Can J&J's Brand Family Stage Recall Recovery?

Budgets Are Slashed, Shelf Space Lost; Tylenol, Mylanta, Zyrtec, Benadryl Suffer Share Declines

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The seemingly unending series of product recalls that has rocked Johnson & Johnson has cost it $1 billion in lost wholesale sales due to production shutdowns. But that 's just the beginning: It's tipped off a cascade of consequences including sliding market share, dwindling ad budgets, lost shelf space and an incalculable blow to employee morale and reputation as the company fell from No. 2 in the 2010 list of Fortune Most Admired Companies to No. 17 this year.

Now, with a plant shutdown looming, J&J will have to wait until early next year to return to full capacity for producing much of its over-the-counter drug lineup, leading to questions about whether some brands will ever recover.

"Just getting back to even is going to be a challenge," said one executive familiar with J&J of the recalls, which numbered at least 20 over the past 18 months. J&J's OTC flagship, Tylenol, has lost share in all its previous categories, though the company has found enough production capacity to keep key products on the shelf and expand the brand into a new category. The bigger question may be what will become of shares for some of J&J's lesser brands, such as Motrin, Mylanta and Benadryl, which have been largely eradicated from some categories because of the recalls and shutdowns.

This winter, J&J projected production problems would be fixed in time to fully resume production around the middle of 2011. But last month J&J moved that timetable back to early 2012. In the meantime, private-label products and branded competitors such as Pfizer, Bayer and Novartis have stepped in to fill the voids -- and the empty shelf space at retail.

Credit: For 12 weeks ended April 17 vs. year ago. Source: SymphonyIRI

A J&J spokeswoman declined to comment on the brand-recovery plans, other than to point to recent comments made by Chairman-CEO William Weldon that the company is beginning to source products formerly made at the Pennsylvania plant from other sites and expects full resumption of production some time in 2012.

In the interim, ad budgets for J&J have been slashed. J&J cut spending on Tylenol and Children's Tylenol products last year almost 80% to $34 million according to Kantar Media (Interpublic's Martin Agency, Richmond, Va., handles).

What spending J&J has done on the brand came mainly on a new category -- Precise pain relief creams and patches. And it did step up advertising last year on Motrin, a smaller brand most at risk of permanent de-listings, which got $16 million (also handled by Martin).

Spending on Zyrtec fell 37% to $84 million, while outlays on Benadryl plunged nearly 60% to $11.2 million ( JWT, as part of WPP's Team Chemistry for J&J, handles).

"I think this is unprecedented," said Don Riker, OTC drug consultant and publisher of the OTCProductNews blog. "I'm not sure there's ever been a case where you've had so much destocking of a brand for such a long period of time."

J&J appears to have employed a triage system, focusing what capacity it can on product for Tylenol and its core internal-analgesic-tablets business. For the 12-week period ending April 17, Tylenol's share of internal-analgesic tablets is down 2.4 points to 15.2%, better than the 6.9% plunge to 13.7% for the full 52 weeks, according to SymphonyIRI. Motrin, having lost 0.5 share points to 3% for the full 52 weeks, is up 0.3 points to 3.5% for the most recent 12 weeks.

But it's a far uglier picture for lesser J&J brands and lower-priority categories. The Tylenol Simply Sleep brand, which had an 18.5% share of the $133 million over-the-counter sleep-aid tablet market before the crisis, has largely disappeared. So has Mylanta in the $90 million antacid liquids and powder category. The former leading brand from J&J's joint venture with Merck shed nearly 28 points and fell to a 0.6% share for the 12 weeks ended April 12.

In the much bigger $2.6 billion cold/allergy/sinus tablets category, J&J's Zyrtec and Benadryl OTC remedies have suffered substantially at a particularly inopportune time. Zyrtec's share is off 2.2 points to 8.8%, and Benadryl is down 1.3 points to 2.9%, accounting for most of the ground gained by the launch last year of prescription-to-OTC switch Allegra from Sanofi-Aventis for the 12 weeks ended April 17. Allegra, which was expected to have trouble getting a foothold as the third non-drowsy Rx-to-OTC allergy switch, now has a 4.3% share, bigger than Benadryl's.

In the $274 million liquid-pain-reliever category, primarily for children, former leading brand Motrin has also largely disappeared for the 12 weeks ended April 17, ceding what had been 37 share points. Tylenol is doing a little better, though share is still down 25.5 points to 9.2%. That business is now dominated by private label, perhaps the biggest winner across all categories as J&J has faltered.

But some branded players have won big, too. Pfizer's Advil, acquired in the 2009 Wyeth acquisition after Pfizer sold its former OTC brands to J&J in 2006, has been eagerly devouring business J&J surrendered. Advil, once nearly eliminated from liquid pain relievers prior to J&J's fall, is now the leading branded player, with sales up more than tenfold and a share of 13.6% in the 12 weeks ended April 17.

Novartis' Maalox is also having its moment, more than doubling sales and adding nearly 28 share points to surpass recall-plagued Mylanta as the leading brand in antacid liquids and powders for the most recent 12 weeks.

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