists. They charge the monopoly price, make monopoly profits, and share them according to market share. In this scenario, minor firms have rarely the power to interfere in price-making decisions. The reason of this consistent fall in prices is that national supermarket chains have expanded as condom suppliers over the past decade.
As such, they have been able to use their negotiating strength to buy in condoms at lower prices and to pass on these efficiencies to consumers through different promotions. This has compensated the lack of any price competition that may exist in the supply of condoms. In addition, as most contraceptives are supplied for free and subsidised by the NHS, and many consumers consider them a necessary rather than discretionary purchase, the market for contraceptives eluded the recent economic crisis unhurt.
Key Note estimates that the UK contraception market grew by 14% between 2006 and 2010, up to a total of £190. 9m. It also predicts that the UK market for contraception will grow by 17% between 2012/2013, to a value of £219m. Condoms are only one of the many existing methods of contraception. Substitute products include the pill, the vaginal ring and the skin patch. However, on the basis of the studies carried out by the Office of National Statistics (ONS), the pill and the condom are the most employed methods in Britain. Both are used by about 25% of sexually active couples.
Even though some contraceptive methods are more effective in preventing pregnancy than condoms, only condoms offer any protection against sexually transmitted infections (STI’s). Considering the number and the closeness of the many substitute products available in the British contraception market, demand for condoms can be considered price elastic. Therefore a change in price leads to a proportionally greater change in quantity demanded for the product. However, since many consumers consider condoms as necessary goods, their price elasticity of demand tend to become more inelastic.
If prices of some condoms were to rise, consumers could opt for a less expensive brand, but habitual consumers’ demand for the product will not decrease. Condoms are necessity goods and their demand should be income inelastic. Nonetheless, if income rises, consumers could choose to buy a more expensive condom due to the various types, brands and qualities available in the market. “Statistics from the Health Protection Agency show that there was a 5. 9% rise in the number of diagnosed cases of STIs between 2006 and 2007, but condom use has not increased significantly in response to this trend”.
In order to limit the spread of such diseases and increase consumption of condoms, the British government introduced public health campaigns promoting greater awareness, social marketing programs, commercial advertising and has expanded distribution channels. Also the use of condoms by unconventional users such as gays resulted in a steady increase in sales of condoms. The rise of demand for condoms has also been driven by new condom design, intended to amplify pleasure for both sexes.
Analysts say the condoms, which contain a gel that helps men maintain a firmer erection for a longer time, could have a significant impact on the market, where innovation is uncommon. In addition, SSL International introduced a number of successful new products in 2007/2008 which are complementary to the use of condoms. The latest of these is Play O, a lubricant designed to enhance the female orgasm. The condom market is certainly very conservative. Merchandising experts agree the embarrassment factor remains a key consideration in placing contraception and sexual health category within a pharmacy.
Durex marketing manager Henry Turgoose admits that the brand’s products are mainly purchased at the pharmacy when customers are there for other reasons. “For many there is still a cringe factor when it comes to buying sexual health products, so ensuring they are easy to grab and close to the till reduces potential embarrassment and increases sales,” he says. Two years ago, Boots decided to move condoms from the pharmacy counter to self-select stands.
Richard Colchester, marketing services manager for Boots Healthcare, says: ‘Research shows that people prefer the anonymity of self-select, rather than open displays on the pharmacy counter. The embarrassment factor has helped online retailers. Internet is satisfying the demand of those users who prefer to buy condoms in a discrete way. It is also being used as a forum for the distribution of condom samples, in addition to providing encouragement for safer sex. In the four years since it was set up, myCondom. co. uk has seen sales increase month-on-month. In the long run, the condom market will probably experience a fall of demand due to the ageing of the UK’s population. In fact younger people tend to have a higher usage rate of contraceptives than the elderly.
There are, however, a number of factors slowing down this process: the tendency of women to delay motherhood via contraception, and the increasing prevalence and awareness of STIs. These factors might also boost demand for condoms’ substitute products and alternative contraception methods. The government should also aim to achieve a greater sex education of the population by taking up aggressive social marketing across all commercial and professional media. Condoms have also encountered religious opposition which has sometimes restricted their availability and use.
Health professionals state that the most effective way to overcome this obstacle is better sex education in schools, so that students can fimiliarise with condoms and learn the importance of using them. In addition, the market could experience growth from the entry of a new or improved product. Research should be done in this respect to avoid condom defects such as the risk of breakage during intercourse. A better quality and a greater efficiency could decrease demand for substitute contraceptive methods in favour of condoms’ demand.
The condom market will probably always have a constant demand due to the nature of the product in question. It is unlikely, however, that a new industry will enter this oligopolistic market. Existing firms will then have to invest in research and technological innovation to improve production and maximise profits and continually reinvent themselves in order to increase demand. Judging by sales of Durex, large numbers of Brits have decided to hide from the credit crisis by tumbling into bed — or they have decided they can’t afford children.
