Corporate Wellness Services in Australia

Transcription

1 Health and wealth: Government promotion of workplace wellbeing supports industry growth IBISWorld Industry Report OD4128 Corporate Wellness Services in Australia August 2013 Sebastian Chia 2 About this Industry 2 Industry Definition 2 Main Activities 2 Similar Industries 2 Additional Resources 3 Industry at a Glance 4 Industry Performance 4 Executive Summary 4 Key External Drivers 5 Current Performance 7 Industry Outlook 9 Industry Life Cycle 11 Products & Markets 11 Supply Chain 11 Products & Services 13 Demand Determinants 14 Major Markets 15 International Trade 16 Business Locations 18 Competitive Landscape 18 Market Share Concentration 18 Key Success Factors 18 Cost Structure Benchmarks 20 Basis of Competition 20 Barriers to Entry 21 Industry Globalisation 22 Major Companies 22 Medibank Private Limited 23 Recovre Holdings Pty Limited 23 BUPA Asia Pacific Pty Limited 25 Operating Conditions 25 Capital Intensity 26 Technology & Systems 26 Revenue Volatility 27 Regulation & Policy 27 Industry Assistance 29 Key Statistics 29 Industry Data 29 Annual Change 29 Key Ratios 30 Jargon & Glossary (03) info@ibisworld.com

2 Corporate Wellness Services in Australia August About this Industry Industry Definition This industry includes companies that primarily provide workplace programs that offer a combination of educational, organisational and environmental activities designed to support behaviour that is conducive to the health of employees in a business, and their families. This does not include programs designed internally by existing human resources personnel. Main Activities The primary activities of this industry are Education and training provision Health check provision Psychology services provision Fitness and dietary program provision Health risk assessment provision Online wellness services provision The major products and services in this industry are Education and training Health and fitness programs Health risk assessments and health checks Psychology programs Similar Industries Q8599 Blood Bank Operation in Australia Companies in the industry are mainly engaged in providing paramedical, nursing, health or blood bank services. IBISWorld writes over 500 Australian industry reports, which are updated up to four times a year. To see all reports, go to Additional Resources For additional information on this industry Australian Institute of Health and Welfare Health and Productivity Institute of Australia WorkHealth

3 Corporate Wellness Services in Australia August Industry at a Glance Corporate Wellness Services in Key Statistics Snapshot Revenue $134.7m Profit $11.2m Annual Growth % Wages $57.6m Annual Growth % Businesses 39 Market Share Medibank Private Limited 20.0% Recovre Holdings Pty Limited 15.4% BUPA Asia Pacific Pty Limited 15.1% % change Revenue vs. employment growth % change Capital expenditure by the private sector Year Year Revenue Employment p. 22 Establishments SOURCE: Key External Drivers Capital expenditure by the private sector Health consciousness Total number of nonmanual employees in the workforce Total time available for leisure and recreation Sport participation 16% QLD 6% WA 3.5% SA 2% ACT 1% NT 1% TAS 42.5% VIC p. 4 28% NSW SOURCE: SOURCE: Industry Structure Life Cycle Stage Growth Revenue Volatility Low Capital Intensity Low Industry Assistance Medium Concentration Level Medium Regulation Level Technology Change Barriers to Entry Industry Globalisation Competition Level Light Medium Low Low Medium FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29

4 Corporate Wellness Services in Australia August Industry Performance Executive Summary Key External Drivers Current Performance Industry Outlook Life Cycle Stage Executive Summary The Corporate Wellness Services industry is in good health. The industry has recorded robust growth over the past five years as companies and governments have recognised the benefits of promoting health and wellbeing in the workplace. A wealth of research conducted during the past decade has shown that investing in employees health and wellbeing can have enormous benefits in terms of reducing costs associated with absenteeism and injury, and boosting productivity. Growth in the industry has also been driven by government programs that check the health of employees and promote healthier lifestyles. During , the industry will again receive a clean bill of health as businesses desire to boost productivity and government programs and grants underpin revenue growth of 7.4% to $134.7 million. IBISWorld estimates industry revenue will rise at an annualised 4.8% over the five years through Despite a weak period in the economy, corporate wellness services have benefited from the structural shift towards professional services, which provides an environment that is not typically active. The industry is expected to remain in good shape during the five years through Government programs and grants designed to promote healthier lifestyles among employees will underpin industry growth, particularly in Victoria, although other states are expected to follow suit. The industry will benefit as strengthening economic conditions and a desire to boost productivity encourage businesses to invest in corporate wellness. The continuing shift from blue-collar to white-collar professions in Australia and an upturn in the finance and insurance sector will also support investment. Online delivery of wellness services such as fitness and dietary programs and health and fitness monitoring is forecast to expand over the next five years. IBISWorld forecasts industry revenue will grow at an annualised 9.2% over the five years through to reach $208.7 million. Key External Drivers Capital expenditure by the private sector Corporate wellness services are considered a non-essential expense, and expenditure on corporate wellness is largely affected by private capital expenditure. Capital expenditure by the private sector is expected to grow strongly over , with a more stable business environment forecast following the election. Health consciousness The more health conscious the population, the greater the demand for Capital expenditure by the private sector 16 Health consciousness % change Percentage Year Year SOURCE:

