Flu Gives Reckitt, Johnson & Johnson a Shot in the Arm

Sales Surge in $6.5 Billion Cough-Cold Category as Illness Sweeps Nation; Disinfectants Also Post Gains

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The New York Post dubbed the Big Apple "Flu York City." Boston declared a health emergency amid four flu-related deaths and a tenfold rise in serious flu cases vs. last year. Nationally, the percentage of doctor visits due to flu is way ahead of last year, according to the Centers for Disease Control and Prevention, which finds the flu widespread in 44 states. The CDC expects cases to peak later this month or next, meaning the worst is yet to come.

It all adds up to great news for cough-and-cold marketers. What is shaping up to be the worst flu season in a decade is proving to be a windfall for the category just as competition was heating up between new leader Reckitt Benckiser and the company it bypassed, Johnson & Johnson.

Note: Because portfolio of Reckitt Benckiser and Procter & Gamble Co., (Vicks/Nyquil/Dayquil) skew more toward cold and flu products, their sales have been more affected by the strong flu season than the category as a whole or J&J, whose mix includes more allergy products (Benadryl and Zyrtec).
Note: Because portfolio of Reckitt Benckiser and Procter & Gamble Co., (Vicks/Nyquil/Dayquil) skew more toward cold and flu products, their sales have been more affected by the strong flu season than the category as a whole or J&J, whose mix includes more allergy products (Benadryl and Zyrtec). Credit: Source: Nielsen data from Deutsche Bank for cough/cold/allergy products

RB, which acquired its way into the U.S. cough-cold business with the 2007 acquisition of Mucinex and Delsym and the 2011 acquisition of Cepacol, now commands a market that Deutsche Bank pegs as $6.5 billion annually, based on Nielsen data. Private-label leads brands in most segments, but RB is the top brand marketer.

For the four weeks ended Dec. 22, RB posted cough-cold sales of just under $100 million, a leap of 22% over a year ago and double the 10% growth pace to $773 million for the full year, according to Nielsen.

RB's rise in the cough, cold and allergy business in recent years owes partly to the collapse of Johnson & Johnson's sales following quality issues and recalls that first surfaced in late 2010. But the healthy growth for Mucinex and Delsym has also been propelled by an aggressive RB marketing effort. The push, led by Havas Worldwide, includes a caplet version of Mucinex FastMax expectorants and a FastMax Sinus product, plus geo-targeted and symptom-targeted ads and local promotions driven by data from symptom searches by WebMD visitors.

RB has been on top of the trends nearly in real time, thanks to a combination of WebMD, Google and CDC data, said Laurent Faracci, general manager-U.S. marketing. It's also evaluating results from a partnership with Drugstore.com to provide free overnight shipping on cold and flu products.

"Last year we gained share in a very weak season," Mr. Faracci said. And this year, RB is gaining share in a strong season, pushing the company's overall U.S. retail sales measured by Nielsen up 4% for the latest 12 weeks and 8% for the latest four vs. 2% for the full year.

"We were ready" for cold and flu season, said Mr. Faracci, with an effort that focuses on treatment via OTC remedies and prevention with its Lysol brand. They were represented together in retail displays.  

Lysol has seen a 17% rise in disinfectant and 24% rise in liquid-cleaner sales for the four weeks ended Dec. 22, per the Nielsen data, a spike that also appears linked to flu concerns.

Bleach king Clorox, too, has been lifted by the flu. Its sales of disinfectants and wipes are up 12% and 27%, respectively, for the latest 12 weeks for which data are available. Clorox marketing efforts led by DDB Worldwide, San Francisco, have focused heavily on preventing the spread of colds, flu and other bugs at home and school, said Mary O'Connell, global director of digital and public relations.

Earlier misery propelled the cough-cold-allergy category as a whole, which was up 8% for the four weeks ended Dec. 22 and 5% for the full year due to an unusually long and strong allergy season. With less inventory, J&J didn't benefit as much as RB: Its full-year sales of $658 million rose 18%, according to the Nielsen data.

But the company is getting its distribution back on track. Its cough-cold sales were up 38% for the four weeks ended Dec. 22, and with doctor visits due to flu eight weeks ahead of the last moderately severe traditional flu season in 2007-2008, it couldn't be a better time for J&J. However, its production won't be fully up and running until at least later this year, as it makes fixes required by a consent decree with the Food and Drug Administration.

Even so, J&J is poised to benefit somewhat: It has resumed more production of Tylenol cold and flu remedies as well as relaunched Children's Motrin in recent months, putting new advertising behind the latter via JWT, a spokeswoman said.

Combined with Tylenol sales, that's returned J&J to leadership in the relatively small children's liquid-analgesic market, according to SymphonyIRI data for the four weeks ended Dec. 2 -- a potentially good omen as J&J looks to eventually resume full production for its bigger Tylenol tablet business and a portent of a bigger battle with RB to come.

It's not just the respiratory flu that's making people sicker and packaged-goods companies richer. A new strain of intestinal norovirus from Australia entered the U.S. in recent months, driving what the CDC projects as a 50% rise in viral stomach illnesses.

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