Sales for Bayer’s consumer health business have been driven by higher product prices in recent years, due to inflation.
However, the company believes that this will not be sustainable in the long term and is hoping to bump up volume sales by encouraging quicker new product development and launches.
“In consumer health, you’ve gotten used to continued growth from us over the past five years. Julio (president of consumer health division) and team have every intention of continuing that while recalibrating growth back towards volumes.
“With that comes a reorientation of investments behind our brands. They’re shifting resources to the right brands and the right markets while addressing the key factors weighing on our costs and cash,” CEO and chairman Bill Anderson said during the investor call that took place after the company’s Q3 financial presentation.
He said that the approach has already yielded results for Bayer’s dermatology and digestive health categories, and the company would be applying it to the rest of its consumer health business.
“Our dermatology and digestive health categories are growing consistently, largely due to this approach. Now, our team is translating it to the rest of the portfolio, and we expect it to fuel growth in 2025.”
Bayer’s consumer health division reported a sales growth of 5.7 per cent to €1.4bn (US$1.5bn) in Q3 FY2024.
Sales for its nutritionals sub-segment were up four per cent to €326m (US$345m), while that of digestives also grew four per cent to €217m (US$229.6m)
Other sub-segments in its consumer health division include dermatology, allergy and cold, pain and cardio, and others.
“Our business has the benefit of a balanced portfolio, well-proportioned across categories and regions. This broad portfolio has served us well in the past because we have been able to capitalise on shifting demand patterns,” said Julio Triana, president of the consumer health division during the call.
“But over the past two years, our growth has been mostly driven by price. In a highly inflationary environment, that can happen, but long-term it’s not healthy.
“So, looking ahead, we’re adjusting that by striking a healthier balance of price and volume mix growth. That ambition is at the heart of our vision, which is to reach billions of people with the most trusted self-care solutions,” he said.
Aside from consumer health, the Bayer Group also operates crop science and pharmaceuticals businesses.
Three key strategies for consumer health
The company has set out three key strategies to drive a balance between price and volume mix growth for its consumer health business.
First, it will focus on investing in core businesses and brands, including fertility and infant health brand Elevit.
“We’re leaning on three priorities. The first has to do with investment focus, especially at the core of our business. Brands like Bepanthen, Claritin, and Elevit, claim great equity with consumers and strong scientific backing, which make them great platforms for investment.
“We have found that we can get more choiceful with our funding, shifting the right resources to the right brand in the right market. That’s going to translate to better growth in the future,” said Triana.
Second, the company will look at selective expansion in “the right segments or markets”.
He gave the example of India, a market which the company had re-entered recently and has seen good results so far.
The company has set up its consumer health division team in India officially in May 2021 and said back then that it was targeting both the metro and rural vitamin and mineral supplement markets with its reformulated bestseller Supradyn.
Third, the company will be driving quicker new product development with its Dynamic Shared Ownership model.
The purpose is to meet consumer needs within a shorter period of time.
“Finally, our new operating model of dynamic share ownership presents so many opportunities in the consumer health space. It enables us to be faster, more efficient, and more creative…
“In consumer health, we’re already seeing benefits in terms of speed to market and consumer centricity in many of our operations around the world. That’s only going to accelerate going forward.”
The model was officially introduced in January this year, with the aim of making the company much more agile and to significantly improve its operational performance.
With this, Triana said that the company was expecting the market to grow at a similar level next year, but growth would be fuelled by the volume of product sales.
“So, what does this mean for 2025? Next year, we expect the market to grow at a similar level in 2024 than in 2024. In that context, we aim to deliver robust growth, with a focus on volumes.”
Under this model, some of the teams, especially from the nutritional supplement business, have manged to cut launch times nearly by half, Anderson added.
“In consumer health, teams on the ground tell me they’re cutting launch times nearly in half, particularly in our nutritional supplement business.
“We’re going to keep shrinking the time from consumer insight to hitting the market and meeting a need,” said Anderson.
Q3 performance
Bayer’s consumer health business recorded a 5.7 per cent sales growth in Q3, but it was not at the rate expected, due to slowdown in key markets like the US and China.
In China, for instance, the company has seen weaker demand for its nutritionals and digestive health products.
“Our consumer health division achieved a six per cent year-over-year sales growth in the third quarter, reaching €1.4 billion in revenues. This growth was broad-based across all the categories, albeit with different regional dynamics…
“In China, notably weaker household consumption impacted our prevention focus categories such as nutritionals and digestive health.”
“A slow start to the cold season in the United States led to lower than expected retailer orders,” said CFO Wolfgang Nickl.
Elsewhere, in Latin America, the company saw strong performance in both its nutritionals and pain and cardio portfolios.
For the rest of this year, the company is forecasting lower growths due to softer economic conditions in key markets.
“For consumer health, we anticipate moderately lower market growths for the rest of 2024. This is largely due to softening economic conditions in selected markets.
“US consumers are becoming more cost conscious and there are early signs of a weaker than expected cough and cold season. In China, we see a deceleration of market growth,” said Nickl.