5 Corporate Wellness Services in Australia August Industry Performance Key External Drivers continued corporate wellness services. Participation in dieting, health and fitness programs will increase as people become more knowledgeable about the benefits of healthy lifestyles. The level of health consciousness is expected to continue its upwards trend over , representing an opportunity for the industry. Total number of non-manual employees in the workforce The largest market for corporate wellness and workplace health services is whitecollar (or non-manual) labourers. These include managers, professionals, government employees and salespeople. The total number of non-manual employees in the workforce is expected to continue its upward trend over , on the back of a structural shift in the economy towards services. Total time available for leisure and recreation A lack of available time is a primary constraint on the pursuit of health and fitness activities. Corporate wellness activities such as educational classes or fitness programs may take place outside of work hours and must be undertaken during an employee s leisure time. Spending on corporate wellness thus tends to be positively correlated with availability of leisure time. A threat looms in the near future as the economy recovers and businesses demand more labour. However, the total time available for leisure and recreation is expected to rise over , in line with a growing casualisation of the workforce and an increasing amount of baby boomers leaving the workforce. Sport participation The level of sport participation is a proxy for the trend towards leading a more active life and an increasing focus on physical health. Increasing sport participation means people are more active, seeking to improve fitness or spend more time outdoors. Employers looking to improve employee happiness and productivity will therefore invest in corporate wellness services if sport participation rates grow. The level of sport participation is expected to fall in , following a particularly high rate in due to a large number of sporting events. Current Performance The Corporate Wellness Services industry is in a healthy state. During the past decade, the industry has recorded stellar growth as businesses and governments have realised the benefits of promoting health and wellbeing in the workplace. During , the industry will continue to perform well as businesses seek to boost productivity and as government programs and grants drive demand. This is expected to drive revenue growth of 7.4%. IBISWorld estimates industry revenue will rise at an annualised 4.8% over the five years through , to $134.7 million. The industry has grown strongly during the past five years, weathering the downturn better than most. The industry boomed during the early to mid-2000s, with revenue growing at % change Industry revenue Year double-digit rates as employers invested in their employees health and wellbeing. During and , industry revenue growth slowed as 20 SOURCE:

6 Corporate Wellness Services in Australia August Industry Performance Current Performance continued weak business confidence and fears of a deep recession led many businesses to cut spending following the financial crisis and ensuing global economic downturn. The industry was shielded from the worst of these effects due to government subsidies designed to promote health and productivity. Many businesses also chose to prioritise spending on health and wellbeing due to productivity benefits. The industry has since recovered, recording robust rates of growth given the generally weak economic climate. This performance has been driven by the rollout of government health programs, including the national Healthy Workers Initiative and the Victorian WorkHealth initiative. Growth has been supported by rising awareness of the benefits to employers of encouraging health and mental wellbeing among their workforce. The trend has also been underpinned by an ongoing shift in the Australian labour force, away from blue-collar industries like manufacturing and towards whitecollar service industries. Booming conditions in the resources sector have aided industry growth, as miners invest heavily in the health and lifestyle of employees as a way of retaining workers in a tight labour market. Rising health awareness Growth in the industry during the past five years has been driven by rising awareness among businesses and governments of the importance of promoting health and wellbeing in the workplace. This has mirrored a general trend of rising health awareness across the population. Businesses in Australia have lagged those in other countries such as the United States, where they are directly responsible for employees health needs. During the past decade, academic research and media attention have focused on the rising incidence of chronic disease in Australia. The National Health Survey, for example, found that about 33.0% of Australians aged between 25 and 64 years suffered from a chronic disease. Other research has found that the incidence of chronic diseases, including cardiovascular disease, cancer, diabetes and mental illness, has increased significantly. While the ageing of the population has contributed to this, health authorities also blame lifestyle factors such as physical inactivity, alcohol consumption and poor diet. A study by Medibank Private in 2005 estimated the cost of absenteeism in the workplace to be $7.0 billion per year, while the cost of presenteeism (not performing a job fully due to injury or illness) was estimated at $26.0 billion per year. As a result, businesses have come to view promoting health and wellbeing in the workplace as an effective way of reducing these costs and boosting productivity. The economic downturn which focused employers attention on costs and profitability has exacerbated this trend. Changes to industrial relations laws since the introduction of the Fair Work Act have also led businesses to focus on productivity. Government support Interest in health and wellbeing has also been rising at the government level. As well as increasing costs for employers, the rising incidence of chronic disease imposes a burden on the health system and the public purse. Governments have responded by allocating funds to promoting health and wellbeing in the workplace. The Victorian Government has led the way through its Victorian WorkHealth initiative. Since the program s inception in , more than 550,000 employees have received free health checks. The government has also supported the introduction of workplace health promotion programs and offered grants of up to $10,000 for further

