A consumer health product can be clinically sound, fully compliant, and manufactured at scale—yet still fail. When this happens, the reasons are often not scientific, but human: perhaps the dosage form is unpleasant, inconvenient, or simply does not fit into real routines. In the consumer healthcare (CHC) and over-the-counter (OTC) markets, those details can determine whether a product is selected, used consistently and repurchased, or quietly abandoned.

At the same time, competition in these markets is intensifying. Categories are increasingly crowded, price pressure is squeezing margins, and agile new brands are raising expectations around convenience, sensory experience, and usability.

Traditionally, many CDMOs have been positioned primarily as manufacturing partners: executing predefined briefs and delivering against established specifications. In this model, brand owners led concept development internally, and CDMOs were brought in once the product direction was already largely fixed.

But the CHC market is now placing pressure on brand owners to innovate more intelligently—and to do so with greater speed and confidence. As a result, innovation increasingly depends on upstream collaboration between brand owners and their CDMO partners. Forward-thinking CDMOs are evolving into strategic co-innovation partners who can combine technical depth, consumer understanding, and long-term reliability to help shape concepts, not only manufacture products.

Market Forces Driving Change

CHC is one of the fastest-growing segments in the broader health and wellness economy, and that growth is reshaping expectations for product innovation. 

The global OTC market was valued at $142.27 billion in 2025, with projections of $268.32 billion by 2035.¹ This represents a CAGR of 6.55% between 2025 and 2035¹ driven by long-term shifts toward self-care, self-medication, and prevention. These trends are supported by multiple demographic and public-health factors, including an aging population, rising incidence of infectious disease, and greater consumer access to health information and products.¹

Nutraceuticals are growing even faster. The global nutraceutical market was estimated to rise from $500.62 billion in 2025 to $1,124.56 billion by 2034, exhibiting a CAGR of 9.40%.*²

However, growth does not automatically translate into commercial success. As OTC and nutraceutical categories expand, competition intensifies—not only between established pharmaceutical players, but also from agile start-ups and digital-first brands. Consumers now have more choice than ever, and loyalty is increasingly conditional.

Consumer Expectations Are Raising the Bar

This shift has important implications for how CHC brands differentiate. Product success is no longer driven by efficacy alone. Consumer expectations now include the full experience: taste, mouthfeel, convenience, speed of perceived onset, and even packaging usability. Experience begins with the product’s appearance and continues through every interaction, involving multiple senses and practical behaviors.

At the same time, expectations are rising on the B2B side too. Brand owners are under pressure to strengthen supply chain resilience, ensure global regulatory compliance, and manage ever-increasing quality requirements. They must deliver consistent performance across markets while also responding to changing consumer preferences and emerging trends.

Together, these forces are pushing CHC companies toward a new innovation model: one that reduces risk, supports faster iteration, and delivers differentiated products that consumers genuinely prefer—without compromising manufacturability, compliance, or continuity of supply.

From Order-Taker to Co-Innovator

For many years, the CDMO value proposition in CHC was relatively straightforward: reliable manufacturing, robust quality systems, and continuity of supply. Brand owners defined what they wanted to make and CDMOs focused on delivering it, often with limited involvement in earlier-stage decision-making. 

This “order-taker” model still has a role. Manufacturing excellence, regulatory compliance and reliability of supply remain non-negotiable, especially as CHC brands expand globally and face greater scrutiny. But in today’s consumer-driven environment, execution alone is not enough to ensure product success. 

Why CDMOs Are Being Pulled Upstream

With CHC brands facing increasing pressure to differentiate not only through health claims but through usability, sensory appeal, convenience and overall consumer experience, these factors can no longer be treated as late-stage refinements. They are shaped by formulation decisions, dosage-form selection and packaging design—all of which must also align with regulatory requirements and scalable manufacturing. 

Therefore, the CDMO role is evolving. Increasingly, CDMOs are being engaged earlier and more strategically, not simply to manufacture but also to help translate consumer needs into product concepts that are technically feasible, compliant and commercially viable. This shift requires a different type of partnership—one that combines formulation science, process development, packaging expertise and regulatory rigor with a structured approach to ideation and rapid prototyping. 

