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Today GlaxoSmithKline and Pfizer announced a joint venture combining their consumer health divisions. This new business would represent by far the world’s largest consumer health company with around 6% of the global market.
This deal makes sense on a number of fronts. It brings together a number of global megabrands under one roof, from GSK’s Panadol and Voltaren to Pfizer’s Advil, Centrum and Nexium; together the company will house 25 consumer health brands with more than US$100 million in annual retail sales. It also marks a logical end to the rumors about Pfizer’s underperforming consumer health division, which had been reported to be on the block off-and-on for the last couple of years.
GSK has the capacity to take on a joint venture of this magnitude, as its 2015 JV of Novartis’s consumer health division proved (GSK bought out Novartis’s share of this joint venture earlier this year). GSK has also been able to show steady growth in a consumer health marketplace where many of the leading players, like Pfizer, have seen recent difficulties. It also makes sense in terms of the new company’s geographic portfolio, with Pfizer’s well-built presence in the US complementing GSK’s leading position in Western and Eastern Europe and the Middle East and Africa.
Finally, it will also expand GSK’s consumer health portfolio from pure OTC toward the faster-growing vitamins and dietary supplements categories where Pfizer plays more actively (with megabrands such as Centrum, Caltrate, Emergen-C and Vitasprint); more than half of Pfizer’s global consumer health sales come in the form of vitamins and dietary supplements, while 95% of GSK’s consumer health sales fall in OTC. This will allow the newly merged company take advantage of changing consumer trends around healthy living that are driving interest in vitamins and dietary supplements and will give them a competitive boost in diversifying away from a pure OTC portfolio.