J&J plots path ahead for 2018
This article was originally published in OTC Bulletin & The Rose Sheet
Rolling out “insight-led” innovation, “rapid” e-commerce expansion, and a global relaunch of its Baby Care franchise will help Johnson & Johnson’s (J&J’s) Consumer business to drive growth in 2018, according to the firm’s chief executive officer Alex Gorsky.
Speaking as the US-based pharmaceuticals giant reported Consumer sales up by 2.2% in 2017, Gorsky said this three-pronged strategy would help J&J grow the business “at a faster rate in 2018”.
On Consumer’s product development plans, Gorsky said J&J would work to “broaden the scope” of its innovation model to deliver “breakthrough” new lines. “We want to build our portfolio through insight-led innovation that delivers superior science and differentiated products that are professionally endorsed,” he explained.
Noting that J&J’s product development needed to become “faster, more agile and more flexible”, Gorsky said the firm intended to “export” the fast-cycle innovation model of hair-care specialist Vogue International – which the firm snapped up in 2016 (OTC bulletin, 17 June 2016, page 3) – to other parts of its business.
Turning to J&J’s plans for Baby Care, Gorsky said the firm would “throughout the course of 2018” relaunch the franchise “with new formulations and new packaging to meet the purchasing preferences of ‘millennial’ parents”.
J&J was confident that this “major relaunch” of Baby Care would “result in improved performance” at the franchise, he insisted.
In addition to the focus on innovation and refreshing the Baby Care franchise, J&J would in 2018 continue to “rapidly expand” its e-commerce activities to increase its online sales, Gorsky revealed.
Pointing out that the company was already partnering with Amazon and other large online retailers to offer its products, Gorsky stated that J&J would continue to make “aggressive moves” in the e-commerce space. “We are not just sitting back,” he insisted.
J&J has made clear growing its online presence is a top priority for its Consumer business. Speaking last year, Jorge Mesquita, worldwide chairman of J&J Consumer, said the firm was “committed to growing our e-commerce business by eight-fold in the next three years” (OTC bulletin, 22 September 2017, page 4).
“We’re investing heavily in information technology, in the supply chain and in leadership to ensure we accomplish this,” Mesquita explained. “We are also experimenting with connected e-commerce, or direct-to-consumer, as well.”
Meanwhile, higher sales at its OTC and Beauty franchises helped push up J&J’s worldwide Consumer sales to US$13.6 billion (€10.9 billion) in 2017.
US Consumer sales advanced by 2.7% to US$5.57 billion, while international turnover moved ahead by 1.9% to US$8.04 billion.
Excluding the impact of divestments and acquisitions, worldwide Consumer sales slipped back by 0.5%, as a 0.7% drop in US turnover was compounded by a 0.3% fall internationally.
Looking at Consumer’s individual businesses, the OTC unit reported a 2.6% operational rise in worldwide turnover, driven by sales of Tylenol analgesics and Rhinocort nasal sprays.
The operational growth was bolstered by a 1.1% positive currency effect, meaning that worldwide sales as reported improved by 3.7% to US$4.13 billion .
In the US, OTC sales had grown by 2.4% to US$1.72 billion, J&J noted, thanks primarily to the launch of Tylenol Rapid Release Gels.
J&J’s US Consumer business continues to operate under a consent decree – which will stay in place until 2021 – following manufacturing problems at a number of its plants.
The company was issued with the consent decree for failing to comply with good manufacturing practice (GMP) requirements at its Fort Washington facility in Pennsylvania, US, and its Las Piedras site in Puerto Rico.
Outside the US, international OTC sales in the 12 months advanced by 4.7% to US$2.41 billion. Better sales of Benadryl allergy products across Asia-Pacific, as well as the performance of Rhinocort, had driven the single-digit rise in turnover, J&J said.
Apart from the OTC unit, Beauty – formerly known as Skin Care – was the only other Consumer unit to record improved sales in 2017.
Consumer’s Beauty business reported a 7.8% rise in salesto US$4.20 billion, driven by a 9.4% jump in US turnover.
J&J attributed the rise in domestic Beauty sales to the acquisition of Vogue and the growth of its Neutrogena range.
International Beauty turnover had increased by 5.8% to US$1.87 billion, the firm noted, thanks to the performance of Japanese cosmetics firm Ci:z Holdings, in which J&J holds a 19.9% stake (OTC bulletin, 22 July 2016, page 3).
By contrast to OTC and Beauty, Baby Care posted worldwide sales down by 4.2% to US$1.92 billion. Increased competition saw US Baby Care sales drop by 8.0% to US$449 million and international turnover to fall by 3.0%, J&J said.
Turning to Oral Care, the company reported a fall in worldwide turnover by 2.4% to US$1.53 billion, as a 0.5% fall internationally was compounded by a 4.9% slump in the US.
Meanwhile, worldwide Women’s Health sales slipped back by 1.6% to US$1.05 billion. Share loss in Brazil and category declines in Europe had hit international sales, J&J said.
Worldwide Wound Care/Other sales were down by 2.3% to US$779 million, as US turnover fell and international sales remained flat.
The Consumer division accounted for 17.8% of J&J’s total worldwide sales in 2017, which advanced by 6.3% to US$76.5 billion.