Earlier this month, Johnson & Johnson (J&J) announced it would spin off its consumer health business into a new publicly traded company by the end of 2022. Part of a wider plan to pursue more targeted growth strategies – in both personal care and pharmaceuticals – it would run the Consumer Health Company with brands like Neutrogena, Aveeno, Listerine independently from its new Johnson & Johnson business, housing its pharmaceutical and medical device brands.
For the full-year 2021, the brands within the soon-to-be Consumer Health Company were set to generate revenues of €13.2bn ($15bn) and the brands within the new Johnson & Johnson around €68.4bn ($77bn). J&J said splitting out both businesses would create “two global leaders” in each respective category.
Alice Popple, consumer analyst at GlobalData, said the move would certainly translate to “more competitive” operations in personal care for the major.
‘Added-value’ personal care – personalisation and premium NPD
“The split will benefit consumers through a more focused industry approach, to really deliver the products that consumers demand,” Popple told CosmeticsDesign-Europe.
And according to GlobalData’s Q4 2021 consumer survey, 24% of global consumers were ‘always influenced’ to purchase products tailored to their needs – a figure that rose to 27% amongst consumers aged 16-24, she said.
The business carve-out would enable J&J to tap into this trend, she said, upping investment in dedicated R&D to propel expertise, resources and strategy in personal care. “Increased investments will allow Consumer Health Company to focus on added-value properties that can help to create a level of personalisation and empower consumers with tailored product choices.”
Such investments would also enable the company to “leverage a premium position” in the personal care market, she said, which also aligned well with a global consumer willingness to spend more on products that supported health and general wellbeing. According to GlobalData’s Q3 2021 consumer survey, 18% of consumers globally purchased premium versions of oral and personal hygiene products, whilst the same said they purchased premium versions of vitamins and supplements.
The start of more major splits in personal care?
In April this year, fellow personal care major Unilever announced its plans to carve out a selection of smaller beauty and personal care brands into a standalone business Elida Beauty – a move company CEO Alan Jope said would create space for “dedicated management focus” as the company explored different “value creation” options.
So, was this a sign of trends to come in beauty and personal care?
“The main reason for splitting out business units is ultimately to update strategy, as it allows the company to solely focus and excel in one respective market,” Popple said. “Investment and finance opportunities are a main driving factor in splitting up businesses; investors are more willing to partner with a company that has a designated focus to grow rapidly in a market and are likely to be more profitable.”
As J&J’s Consumer Health Company started to grow and take its place in the market, she said it could indeed encourage more business splits amongst global leaders in the category who were looking to develop more “targeted” approaches.
Health and wellbeing NPD – functionality and natural claims
J&J’s split would also likely to trigger a wave of fresh innovation in personal care, she said, particularly given the level of new product development expected to come out of the business spin-off. For the new Consumer Health Company, she said innovations in health and wellness would be vital as this was set to be “a key trend across all industries this decade”.
For personal care, this trend translated as an opportunity for companies to take a “holistic approach that incorporates added functionality and natural claims”, she said.
