P&G/Merck acquisition is worthy of comment

Muzable Thinking No. 29 posted by Tim Brooks 22nd August 2o18

By David Gray CEO Creative Leap and Tim Brooks Director Muzeable and Strategic Advisor to Creative Leap.

 

The acquisition of Merck KGaA by P&G is interesting on lots of levels and it reflects some of the seismic challenges/opportunities the consumer healthcare industry faces at this point of change.

Why is P&G committed to healthcare/wellness? It probably reflects what we already know; the industry is doing ‘ok’, but the future potential is HUGE – we are still just struggling to define a journey to get there! P&G CEO David Taylor recently defined this growth potential based on… ‘The 3 megatrends that have supported the growth of OTC healthcare for the past decade should continue for many years to come.’ The 3:

  • Ageing population – over 65s population doubling to 1.6B by 2050
  • Wellness/Quality of life – aging populations focus on quality/outcomes and will invest in achieving it
  • Need for control – consumers are – slowly – getting that they need to drive this. No-one will do it all for them & they need info/support and relevant solutions to do this. Sadly, most regulators and many HCPs don’t get this ‘truth’ yet…

Scale aint what it used to be! This is also a tacit acknowledgement that the hegemony of global scale is over – in truth, it never really got going in OTCs. P&G know a thing or three and this deal wouldn’t have fitted their $ billion plus asset model of recent times. It is about smaller, specialist brand assets targeting interesting future-potential high margin wellness needs – this is a strategic change. Whether Nelson Peltz’s agitation is behind it or not is, in the end, moot, but in consumer healthcare this is interesting and it drives 3 mega-challenges:

  • New marketing models. To capture more growth the big OTC/healthcare players need to consider their investment models and global vs local balance – superior audience data/understanding will be key & influencing/expert strategies will need to change. We’ve wasted too many years ‘imagining’ that consumer healthcare is just like FMCG – it isn’t – this has driven some poor strategic choices.
  • Fighting commoditisation through ‘service’ and trust. Brands might or might not be facing an existential crisis [Link to Bain & Co article ] but in healthcare where generic solutions and regulatory constraints abound we need to define how we add value vs ‘the ingredient’ and the endless – partly ridiculous – rhetoric that savvy people buy own label. Amazon et al are magnifying this. But, we still believe, that better marketing – strong data/insight, more relevant products, information & service integration into e-commerce models etc. – can still create a world where consumers/shoppers TRUST brands with their health. The nature of this trust relationship is a fundamental truth that can differentiate us from FMCG. Healthcare must resist becoming transactional – an unintended consequence of mass market/mass retail/FMCG mindset.
  • Regulatory change. Underpinning this is a pressing need to drive regulatory/access changes to facilitate more marketing – this mustn’t be an ‘unfettered’ free market wild west – but if the industry is tasked with driving behavioural change then marketing, not healthcare systems/governments, will make it happen.

This makes us feel really positive. These are the challenges we & Creative Leap want to work on.

This is BIG STRATEGY and not enough of the industry is reflecting on, or talking about this stuff.

It’s complex and multi-faceted. A blend of big data and big insight. A need to be highly commercial – but with creativity and marketing at its heart. As sad consumer healthcare geeks we’re always happy to talk about the above subject matter with likeminded souls! So, get in touch.

 

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