7 Corporate Wellness Services in Australia August Industry Performance Government support continued workplace wellbeing programs. This has been a key driver of growth for industry participants during the past five years. During , state and territory governments agreed to spend $289.4 million on the Healthy Workers Initiative. The money will be spent between and on promoting health in the workplace through a number of programs designed to modify unhealthy lifestyle factors such as smoking, high alcohol consumption, physical inactivity and poor diet. Profit and enterprises As befits an industry in the growth stage of its life cycle, industry profitability has been strong and enterprise numbers have demonstrated robust growth during the past decade. While profitability has fallen slightly due to rising wages, margins have been supported by rising demand for industry services. Increased awareness of the benefits of promoting health in the workplace and the introduction of government programs and grants have been instrumental in propelling industry growth over the past five years. Wages have risen as the suite of services being offered has widened and more specialist healthcare practitioners such as doctors, physiotherapists and dietitians have Industry profit margins have been supported by growth in demand been hired. As a result, the average wage has increased from about $50,000 to over $59,000 during the past 10 years. The trend to offer services online increased costs initially, but is expected to improve profitability over the next five years. The number of enterprises in the industry has increased from 21 to 39 over the past 10 years as new players have entered the industry. Industry Outlook The Corporate Wellness Services industry is expected to remain in good shape over the next five years. The ongoing rollout of government initiatives designed to promote health and encourage businesses to reduce absenteeism and boost productivity will underpin robust demand for corporate wellness services. Structural changes in the labour force also bode well for industry participants. IBISWorld forecasts industry revenue will grow at an annualised 9.2% over the five years through , to reach $208.7 million. What the doctor ordered The industry will go from strength to strength over the next five years as the attention of corporate Australia and governments remains focused on health and wellbeing. Early in the period, businesses are expected to invest in wellness programs to minimise the costs of absenteeism and presenteeism. As the economic climate improves, returning business confidence and rising corporate profit levels are likely to lead businesses to increase their investment in health and wellbeing programs, supporting demand for higher value services like fitness and diet programs. Growth will also strengthen due to upturns in the key finance, insurance and business services sectors as they hire more staff and further boost demand for industry services. The industry will benefit from the ongoing rollout of government programs designed to promote health in the workplace. The Victorian Government s WorkHealth initiative has committed to check the health of every employee in the state. With only 550,000 of the state s 2.9

8 Corporate Wellness Services in Australia August Industry Performance What the doctor ordered continued million workforce checked as of , there is substantial room for growth over the next five years. Workplaces that have carried out the health checks are eligible for government grants to subsidise educational and fitness programs, providing further demand for industry operators. Other states are expected to follow Victoria s lead over the next five years. The industry will be bolstered by the $289.4 million Healthy Workers Initiative, due to be spent between all states and territories from through on programs promoting health in the workplace. Demand for industry services will be underpinned by forecast growth in white-collar jobs. During the past 20 years, traditional sectors like manufacturing and agriculture have gradually been displaced by the services sector. IBISWorld expects strong growth in the white-collar industries such as finance and insurance, business services and the government sector during the next five years. Firms in these industries are more likely to have the capital and motivation to invest in corporate wellness programs and services. Strong forecast growth in the mining and energy sectors should also support demand for industry services. Profit and enterprises Profitability is forecast to grow over the next five years as demand for industry services strengthens and the government continues to support the industry. Wages, which will remain by far the largest expense for operators, will rise as more specialist healthcare practitioners are hired. However, this will be more than offset by rising revenue. Strong growth in the use of online delivery services such as dietary advice and fitness programs will also support profitability. Enterprise numbers are forecast to grow as new firms enter the industry, but consolidation is expected to increase in the longer term. Online delivery growth Online delivery of some industry services is forecast to demonstrate healthy growth over the five years through Most industry participants offer a range of wellness services online, including the provision of dietary and fitness programs, training schedules, online seminars and webinars, health monitoring and postconsultation advice. The major benefits of offering services online are increased accessibility and lower costs for both providers and clients. Online services are typically designed to work in conjunction with those delivered on-site. They could include initial health and wellness scores and online bookings for appointments, followed by health checks performed on-site by professionals. Online delivery also appeals to employees who may be more comfortable discussing personal issues of health and fitness online rather than in person. This segment will be boosted by the construction of the National Broadband Network, which will increase broadband speeds. In addition, access for rural towns is expected to increase the industry s client base.

