Carcinogens, Cancer & Chaos: The Story Behind J&J’s Baby Powder
Tags: Stocks, Baby Powder, Company, Insights, Johnson And Johnson

The fall of a family friendly company.

Johnson & Johnson’s — The Empire

You, me and I believe, the entire world, used Johnson & Johnson’s baby powder while growing up. From being gifted to parents who have a newborn to the ones who wanted a “chemical-free” option, J&J products were used by several people because people used to think, “It’s a baby product. It can’t contain any harmful chemicals”.

Founded in 1886, Johnson & Johnson was making a mainstream manual on treating injuries and the first mass-market first-aid kit in the earlier years. However, Johnson & Johnson, as we know it today, arguably began in 1959.

Since then, the company has acquired several other firms and has reported billions of dollars in profit. Even though the company is doing well now (in terms of numbers), a lot of things have actually changed, especially the perception of the company in people’s minds.

What Happened Now?

Today, Johnson & Johnson announced it would stop selling its talc Baby Powder in the United States and Canada. The company said that the demand has dropped for the product. It also said that it had stopped shipping talc baby powder when the coronavirus crisis led to limits on shopping and manufacturing.

Not only the Covid-19 crisis, the firm said that the “misinformation” around the safety of the product and a constant barrage or litigation advertising also led to the change in the consumer habits.

Why Did This Happen?

In 2018, Reuters released an investigative report, which said that from at least 1971 to the early 2000s, the company’s raw talc and finished powders sometimes tested positive for small amounts of asbestos and that company executives, mine managers, scientists, doctors and lawyers fretted over the problem and how to address it while failing to disclose it to regulators or the public.

The report also said that J&J didn’t tell the FDA (U.S Food and Drug Administration) that at least three tests by three different labs from 1972 to 1975 had found asbestos in its talc — in one case at levels reported as “rather high”.

In short, J&J knew for decades that its talc powder had asbestos, which is a known cancer causing substance, but failed to tell the regulators. And people were using it on their newborns for years without knowing about it.

The Fallout

The Reuters report triggered a stock selloff that erased around $40 billion from J&J’s market value in one day and created a public relations crisis for the company.

In order to limit the impact of the report, the company took out full-page newspaper ads defending its products and practices.

In 2019, the company’s stock suffered its biggest loss in 10 months over news that the company recalled a “single lot” of its Baby Powder, “out of an abundance of caution”, after a FDA test found “sub-trace levels” of chrysotile asbestos.

The company faces over 19,000 lawsuits from consumers and their survivors claiming its talc products caused cancer.

Even though Johnson’s Baby Powder now accounts for only around 0.5% of its U.S consumer health business, the baby powder has always remained a symbol that the product has nothing but goodness for babies. However, J&J still hasn’t said anything about their talc products containing asbestos. They have rebutted all of the information in the Reuters report and said that their products are safe.

But the news of a decline in demand due to change in consumer habits shows that the company, which once was perceived as something family friendly, is now seen as dangerous and deadly. And we believe that it will take years and a lot of effort to change its brand perception.