Johnson & Johnson (J&J) recently agreed to pay over $16Bn for Pfizer Consumer Healthcare (PCH), whose brands include Listerine, Sudafed and Nicorette*. Assuming the sale meets regulatory and shareholder approval, it will make J&J the world’s largest consumer healthcare company by some way.
IRI has taken a look at the impact of this planned merger of these two businesses on the UK OTC business and the other areas where both J&J and PCH operate.
From a total perspective the brand fit is outstanding in the UK – there are no significant sector overlaps and even where both companies have brands in the same sector they are not big competitors.
Pfizer and J&J UK compared – by Market Sector
By acquiring Listerine J&J becomes the market leader in daily-use mouthwash, which is the major growth area in the oralcare market.
PCH and J&J UK compared – by individual category groups
In OTC in the UK PCH are the major player - McNeil Consumer (the OTC division of J&J) is currently the ninth largest OTC company, whereas Pfizer is #3. Again the portfolios are complementary with no overlap of supported brands. With the addition of Imodium, J&J/McNeil’s biggest OTC brand to the PCH portfolio, the new group now has a presence in each major OTC sector.
The combined companies will take #2 spot in the OTC Top 10 (IRI data to June 06).
Value share of PAGB/IRI defined OTC
A year ago GSK was the largest branded manufacturer in the UK OTC market. However, the recent acquisition of Boots Healthcare International (BHI) brands has seen Reckitt Benckiser move up to #1, and, with the amalgamation of J&J and PCH, means GSK slip to third place.
IRI Comment:
On the merger Martin Wood, healthcare director at IRI, said “This proposed merger will shake up the dynamics of the market. It creates another bigger manufacturer to counterbalance the increasing dominance of the major retailers. It’s a great fit in many respects with little divestment necessary. It will give J&J a bigger presence in some key new markets particularly Oralcare, and healthcare growth markets like Smoking Control and Allergy. And for Pfizer it represents a fantastic cash injection and a reward for outstanding recent growth."
*Footnote: Non-OTC Nicorette (Smoking control) sales on doctors’ prescription (included in the deal) are excluded from all the IRI figures shown.