Coppertone, One-A-Day Sales Slump As Bayer’s Consumer Health Slide Continues
This article was originally published in The Rose Sheet
Executive Summary
Bayer reported consumer health sales globally fell 1.4% to $1.64bn after a late start to the allergy season drove down Claritin sales. Aleve analgesics sales grew 3.3% to $112.5m on US line extensions while Alka Seltzer line sales were flat at $47.5m.
Bayer AG’s consumer health sales stumbled again in the company's latest quarter as sales slumped for brands including Coppertone sunscreen and skin care products and the One A Day vitamin and supplement line.
Sales of the Claritin line slowed by a late start to the US allergy season and supply disruptions for Bayer Aspirin also held back Bayer's growth in the consumer health sector during its fiscal 2018 second quarter. Global sales, adjusted for foreign exchange and portfolio impacts, declined for the Claritin (loratadine) allergy brand 5.7% to 140bn ($162.4mn), for Coppertone 5.1% to 71m ($82.3m) and for Bayer Aspirin 2.2% to 93m ($107.9m), the German firm reported on Sept. 5.
"We are key players in allergy with Claritin and in sun care with Coppertone. Both seasons, sun and allergy, started late and therefore impacted our sales levels significantly." – Bayer CFO Nickl Wolfgang
The results continue to fall short of expectations for a turnaround Bayer had expected to start in late 2017 resulting from integration of Merck & Co. Inc.'s consumer brands – which it acquired in 2014 and include Claritin, Coppertone and Dr. Scholl’s foot care brand – and the launch of dozens of consumer health products. (Also see "Bayer Plans 19 Consumer Product Launches To Revive Sluggish Sales" - Pink Sheet, 23 Feb, 2017.)
Bayer’s total consumer health sales in 2017 slipped 2.9% for the full year as competitive pressure in the US OTC market, especially from lower-price lines and brands sold on e-commerce sites, cut into sales of the firm’s Aleve (naproxen) analgesic and Claritin lines. In the 2018 first quarter, the consumer health unit continued to plummet, with a 12% decline. The stalled turnaround prompted Bayer to appoint Heiko Schipper as consumer health business chief. (Also see "Bayer Seeks Stronger Footing In Consumer Health After 2017 Stumble " - Pink Sheet, 2 Mar, 2018.)
Seasonal Upticks Muted
Bayer said the April-June period typically is an important quarter for its consumer health sales because the period spans spring and the start of the summer season, when use of Claritin and Coppertone products is expected to grow. But like other firms marketing OTC allergy products, the period did not deliver a boost in those sales for Bayer.
"The second quarter is always an important quarter for us, as we are key players in allergy with Claritin and in sun care with Coppertone. Both seasons, sun and allergy, started late and therefore impacted our sales levels significantly," said Chief Financial Officer Nickl Wolfgang during the firm's same-day earnings call.
Wolfgang also pointed out that constraints on aspirin product supplies "will remain a substantial headwind for the remainder of the year."
Bayer's $1.64bn in consumer health global sales was down 8.4% on a reported basis. North American sales declined 2.7% to $690m adjusted for foreign exchange and portfolio adjustments; European sales fell 3.4% to $540m.
Bayer also reported declines for other major consumer health brands during the quarter, including One A Day vitamin sales off 1.8% to $57.9m. Dr. Scholl’s foot care products $62.6m sales were down a “substantial” 9.8% on a comparison to the year-ago period when the firm recorded inventory build by retailers.
Alka-Seltzer cough/cold and antacid line sales were flat, up 0.5%, at $47.5m but Aleve sales grew 3.3% to $112.5m on a product line extension in the US, Aleve Back & Muscle Pain (naproxen sodium/200 mg) touted as providing 12 hours of “targeted” back and muscle pain relief. Bayer supported the launch with a 30-second ad campaign on social media sites that ties in with the movie “Uncle Drew." In the spot, the elderly Uncle Drew runs circles around younger players on a basketball court.
Bayer expanded its play in the dietary supplement space using the Alka-Seltzer brand with Alka-Seltzer PM Heartburn Relief + Sleep Support Gummies, a nighttime formulation of gummies for heartburn it launched in 2017. (Also see "Alka-Seltzer Antacid Will 'Plop, Plop Fizz, Fizz' Without Aspirin" - Pink Sheet, 26 Mar, 2017.) In addition to tricalcium phosphate for heartburn, the Relief + Sleep Gummies contain the sleep-benefit ingredient melatonin; each two-gummy serving contains 3 mg melatonin.
The firm added to its One A Day line with Nature’s Medley “complete” multivitamin containing antioxidants from one total serving of fruits and vegetables in versions formulated for men, women and children.
The Aleve line previously was extended in 2016 into the OTC device sector as Bayer launched Aleve Direct Therapy OTC, also addressing back pain, with transcutaneous electrical nerve stimulation. (Also see "Bayer Shoulders Marketing Spend To Lift Consumer Product Sales" - Pink Sheet, 27 Jul, 2016.)
Total sales for Bayer, which also includes its pharmaceutical, crop science and animal health divisions, rose 8.5%, adjusted for foreign exchange and portfolio, to $11bn for the quarter. The firm’s earnings before interest and taxes fell 7.7% to $1.56bn, after special charges resulted mainly from expenses of $448.7m, connected to the acquisition of crop science firm Monsanto Co. for $62.5bn, including debt; the deal was closed in June. (Also see "GSK And Reckitt Opting Out Of Pfizer's Consumer Business Sale Speaks Volumes" - Pink Sheet, 25 Mar, 2018.)
In its second-quarter earnings release, Bayer noted an August verdict in a California state court trial to award $39m in compensatory and $250m in punitive damages to a plaintiff who claimed a Monsanto product caused his non-Hodgkins lymphoma. The firm says it disagrees with the San Francisco jury’s verdict and intends to seek trial court review and will appeal if necessary.
During the second quarter, Bayer signed an agreement in July to divest prescription dermatology bands to Denmark-based Leo Pharma AS for 58m for the US business and $555m for outside the US. (Also see "Deal Watch: LEO Pharma Expands Market Reach Through Bayer Dermatology Deal" - Scrip, 31 Jul, 2018.)