GSK looks to gain from pain relief sector shake-up

GlaxoSmithKline’s launch of a new variant of analgesic brand Panadol, for the first time in seven years, with the intention of “shaking-up ” the pain relief category, heralds a new dynamism in the pharmaceutical giant’s consumer healthcare division (MW last week).

GSK chief executive Andrew Witty, who took over from Jean-Pierre Garnier six months ago, has already given the company’s operational structure a revamp and is intent on modernising GSK against a background of weakening profits and increasing industry regulation.

Witty took the chief executive role after a bruising 18-month internal contest, which pitted him against chief operating officer David Stout and Chris Viehbacher, head of GSK’s US operation. Stout and Viehbacher have departed since Witty’s appointment.

GSK’s UK performance may benefit from Witty’s presence at its London headquarters in contrast to Garnier, who led the company from Philadelphia. Some have suggested that GSK, a £60bn leviathan, should sell its consumer arm, which owns over-the-counter medicine brands such as Beechams, Solpadeine and Night Nurse, oral care lines Aquafresh, Macleans and Sensodyne as well as soft drinks Ribena and Lucozade.

Witty has refused to embark on such a strategy, saying the consumer business is a “core part” of GSK, but has emphasised the company’s need to “constantly evolve”. In a major commitment to its consumer division, Witty unveiled plans to invest £70m in a soft drinks bottling plant last week.

Prescription drugs

Industry analyst Paul Diggle, formerly at Nomura International, says it is expected GSK will build on its consumer health business and may even buy companies and products. He says/ “GSK has always regarded this business as an important lifecycle opportunity for older drugs and we expect an increasing number of prescription drugs to be made available over the counter.”

The launch of Panadol Advance, which GSK claims works five times faster than ordinary paracetamol, demonstrates the company’s desire to reinvigorate its consumer brands. But it faces tough competition, especially from Nurofen-owner Reckitt Benckiser and retailer own-label products.

The 2008 UK analgesics market is worth an estimated £638m, according to Mintel, having grown from £568m in 2003. Much of the growth has been driven by the popularity of Ibuprofen and consumers trading up to newer formats, such as liquid capsules.

RB’s 2007 launch of NurofenExpress, backed by a £10m marketing campaign, is typical of the company’s approach. Nurofen’s market share has climbed to 21% with estimated sales of £133m in 2008, rising from a 2006 total of £115m.

Wyeth Consumer Healthcare’s Anadin, which recently awarded its £5m advertising account to CHI & Partners after a prolonged pitch (MW October 16), has maintained a flat market share of 11% since 2006 but recently launched Anadin Joint Pain, which is the first non-prescription tablet to specifically target joint pain.

But it is the retailer own-label sector that has seen the strongest growth, with such products accounting for 28% of the market and value sales growing at 10% a year.

Own-label growth is likely to continue through a consumer spending downturn, say experts. RB UK Healthcare marketing director Hanna Nowak acknowledges the challenge to brands but says: “Our belief is that consumers are not just looking for value but more that they want to be smart on value. Our strategy is to keep reminding them they are getting more for their money.”

Annual sales of Panadol have remained flat since 2006 at £24m, giving it a 4% share of the market, and innovation has been slow compared to its rivals and marketing spend relatively low. Mintel senior market analyst Alexandra Shore suggests that Panadol could take inspiration from the Ibuprofen category and achieve differentiation by launching new formats such as liquid paracetamol capsules.

Furthermore, by investing in marketing spend, Panadol could build on its 50-year heritage and emphasise its experience in analgesia to mount a serious challenge to its rivals.

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