9 Corporate Wellness Services in Australia August Industry Performance Life Cycle Stage The industry is growing at a much faster rate than the wider economy New firms are entering the industry Business and societal trends are supporting growth % Growth in share of economy Maturity Company consolidation; level of economic importance stable Quality Growth High growth in economic importance; weaker companies close down; developed technology and markets Key Features of a Growth Industry Revenue grows faster than the economy Many new companies enter the market Rapid technology & process change Growing customer acceptance of product Rapid introduction of products & brands Quantity Growth Many new companies; minor growth in economic importance; substantial technology change Corporate Wellness Services Blood Bank Operation Health Services Computer System Design Services Business Services -5 Printing Decline Shrinking economic importance % Growth in number of establishments SOURCE:

10 Corporate Wellness Services in Australia August Industry Performance Industry Life Cycle This industry is Growing The Corporate Wellness Services industry is in the growth phase of its life cycle. Industry value added is forecast to grow by an annualised 7.0% over the 10 years through , compared with annualised growth in GDP of 2.5%. This indicates that the industry is growing at a much faster pace than the overall economy. Industry growth will be supported by businesses desire to reduce costs associated with absenteeism and injury. Given the weak economic climate, businesses have also become increasingly focused on boosting productivity and increasing profitability. Corporate wellness services providers have been emboldened by government spending on workplace health checks and programs designed to encourage healthier lifestyles. The Victorian Government has led the way during the past five years, but IBISWorld expects other states and territories will introduce similar programs over the next five. There has also been strong growth in enterprise and establishment numbers in the industry over the past five years, as robust growth in revenue and profit has enticed new players to enter the industry. These trends are expected to continue over the five years through

11 Corporate Wellness Services in Australia August Products & Markets Supply Chain Products & Services Demand Determinants Major Markets International Trade Business Locations Supply Chain KEY BUYING INDUSTRIES K M6900 Financial and Insurance Services The finance sector employs a large proportion of Australia s white-collar labour force. Given that the nature of most jobs in the sector is not physical, employers invest in corporate wellness programs to promote worker health. Business Services in Australia Firms that employ white-collar professionals such as accountants, consultants, real estate agents and developers, and legal service providers are a major market for corporate wellness services. KEY SELLING INDUSTRIES C1611 M7000 Q8400 X0025 Printing in Australia Corporate wellness firms require printing services for the production of pamphlets, booklets and other printed educational material that is distributed to their clients. Computer System Design Services in Australia Corporate wellness firms buy software that is then provided to clients. This software is used to deliver exercise programs, health checks and educational material online. Health Services in Australia The health sector provides the services of doctors, nurses, dietitians and psychologists to the Corporate Wellness Services industry. Fitness in Australia The Fitness industry provides services from gym instructors and personal trainers. Products & Services The Corporate Wellness Services industry sources the majority of its revenue from health risk assessments and employee health and fitness programs. Health risk assessments are a quick and simple way of giving employees feedback on their level of health and giving them direction on how to improve their health. Health and fitness programs are growing in popularity and provide a more in-depth program designed around a fitness program or diet, or both. Education and training services are another increasingly popular choice, offering education relating to mental and physical health, exercise and workplace safety. Some workplaces also offer psychology services to employees. Education and training A simple and popular form of corporate wellness or workplace health is provided within the education and training segment. This may involve workplace seminars or expos, or office campaigns designed to increase employee health awareness and encourage physical activity and healthy eating. These may also cover job-specific safety issues such as manual handling training. This segment is fairly stagnant it is gaining in popularity, but is not growing at a faster rate than the industry, and is thus maintaining a steady proportion of industry revenue. This segment could grow in the next five years as the trend of outsourcing training processes continues. Health risk assessments and health checks Workplace health assessments are an evaluation of an employee s physical condition, assessing disease risk and their overall level of health and fitness. The thoroughness of these assessments can vary and they may be carried out by a nurse or doctor, or completed via a questionnaire. Topics such as diet, level of exercise, height, weight, family history, stress perception and metrics such as blood pressure and cholesterol may all be covered. From this data, a fitness program or diet may be designed, the employee may receive a response with a risk score or rating, or they may be referred to a doctor.

