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+MSD% CAGR including +6.2% in Essential Health categories, +5.1% in Self Care
categories, and +4.5% in Skin Health & Beauty categories, although we note that the
category growth rates over the past few years were impacted by pandemic-related
tailwinds and more recently pricing actions from inflationary cost pressures. Typically
(as we detail later), Essential Health categories grow slower relative to Skin Health &
Beauty (fastest growing) – albeit KVUE was negatively impacted in this segment by
self-inflicted SKU rationalization – and Self Care (slightly below Skin Health &
Beauty).
Figure 9: Category Sales CAGR - Each Category CAGR Accelerated vs. Historical Trend
3.4% 3.6%
3.0%
3.5%
5.1%
4.5%
6.2%
4.8%
0%
1%
2%
3%
4%
5%
6%
7%
Self Care Skin Health & Beauty Essential Health Total
CAGR '18-'21 CAGR '19-'22
Source: Company reports.
We view KVUE􀋖s category exposure as a sweet spot in CPG at the intersection of
healthcare and consumer goods – both with long-term secular tailwinds that should lead
to consistent +3-4% growth globally through 2025. At a high level from a category
perspective, growth should be enabled by increased focus on health by consumers and
retailers alike, which was accelerated by the pandemic era, aging population and rising
middle class globally, premiumization, and digitization.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
10
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
Growth Strategy Focused on Five Pillars
KVUE aims to grow the top line competitively with its underlying category exposure
(+3-4%) driven largely by reinvesting behind its iconic core brands and supplementing
with expansion into new category adjacencies and geographies and bolt-on M&A
focused on consumer health.
The company is primarily focusing its investments behind its top 15 global brands
(Tylenol, Zyrtec, Rhinocort, Motrin, ORSL, Benadryl, Nicorette, Zarbee􀋖s, Aveeno,
Neutrogena, Dr.Ci:Labo, OGX, Johnson􀋖s, Listerine, Band-Aid) and eight priority
markets (U.S., Canada, U.K., Germany, Brazil, India, Japan, China) where it sees the
greatest opportunity for growth ahead with long runway.
Below, we outline our view on KVUE􀋖s growth strategies and thoughts on the
company􀋖s prospects.
1. Grow Brand Relevance and Salience
The biggest driver for long-term growth is likely to be household penetration and
incidence opportunity as even KVUE􀋖s largest brands have significant usage gaps.
Relevance and salience to consumers should be enabled by marketing campaigns
(predominately digital-focused at this point – more below) and continued focus on
clinical claims and working with healthcare professionals to secure recommendations
(also applicable to innovation).
For example, in the pain relief category in the U.S. there are 4.5x more consumers using
some form of non-steroidal anti-inflammatory drugs (NSAIDs) vs. consumers
exclusively using acetaminophen (generic name for Tylenol); in skin care there are 2.7x
more consumers who suffer from sensitive skin vs. sensitive product contribution to the
body care category in the U.S.; and in oral care household penetration for mouthwash is
1.8x higher in the U.S. and U.K vs. larger markets in ROW (e.g., Spain, Italy, France,
China, Japan, Thailand, Indonesia, Philippines). See deep-dive analysis in the back of
this report for market sizes, household penetration, and market share globally and in the
most relevant countries and categories.
Figure 10: 4.5x More Consumers in U.S. Use
Some Form of Pain Care vs. Acetaminophen
Alone
26M
118M
Consumers with certain medical conditions exclusively using
acetaminophen in the U.S.
Consumers with certain medical conditions using some form
of pain relief in the U.S.
Source: Nielsen Homescan Panel.
Figure 11: 2.7x More Consumers Have
Sensitive Skin vs. Sensitive Skin Product
Share of Body Care
26%
71%
Sensitive skin product contribution to body care category in
the U.S.
Suffer from sensitive skin in the U.S.
Source: Aveeno State of Skin Sensitivity Report.
Figure 12: Household Penetration Opportunity
in Mouthwash
15%
29%
50%
Household penetration in China Household penetration in Japan Household penetration in U.S. and U.K.
Source: Company reports.
2. Increase Product Availability through Omnichannel Strategy
The largest areas of opportunity are to expand presence in pharmacy and e-comm, in our
view. In retail, the opportunity is for incremental shelf space gains as retailers devote
more space to consumer health categories with KVUE well positioned to gain share
given its scale, market share position, and investments behind marketing and consumer
insights, in addition to deeper penetration in the faster growing pharmacy channel in