Consumers spend on health products as they pull back elsewhere

Thibaut Mongon, CEO of Kenvue Inc., Johnson & Johnson’s consumer health business, speaks during an interview celebrating its May 4, 2023, initial public offering on the New York Stock Exchange (NYSE).

Brendan McDermid | Reuters

Most consumers spend less as inflation squeezes wallets, but they haven’t stopped buying name-brand products Health and Personal Care product, Kenvue CEO Thibaut Mongon said.

Mongon told CNBC on Thursday that consumers are still willing to buy the company’s branded products, even as they reduce discretionary spending in retail stores and reduce purchases of some necessities by changing the size of their usual purchases or switching brands to lower prices.

this Johnson & Johnson consumer derivatives Kenvue beat second-quarter revenue on Thursday and adjusted its earnings forecast, bolstered by strong demand for the company’s many well-known brands such as Band-Aid, Tylenol, Listerine, Neutrogena and Aveeno.

Still, J&J shares fell after the company announced it would launch an exchange offer to reduce its stake in Kenvue much sooner than expected.

Kenway also pointed out “Private Label” Penetration in the consumer healthcare market remained stable during the quarter. Private label refers to products produced and sold under a specific retailer’s name at a lower price point to compete with branded products such as Kenvue.

These consumer trends bode well not only for Kenvue, but also for other companies in the consumer health, beauty and beverage space, as consumers may not switch to cheaper products as often, despite high prices.

“Right now, we’re living in a volatile environment with constant consumer uncertainty and persistent inflationary pressures,” Mongon told CNBC. “But I think people are very concerned about their health and well-being right now.”

“They want to make sure they’re doing everything they can to improve their health,” he said. “They’re looking for trusted, science-backed and effective solutions to take better care of their health, and that’s what we and our brands do. That’s what we’ve been doing for a long time.”

Kenvue expects continued strong demand in the coming quarters. The company expects sales in 2023 to grow 4.5% to 5.5% from last year.

RBC Capital analyst Nik Modi expressed confidence in Kenvue’s ability to “maintain momentum,” underscoring consumers’ overall trust in the company’s brand and health and personal care products.

He noted that certain companies have seen increased pressure to cut prices based on market share changes over the past few months. At the same time, he noted that Kenvue has gained market share and is likely to continue that momentum despite the broader environment.

“If we were going to see a decline in trade with them, we would have started seeing it long ago,” Modi said.

who else can benefit

consumer trust

In challenging economic times, consumers turn to brands and products they “know and trust,” Mungon said.

That behavior — and a growing focus on health and well-being — is driving demand for Kenvue products that have been “in families for years, decades, and sometimes generations,” he said.

Modi agreed, adding that the Covid-19 pandemic has significantly increased consumer attachment to brands, especially those that help people take care of their health.

Take the demand for Tylenol as an example, soar It outsold other pain relievers at the start of the pandemic as people scrambled to stock up on essential health products.

Modi told CNBC: “During the new crown epidemic, you want to save your family or your children through a difficult period through certain medicines and products. I think this emotional connection and engagement can help increase brand stickiness.”

“Consumers tend to trust these brands during very painful moments in their lives, so I think that’s why we’re seeing brands like Kenvue being so resilient despite macro pressures,” he said.

Navann Ty, analyst at BNP Paribas Exane, added that the pandemic has empowered consumers to “take their health into their own hands at home”.

The shift could benefit Kenvue and other companies in the consumer health space, and is an “additional differentiator from other consumer categories,” she said.

Ty noted that Kenvue isn’t “completely immune” to price cuts and private-label competition. But she said products recommended by healthcare professionals were offering “some protection.”

A third-party survey of select U.S. healthcare practitioners conducted between 2020 and 2022 found Tylenol to be the top doctor-recommended adult pain reliever nationwide, according to Kenvue IPO filing in April.

Those surveys also found that Neutrogena was the leading over-the-counter sunscreen and acne-fighting brand in the U.S., while Listerine was the top dentist-recommended mouthwash in the U.S.

Mongon noted on the company’s earnings call that the recommendations “ultimately foster a lifelong loyalty to our brand that is passed down from generation to generation.”

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