12 Corporate Wellness Services in Australia August Products & Markets Products & Services continued The popularity of workplace health assessments has been bolstered by research into Australia s health industries, specifically workplace health. Victoria has been a national leader in this area, initiating the WorkHealth program in This program is designed to use the workplace as a medium for delivering preventative health care. Through the WorkHealth initiative, the Victorian Government has committed funds to subsidise a health check for every Victorian employee. In a March 2012 report, WorkHealth found that 400,000 Victorian workers had received a health check between July 2009 and October Although Victoria is the only state that has gone to such lengths to encourage workplace health checks, this segment is expected to have grown in popularity over the past five years, increasing its share of overall industry revenue. This trend will continue as other states adopt similar initiatives to boost productivity. Health and fitness programs Health and fitness programs involve a program being designed to address weight loss, healthy eating or general fitness. The popularity of these programs has boomed in the past five years, resulting from a combination of increased health awareness and government encouragement of workplace health and safety. The links between employee health and workplace productivity and absenteeism have been well researched. Investment into increasing the physical and mental health and wellbeing of employees can be paid back with interest in increased productivity, reduced sick days and a higher sense of loyalty towards an employer perceived to have an interest in their employees health. Innovation in this area has benefited the segment, with programs such as Pilates and yoga providing an alternative to using a gym. Corporate wellness providers have embraced new trends in fitness and exercise and have designed workplace programs accordingly. An increasing proportion of corporate health and fitness programs are being offered online as opposed to in person in the workplace. Others are a combination of face-to-face and online delivery. Some industry operators now offer online programs that allow employees and employers to log in and view a predesigned fitness regime or diet. The combination of innovative delivery mediums, a trend towards increased health awareness and government encouragement has resulted in this segment growing faster than the industry as a whole over the past five years, and increasing as a share of industry revenue. Products and services segmentation ( ) 4% 3% Psychology programs Other 10.5% Education and training 44.5% Health and fitness programs 38% Health risk assessments and health checks Total $134.7m SOURCE:

13 Corporate Wellness Services in Australia August Products & Markets Products & Services continued Psychology and other services Workplace psychology services include sessions or seminars offered to employees (and sometimes to direct family members) either in person or online. These programs are used for stress management, employee coaching, psychological assessments and workplace resistance training. Investment in psychology services offers a potentially high return on investment, as stress is a major cause of productivity loss and absenteeism among Australian employees and a psychology program can address this issue. Corporate psychology services form a significant industry segment. However, relative to the other industry segments, they are shrinking in proportion amid the boom in popularity of workplace health and fitness programs and health and safety checks. Corporate wellness services may cover more job-specific or niche services, such as stress management, smoking cessation, ergonomics or safety training and assessment tailored to specific workplaces. Alternative therapies may also be offered as part of a corporate wellness program. Demand Determinants Companies are increasingly demanding corporate wellness and workplace health programs in an attempt to increase worker productivity and attract and retain high-quality labour. Corporate wellness is also being promoted as an investment, as increased productivity and reduced absenteeism can pay a healthy return. Demand is affected by health consciousness, and more specifically the link between a healthy employee and a productive employee. As more research is conducted into the area, private businesses and governments are realising the benefits of good mental and physical health in the workplace, driving demand for corporate wellness services. Australia is in the midst of a shift towards increased health consciousness and a growing focus on dietary and exercise concerns. Industries such as the Corporate Wellness Services industry offer a way for an organisation to address this growing trend and increase employee satisfaction. Demographic and structural changes within the Australian labour force influence demand. Corporate wellness services are demanded more by whitecollar organisations, such as insurers, accountancies and banks, as opposed to blue-collar companies. They are also targeted more towards these organisations, as office workers are more inclined to adopt a physical activity outside of a non-physical job. Higher educated white-collar workers are a larger investment for employers and are paid a higher wage. Employers are thus willing to spend a greater amount per head on corporate wellness services for these employees. As the proportion of non-manual labour grows (compared with manual labour), the market for corporate wellness services also grows. Business cycle trends and the subsequent level of capital expenditure affect demand for industry services. Corporate wellness services are seen by some organisations as a luxury afforded employees to increase satisfaction, loyalty and retention rates. Therefore, when an economic downturn occurs and costs need to be cut, corporate wellness services can be among the first to go. Even firms that consider these services an investment that will pay back in productivity gains may choose to cut them from the expense sheet. IBISWorld expects that government assistance will become a greater demand determinant in the next five years. Victorian workplaces are currently being subsidised for implementing health checks and health programs for their employees. This increases demand for corporate wellness services, as it effectively makes them cheaper for the employer. More states are expected to adopt similar encouragement programs, which will benefit the industry.

