Reckitt starts strategic review of its infant formula business in China

• Pramod Thomas
• 26 February, 2021

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By: Pramod Thomas

RECKITT BENCKISER has launched a strategic review of Mead Johnson, the infant formula business in China, four years after the $18 billion acquisition of the brand.

Though there are reports of a possible sale, Laxman Narasimhan, Reckitt’s chief executive, told The Times that it was premature to speculate on the outcome.

Mead Johnson was more expensive than all of Reckitt Benckiser’s other acquisitions combined, reports said.

This week, the group announced the sale of Scholl, its footcare products business, to Yellow Wood Partners, the US private equity firm.

It was announced alongside the acquisition of the Biofreeze pain relief brand from Performance Health, owned by US private equity firm Madison Dearborn Partners.

Narasimhan, chief executive since September 2019 and a former Pepsico executive, has been trying to revive trading after years of sluggish sales and a series of costly mishaps under Rakesh Kapoor, his predecessor. They included an unsuccessful product launch at Scholl and disruption at a baby formula factory in the Netherlands.

Meanwhile, Reckitt posted an 11.8 per cent rise in total like-for-like sales growth to almost £14bn for the year to December, its largest increase since the group was formed in 1999.

The jump was driven by its hygiene business, where sales rose 19.5 per cent to £5.8bn amid increased concerns about cleanliness because of the pandemic. Sales in its health division, which include Dettol, jumped 12.1 per cent to almost £4.9bn.

Group sales in its fourth quarter were up 10.2 per cent, reports said.

Profit before tax rose to £1.9bn from a loss of £2.1bn in 2019.

Reckitt forecast sales this year in the range of flat to 2 per cent and raised target cost savings to £1.6bn over three years, from £1.3bn.

While commenting on the numbers, Narasimhan said that Reckitt is positioned to benefit from the post-pandemic world.

When the company acquired Mead Johnson, the manufacturer behind the Enfamil infant formula brand, in 2017, the deal was met with stinging criticism.

Reckitt was seeking to expand its higher-margin consumer healthcare business and to exploit growing demand for baby formula, particularly in China, where demand was expected to increase after the country ended its one-child policy in 2015 and with a growing number of women in the workforce.

Revenues in the infant nutrition business fell 4 per cent last year, despite a strong performance in North America from Enfamil.

Reckitt is based in Slough, operates in more than 60 countries and employs about 40,000 people.