What Upstream Collaboration Looks Like in Practice

A useful way to visualize this shift is through a structured “innovation path” (Figure 1). Rather than starting with a fixed brief, the process begins by framing the opportunity and defining success criteria, then generating consumer insights to guide ideation. Promising concepts can then be shortlisted using clear selection criteria, before moving into rapid prototyping and feasibility assessment.

When CDMOs are involved only at the later stages, key constraints and opportunities often surface too late, after significant time and cost have already been committed. But when they are engaged upstream, consumer expectations and technical reality can be aligned early, enabling brand owners to evaluate options sooner and make more confident decisions before committing to full development and scale-up.

By engaging earlier, from framing the opportunity and generating insight through to ideation, concept selection, and rapid prototyping, CDMOs can help brand owners evaluate options sooner and make more confident development decisions before committing to scale-up.

The Power of Consumer Insight in Reducing Risk

Many CHC and OTC product failures are not caused by poor science, but by poor user acceptance. Even when products are safe and effective, they can underperform if consumers dislike the experience, struggle with the format, or find the product inconvenient to use consistently.

Research highlights how strongly usability can influence real-world behavior. In one general-population study, 69% of people who struggled to swallow tablets or capsules reported not taking them because of these swallowability issues.⁴ Taste is another major barrier: more than 90% of pediatricians have reported that taste is the biggest barrier to completing treatment in children.⁵ 

Consumer Insight Helps Uncover Unmet Needs

The value of consumer insight goes beyond confirming preferences. Its real power lies in uncovering unmet needs—including needs consumers may not be aware of or cannot articulate clearly, but which strongly influence their behavior. The better developers identify and understand these unmet needs, the easier it becomes to design products that fit real routines and expectations.

Too often, product development begins with scientific expertise and internal assumptions about what the consumer needs and will accept. The result can be a technically sound product that does not deliver the experience people want and therefore does not achieve its intended commercial or behavioral impact.

Early Insight Reduces Risk and Strengthens Differentiation

Across categories and demographics, the same experience factors frequently influence adoption: taste, mouthfeel, convenience, preparation time, packaging ease, and expected speed of onset. When the consumer perspective is integrated early, brands can reduce the risk of late-stage reformulation, avoid complaint spikes after launch, and differentiate through sensory and experiential quality—not just through marketing claims and advertising spend.

This is one reason alternative dosage forms are becoming increasingly important. Formats such as orally disintegrating granules (ODGs), effervescent tablets, chewables, instant drinks, and lozenges can help brands address specific usability barriers.

Bringing Research and Market Intelligence Together

CDMOs that have undertaken their own consumer research can bring that data into the development process. Where brands also have their own market intelligence, these inputs can be combined to ensure product decisions are grounded in real behavior not assumptions.

For example, in our own work, this includes international qualitative and quantitative market research using questionnaires, consumer testing, interviews, and group discussions to better understand consumer needs and expectations. Concepts and products are then tested through focus groups and 1:1 interviews. This strengthens the ideation process and adds more creativity. As a result, the process becomes more targeted and effective, while enabling rapid prototyping that can include packaging as well as the dosage form itself.

In a recent project, this co-creation approach enabled the rapid generation of multiple product concepts and prototypes for a client, all of which received positive feedback. The client struggled to choose between the multiple well-received options and so decided to move forward with them all on a staggered timetable. 

The result is not only faster decision-making. It is a higher likelihood that the final product is grounded in real consumer pain points and delivers a clear and meaningful USP. This drives stronger market adoption, enabling CHC companies to compete on consumer value and differentiation, not just price.

Why Full-Service Integration Matters

Fragmented supply chains risk losing nuance between concept and scale-up. When formulation development, analytical testing, packaging, regulatory support, manufacturing, and logistics are split across multiple suppliers, critical details can be lost between hand-offs and timelines can stretch as teams align. 