14 Corporate Wellness Services in Australia August Products & Markets Major Markets Corporate wellness services are primarily aimed at white-collar, corporate office workers, or non-manual labourers. Many industry players are targeting whitecollar employers, who are willing to invest more money per capita than blue-collar employers. However, government initiatives are aimed at having all workers health checked, which means other industries will take part in the growth of corporate wellness. Thus, the largest markets for the industry s services are the government and finance and insurance sectors. Many industry players have establishments located in CBDs to ensure proximity to their preferred markets. White-collar businesses White-collar markets comprise mainly the business services sector and the finance and insurance sector. The business services sector comprises real estate operators and developers, engineers and specialist consultants and business functionaries such as accountants and legal service providers. The finance and insurance sector provides another large market for corporate wellness services. This sector holds many of Australia s largest and most successful businesses. These firms have large budgets and given the nature of the work means it is generally conducted indoors, staff are more motivated to enter a fitness program either during lunch hours or after work. Given that many industry participants are located in CBDs, they can send staff to offices to hold a program. Government The government sector houses much of the remainder of Australia s white-collar workforce and provides the secondlargest market for corporate wellness services. This segment was partly shielded from the economic downturn given that Australian government budgets were all in healthy condition and remained so throughout the period. No large-scale cost cutting occurred and government employees retained many of their benefits. Additionally, the Federal Government has commissioned research into corporate wellness and pinpointed it as a potential area to increase national labour force productivity. Therefore, the government is obliged to adopt corporate wellness and workplace health services for employees to lead by example and encourage the private sector to follow suit. Blue-collar businesses Mining and manufacturing markets, though constituting large amounts of Australia s labour force and considered among the unhealthiest of Australian workers, do not represent the largest market for corporate wellness services. A March 2012 study by WorkHealth Major market segmentation ( ) 14% Blue-collar businesses 10% Other 54% White-collar businesses 22% Government Total $134.7m SOURCE:

15 Corporate Wellness Services in Australia August Products & Markets Major Markets continued Victoria found that male and female blue-collar workers had a 21.0% and 28.0% increased risk of high waist circumference, respectively. The prevalence of cardiovascular disease is also much higher for blue-collar workers. While companies in this market invest heavily in health and safety campaigns, the safety component tends to receive far more attention, given that injuries from poor safety conditions can be extremely serious and fatalities can occur. Other markets for corporate wellness services include the agriculture, construction, retail, health and transport sectors. These sectors are small and remain a fairly stable market in terms of proportion of revenue. International Trade International trade is not relevant to this industry.

16 Corporate Wellness Services in Australia August Products & Markets Business Locations NT 1.0 QLD 16.0 WA 6.0 SA 3.5 NSW 28.0 VIC 42.5 ACT 2.0 Establishments (%) Cold Zone (<10) <25 <50 Hot Zone (<100) Not applicable TAS 1.0 SOURCE:

17 Corporate Wellness Services in Australia August Products & Markets Business Locations Businesses in the industry are skewed towards the eastern states of Victoria, New South Wales and Queensland. Much of the industry s revenue is earned in CBDs, as white-collar and government workers are the major target markets. Many of the industry players that operate nationally have established premises close to finance hubs and office buildings, as industry activities are often held within or near the client company s office space. WHITE-COLLAR STATES Melbourne houses several large players in the industry and the head offices of many manufacturing and business services firms. While the potential market is not as a big as New South Wales, Victoria has benefited from a high level of industry assistance from WorkSafe and Victorian Government initiatives. New South Wales is the financial capital of Australia. Sydney houses many of Australia s largest banks, insurance companies and auditing firms. Given that the finance and insurance sector is the largest market for corporate wellness services, New South Wales houses a significant proportion of industry participants. Queensland is one of Australia s fastest growing states due to the resources boom, and many Queensland-based companies have grown their profit as a result. New South Wales, Victoria and Queensland together account for 86.5% of industry revenue. Percentage Distribution of establishments vs. population ACT NSW Establishments Population NT QLD SA TAS VIC WA SOURCE: RESOURCE BOOM SHIFTS DEMAND Western Australia is the next-biggest state, accounting for 6.0% of revenue. Although this is a small share, WA businesses are benefiting greatly from the resources boom. Population growth is the fastest in this state, corporate profit is high and demand is strong. Higher profit margins mean more spending on items that may be considered luxuries, such as corporate wellness services. There is a growing trend towards corporate wellness services being demanded in Western Australia, while the eastern states maintain strict budgets and expense cutbacks.

