Launched just over six years ago in early 2002, ThermaCare has estimated U.S. sales of $80 million, not counting sales in four European countries that likely bring the total to more than $100 million.
Hefty media budget
The small-for-P&G brand packs a relatively hefty media budget -- with measured media spending last year of $29.5 million, according to TNS Media Intelligence. Publicis Groupe's Publicis Worldwide, New York, handles advertising. Sibling Starcom MediaVest Group handles media planning and buying, while WPP Group's Bridge Worldwide, Cincinnati, handles digital advertising.
A P&G spokesman declined to comment. P&G Chairman-CEO A.G. Lafley and Chief Financial Officer Clayton Daley in the past year have said the company is more likely to be a seller than a buyer of brands in the foreseeable future; P&G last month agreed to a deal to spin its coffee business, including Folgers, Dunkin' Donuts and Millstone retail brands, to J.M. Smucker Co.
Unlike coffee, however, health care is an area Mr. Lafley has termed strategically attractive, having made an investment last year in a Swiss Precision Diagnostics joint venture to develop home diagnostic kits.
Limited extension potential
But ThermaCare's first-of-its-kind self-heating, disposable pain-relief wraps spawned numerous copycats in recent years, cutting into sales. With limited extension potential and a relatively hefty price of around $2 for eight to 12 hours of pain relief, ThermaCare appears to have topped out well short of the billion-dollar threshold P&G ultimately wants brands to reach.
For the 52 weeks ended June 15, ThermaCare sales fell 14.2% to $51.6 million, according to Information Resources Inc. data, which don't include Wal-Mart or club stores, where the brand is also sold.
The brand has been losing considerable share in the measured channels, where sales of heat and ice packs rose 7.9% during the same period. ACNielsen data reported by Sanford C. Bernstein show ThermaCare volume has been declining, often at a double-digit pace, for the past 28 four-week periods.
Earlier this year, ThermaCare launched a lineup positioned specifically for arthritis sufferers, offering 12 hours of low-level heat, vs. eight hours in other products, for the same price.
ThermaCare appears to have neither been hurt nor helped, a P&G spokesman said, by the recall in February of Icy Hot Heat Therapy, a self-heating wrap by rival Chattem, which pulled the product from the market after more than 200 consumers reported first-, second- and third-degree burns from using it.
Chattem is seen by some industry watchers as a potential buyer for Thermacare, along with other over-the-counter analgesic marketers that could cross-market the brand with other products. The brand could fetch $200 million or more at multiples some other recent OTC deals have reached, though its declining sales could bring down the price.