Full-service CDMOs offer continuity across the product lifecycle—from formulation and analytical development through packaging, regulatory support, commercial manufacturing, and supply. Integration reduces hand-offs, helps preserve the original product “design intent” through scale-up, and provides clearer accountability when trade-offs need to be made.

Integration also enables faster iteration. The same cross-functional team can adjust formulations, run pilot batches, and evaluate results without waiting for another vendor or facility. This reduces delays between learning and action, helping teams progress faster and avoid late-stage surprises.

Finally, continuity supports regulatory and quality alignment, particularly as brands expand globally. In an industry marked by consolidation and frequent ownership changes, stable CDMO partnerships also help retain product knowledge over time, reducing reinvention and enabling more efficient innovation.

Building Stronger Partnerships 

Effective innovation partnerships depend on shared goals, trust, and transparency. In a consumer-driven market, the strongest CDMO relationships go beyond transactional delivery and operate as true collaborations.

Early engagement is one of the most important success factors. When CDMOs are involved upstream, feasibility can be assessed sooner, risks can be identified earlier, and trade-offs can be made with greater confidence before timelines and budgets are locked in.

Strong partnerships also rely on regular joint reviews and cross-functional collaboration. In CHC, marketing priorities, consumer insights, formulation development, packaging design, manufacturing requirements, and regulatory considerations must all align. Bringing these perspectives together early reduces rework and supports faster, better decisions.

Long-term relationships help retain product knowledge even when the client’s team changes—preserving expertise and reducing reinvention. Stable CDMOs with strong staff retention bring additional benefits, ensuring that technical understanding and historical context are not lost between programs. The most resilient partnerships can evolve over decades, continuously improving formulation performance, manufacturing consistency, and lifecycle efficiency.

Conclusion 

In CHC, innovation depends on uniting pharmaceutical rigor with genuine consumer understanding. As categories become more competitive and expectations rise, success increasingly depends on products that deliver not only efficacy, but a better experience in real-world use.

This is changing what CHC and nutraceutical companies need from their CDMO partners. The CDMO role is increasingly evolving from contract manufacturer to co-innovation, supporting brand owners earlier to reduce risk, accelerate development, and strengthen differentiation.

Full-service CDMOs that combine long-term stability with agile, insight-driven development can help brands translate consumer needs into scalable, compliant products. When CDMOs and brand owners innovate together, the result is more than a product: it is a better consumer experience.

* Based on calculations from Fortune Business Insights, assuming a corrected CAGR calculation of 9.40%

References

1. Towards Healthcare (2025). Over the Counter (OCT) Drugs Market Drives Growth in Cough, Cold, and Analgesic Products. https://www.towardshealthcare.com/insights/over-the-counter-otc-drugs-market-sizing. Accessed 13 February 2026.

2. Fortune Business Insights (2026). Nutraceuticals Market Size, Share & Industry Analysis, By Product Type (Dietary Supplements, Functional Foods, and Functional Beverages), Distribution Channel (Hypermarkets/Supermarkets, Convenience Stores, Online Retail, and Others) and Regional Forecast, 2026-2034. Source: https://www.fortunebusinessinsights.com/nutraceuticals-market-102530. Accessed 13 February 2026.

3. Harnett A, Byrne S, O’Connor J, Lyons D, Sahm LJ. Adult Patients with Difficulty Swallowing Oral Dosage Forms: A Systematic Review of the Quantitative Literature. Pharmacy (Basel). 2023 Oct 19;11(5):167.

4. Mennella JA, Spector AC, Reed DR, Coldwell SE. The bad taste of medicines: overview of basic research on bitter taste. Clin Ther. 2013 Aug;35(8):1225-46. 

Dr. Jürgen Ott is CEO of Hermes Pharma and an expert in user-friendly dosage forms. With more than 23 years of experience across pharma and healthcare, he has held senior roles at Procter & Gamble, Bionorica, and Dermapharm. He brings a consumer-first mindset to CDMO development, helping integrate consumer insights early to drive product success.