Focus on Japan: Q2 results point to further CHC decline

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According to government data released today, GDP in Japan fell 7.8% quarter on quarter in Q2 2020 (April to June), with Covid-19 having an impact both on domestic consumer spending and exports. Japan’s economy is heavily dependent on exports, especially to China, and demand there has remained subdued during Q2. This downturn does not bode well for the world’s No.3 CHC market, which had already failed to match the boost in OTC spending seen in Europe and North America in Q1, with Japan recording flat sales in MAT Q1 2020 owing to the loss of in-bound tourists from China and Taiwan.

Japan’s OTC market has not outperformed the wider economy, as has been the case in other regions during Covid-19, with several key local marketers reporting Q2 declines in line or in excess of Japan’s 7.8% GDP fall. Daiichi Sankyo saw OTC revenues decrease by 7.3% in fiscal Q1 2020 (Apr-Jun 2020), owing to the impact of Covid-19, while Taisho reported an even more dramatic fall in its Q2 domestic Self-Medication sales, with its OTC portfolio in Japan down 16.4% in fiscal Q1 2020 (Apr-Jun 2020). Tonic drink Lipovitan and CCA range Pabron both led the decline, impacted by Covid-19.

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Takeda outlined size of OTC divestitures still to come

While Takeda no longer reports on the performance of its Self-Medication business in its quarterly results, it did reveal in its Q2 results presentation the value of the various regional portfolios of non-core and OTC products that it plans to divest in the near future. In late 2019, Takeda sold a portfolio of non-core OTC and Rx products to Swiss-based Acino, covering what the describes as its North Europe, Middle East & Africa (NEMEA) region, as well as a larger portfolio to Stada, covering Russia / CIS. Takeda now intends to complete even larger divestments in Latin America and Europe.

In late July, it was announced that Taisho is reportedly in advanced talks to acquire Takeda’s Consumer Healthcare unit in Japan, according to people familiar with the matter. Blackstone, Bain Capital and CVC Capital Partners were also understood to be among the final bidders. If Taisho does secure the deal for Takeda’s CHC portolio in Japan – which DB6 valued at US$571mn in the MAT Q1 2020 period – it will extend its domestic dominance as Japan’s No.1 CHC marketer but still remain the global No.7 behind P&G. Either way, Taisho will be looking to move beyond the business uncertainty caused by Covid-19 and M&A, with a view to reviving growth in Japan’s CHC market in H2 2020.

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Highlights from the Q4 update

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The latest quarterly report on the global CHC market is now available on the CHC DASHBOARD website, including data & trends on the market’s performance at a global, regional and country level (for all 63 markets) in the year to end-December 2019. Here we highlight some of the key topline trends from this update, selecting one major global development from each of our company, category and brand watch sections.

Company Watch: Stada enters the global Top 20

While the list of global Top 5 CHC marketers remains relatively stable, one company that shot up the global rankings in late 2019 thanks to M&A activity, and now claims the No.11 position worldwide, is Stada. The German marketer agreed two major deals in November 2019 that elevated it into the global Top 20. First, as part of Takeda’s goal to divest around US$10bn in non-core assets, Stada bought around 20 selected OTC and Rx products marketed in Russia, Georgia & CIS countries, for US$660mn. Secondly, Stada entered into an agreement to acquire Walmark from Mid Europa Partners for an undisclosed sum. With global No.9 Takeda reportedly now planning to sell its wholly owned OTC subsidiary, Takeda Consumer Healthcare, Stada may feature soon among the Top 10.

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Category Watch: Analgesics already accelerating before Q1

Driven by accelerating growth in North America and Europe in Q4, analgesics recorded an upturn of 4.7% in 2019, ensuring the category’s best performance in three years. This trend looks set to accelerate even further in Q1 2020, with various top marketers reporting very strong analgesics growth for their key brands in the latest quarterly results, as a result of the Covid-19 pandemic. In 2019, topical analgesics still grew faster than systemics, though the latter showed the strongest improvement in growth, powered in particular by upturns in USA, Brazil and Germany.

Brand Watch: Vicks and Tylenol race ahead

Only two CHC brands generate more than US$1bn in sales globally – P&G’s global No.1 Vicks and J&J’s global No.2 Tylenol – and both also grew more than twice as fast as the global CHC market overall in 2019. The latest company quarterly results indicate that both brands have shown further acceleration in Q1 2020, driven in particular by gains in North America.

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Stada to rise up OTC rankings

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Two major M&A deals agreed in the past week look set to elevate Stada into the consumer healthcare global Top 20. In this week’s blog, we look closer at the details of each deal and, based on the calculations of our DB6 data division, where Stada may end up in the rankings once both deals are closed.

As part of Takeda’s goal to divest around US$10bn in non-core assets, the company has agreed to sell to Stada around 20 selected OTC and Rx products marketed in Russia, Georgia & CIS countries, for US$660mn. The portfolio comprises cardiovascular, diabetes, general medicine, respiratory and OTC supplement entries, and includes Russia’s leading systemic cardiovascular, Cardiomagnyl (aspirin + magnesium hydroxide).

Stada will acquire the rights, title and interest to the products in Russia, Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan and Uzbekistan, while under a manufacturing & supply agreement, Takeda will continue to manufacture the products on Stada’s behalf. The deal is expected to complete in Q1 2020 and, based on current assumptions, could elevate Stada into the No.7 position in Europe.

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Stada already takes the No.9 position among Europe’s Top 10 OTC marketers

Stada has also entered into an agreement to acquire Walmark from Mid Europa Partners for an undisclosed sum. Based in Czech Republic, Walmark is a leading consumer healthcare company in CEE with a direct presence in nine markets, while its products are available in 40+ markets globally. The company’s portfolio spans multiple categories, and key brands include Proenzi joint health range, Urinal urinary health brand, Biopron probiotics for gut health and Martians paediatric supplements. 

Stada’s Head of European Markets, Steffen Wagner, commented: “We are significantly strengthening our presence in Central Europe — especially in Czech Republic, Slovakia, Romania, Bulgaria and Hungary — as a result of this acquisition. We are also looking at ways in which we can market the Walmark brands outside of the current core geographies.” Again, the deal is expected to complete in Q1 2020, and the combined impact of these two acquisitions may raise Stada up as high as the No.14 position in the global OTC rankings.

You can now take a first look at the speaker line-up of industry experts who will be joining Nicholas Hall in Athens next year for our 31st European CHC Conference, taking place from 28th to 30th April! To reserve your seat at the early-bird discounted rate, or to find out more, including information on sponsorship opportunities, please contact Jennifer.ODonnell@NicholasHall.com or Lianne.Hill@NicholasHall.com