18 Corporate Wellness Services in Australia August Competitive Landscape Market Share Concentration Key Success Factors Cost Structure Benchmarks Basis of Competition Barriers to Entry Industry Globalisation Market Share Concentration Level Concentration in this industry is Medium The Corporate Wellness Services industry is expected to have a medium level of market share concentration. The top four players are estimated to account for more than half of industry revenue. The industry comprises a fairly large number of small and medium-size businesses. Barriers to entry are low and the industry is growing. This means more small players are entering the industry and existing small players are growing to become medium-size firms by expanding geographically and in terms of the number of services offered. There has been little consolidation in the industry and although some players dominate niche segments or niche markets, no player dominates the industry nationally. However, in 2010 UK-based health services giant BUPA acquired major industry player PEAK to expand into the industry. Additionally, global employment services firm Ingeus has expanded its Australian operations with the acquisition of psychology services provider Assure. Thus, although concentration is considered low, it is increasing. Australian-owned Recovre Group has also been busy, acquiring Active Work Solutions and Medico Legal Opinions. Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: Easy access for clients Corporate wellness services need to be easy to access, given that employers do not want to eat into work hours. This means corporate wellness service providers should be located close to target markets and should be able to travel to workplaces. Access to highly skilled workforce Delivery of corporate wellness services must be conducted by a qualified teacher, trainer or medical practitioner. Having a good reputation Industry competition is growing quickly. Having a good reputation will ensure high satisfaction, repeat business and recommendations through word of mouth. Ability to quickly adopt new technology The industry delivers services both on-site and online. Adopting new technology such as software or hardware can improve the delivery process and reduce labour costs. Cost Structure Benchmarks Industry profitability is forecast to decline over the 10 years through During the five years through , profit has been declining due to rising wages. However, profit margins are expected to have stabilised and will be supported by rising demand for industry services due to increased awareness of the benefits of promoting health in the workplace, and the introduction of government programs and grants supporting industry services. Industry profitability will rise marginally over the next five years as demand for corporate wellness services strengthens and the government supports the sector. Wages Wages are the major cost item for the industry. Wages as a percentage of revenue have increased during the past five years as the range of services being offered by participants has expanded and more specialist healthcare practitioners such as doctors, physiotherapists and dietitians have been hired. The average wage in the industry has increased from about $50,000 to over $59,000 during the past 10 years. Technology will increasingly allow wellness programs to be carried out without the need for face-to-face interaction. Nonetheless, screenings and

19 Corporate Wellness Services in Australia August Competitive Landscape Cost Structure Benchmarks continued health evaluations will continue to require healthcare practitioners to measure blood pressure, cholesterol and other health conditions. Purchases Purchases account for 18.1% of revenue. Advancements in technology during the past five years have increased the cost of purchases. Purchases include computer software, medical equipment, educational materials to help participants in the programs, materials required for workshops and seminars, fitness equipment and uniforms. Rent and depreciation Depreciation is relatively low, representing about 2.5% of industry revenue. Capital expenditure requirements in the industry are quite low, with investment spread across a range of items including fitness and medical equipment. Rent represents about 2.3% of revenue. Operators tend to rent offices in proximity to major clients in CBDs. Some providers also rent health and fitness equipment. Other Industry operators incur a variety of other expenses, such as staff training and development to keep their programs up to date with the latest health trends and research, marketing materials to promote their services, and fees for legal and accounting work. Insurance also makes up a small part of costs. Marketing is a significant cost item for the industry, accounting for 10.5% of revenue. Services are targeted at corporate clients so wellness services providers invest heavily in branding, market research and website development. As participants in the industry need to service clients, often at work, travelling expenses are another noteworthy cost. While these costs are rising, they have fallen as a percentage of total costs due to the strong growth in wages. Sector vs. Industry Costs Average Costs of all Industries in sector ( ) Industry Costs ( ) Percentage of revenue P r o fi t Rent Utilities Depreciation Other Wages Purchases SOURCE:

20 Corporate Wellness Services in Australia August Competitive Landscape Basis of Competition Level & Trend Competition in this industry is Medium and the trend is Increasing Participants in the Corporate Wellness Services industry face competition on the basis of price, brand, reputation, service quality, program flexibility and specialist service providers. Competition in the industry is at a medium level, and the trend is increasing. The industry is far from saturated, with no players dominating the industry to an extent that significantly affects the market. Given the growth rate of the industry and only low barriers to entry, it is no surprise that competition is growing rapidly. Internal competition Competition can be based on the costand time-effectiveness of a corporate wellness service. A corporate wellness firm that can use software effectively to assist with delivery of the program will be more attractive to employers, which are seeking to promote workplace health in a cost- and time-effective manner. Some industry players have in-house IT teams that design software to be provided alongside onsite services. These companies can gain a competitive advantage over rivals if their software is cheaper, easier to use and more engaging. Price is an important basis of competition. Given the current economic climate, employers will look to spend as little as possible on services that may be considered a luxury for employees. However, many corporate wellness firms do not compete on price. Instead, they advertise the fact that corporate wellness services are an investment that can be used to increase worker productivity and retention, providing a positive return on investment and effectively alleviating financial stress in a poor business environment. These firms compete on the basis of the effectiveness of their program and the level to which employees adopt and adhere to it. This leads to brand positioning and marketing as a basis of competition. External competition Other industries are also taking advantage of the trend towards increased health consciousness among Australians, and these industries represent external competition. Gyms, fitness clubs, sports organisations and personal trainers all provide services that compete directly with corporate wellness services. An employer can just as easily go to a local gym or personal training studio and negotiate a group rate to allow their employees access to services, which are a substitute for corporate wellness services. Medical services provided by the industry, such as health risk assessments, psychological assessments, massage, physical therapy and diet plans, can be substituted by the respective specialist industries to which these services belong. However, a corporate wellness firm typically offers these in a package with other services, often both on-site and online, giving them an advantage in the scope of services offered. Barriers to Entry Level & Trend Barriers to Entry in this industry are Low and Increasing Barriers to entry for the industry are estimated to be low and increasing. Skills required to operate a business range from minimal, such as a personal trainer, through to a highly educated doctor or physician. There is no legislation constraining corporate wellness services. In fact, it is being encouraged through government initiatives. Capital required to start a corporate wellness business is not necessarily substantial, depending on the size of the business a new entrant may wish to target and the scope of services they wish to offer. A new entrant aiming to start a niche business specialising in a certain segment may be able to start a sole proprietorship and operate with minimal technological and fitness equipment. Additionally, no player controls a dominant portion of the industry. The life cycle of the industry contributes to the ease with which a new entrant can become established. The industry is in a growth phase of its

21 Corporate Wellness Services in Australia August Competitive Landscape Barriers to Entry continued life cycle and demand for corporate wellness services is rising rapidly. Government support has only benefited the industry in Victoria, as the other states have not yet implemented a similar system of subsidised health checks. As more research is released into the benefits of workplace health, it is expected that other governments will encourage corporate wellness services to increase productivity. Barriers to Entry checklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance Level Medium Medium Growth Low Medium Light Medium SOURCE: Industry Globalisation Level & Trend Globalisation in this industry is Low and the trend is Steady Industry globalisation is at a low level, with several key industry players owned by overseas operators. BUPA and Ingeus Limited both operate globally. However, this does not affect the performance of local subsidiaries. BUPA s primary subsidiary in the Corporate Wellness Services industry is PEAK Health Management, an Australian company that was bought by BUPA in This trend is expected to stay steady over the next five years due to the small size of the market.

22 Corporate Wellness Services in Australia August Major Companies Medibank Private Limited Recovre Holdings Pty Limited BUPA Asia Pacific Pty Limited Other Companies Major players (Market share) Recovre Holdings Pty Limited 15.4% BUPA Asia Pacific Pty Limited 15.1% Medibank Private Limited 20.0% 49.5% Other SOURCE: Player Performance Medibank Private Limited Market share: 20.0% Medibank Private Limited is an Australian Government business enterprise that primarily operates as a health insurance provider, but also offers health services. The group operates 110 retail stores and 50 clinics around Australia, employing over 4,500 staff. It operates in the Corporate Wellness Services industry through Medibank Health Solutions. Medibank Health Solutions provides healthcare services to businesses and government entities. The company services more than 4,000 corporate clients in Australia and reported consolidated revenue of $278.9 million in It employs about 1,500 people and is headquartered in Melbourne. On 1 July 2010, Medibank Health Solutions acquired McKesson Asia-Pacific, allowing the company to boost its telephone and web-based health management activities. In the same year, it acquired Carepoint Holdings to expand its occupational health clinics in Australia. Corporate wellness services fall under the workplace health division. Services include health and wellbeing programs (including an online fitness program called Fitness2Live), injury management and injury prevention. Services for injury management include physiotherapy, psychology services, injury treatment and fitness for duty assessments. Injury prevention services include occupational health consulting, Medibank Private Limited industry segment performance* Year Revenue ($ million) (% change) N/C *Estimate SOURCE: ANNUAL REPORT AND IBISWORLD health surveillance, travel health consulting and pre-employment medical checks. Through Fitness2Live, the company offers 24-hour access to meal and activity plans, motivational material, diet plans, cardio and fitness programs and educational articles. Financial performance Given the size and scope of Medibank s operations, it is in prime position to use its reach and expertise to promote its operations in the fast-growing Corporate Wellness Services industry. Although limited financial information is available for Medibank s operations in the industry, IBISWorld expects it is growing its market share and outperforming the industry average in terms of growth.