OTC Drugs: U.S. Competitor Cost Structures

How are Shifts in Cost Structures Affecting the Leading OTC Marketers?

Major mergers and acquisitions in the U.S. OTC market have a way of shifting OTC cost structures both in the near- and long-term. For example, when major businesses are merged, such as Bayer Group’s acquisition of Merck’s U.S. OTC business or when GlaxoSmithKline and Novartis formed a consumer healthcare joint venture, the costs of goods for these organizations often rises initially. This is largely because of duplication of plants and employees. As the new venture sheds duplicate resources, the organization realizes increased profits over the long-term as a result of consolidated resources being used more efficiently.Continue reading

OTC Drugs: U.S. Competitor Cost Structures

Digital Media, Gummy Product Forms, and Mergers Impact OTC Cost Structures

The OTC industry continues to consolidate and transform itself with companies merging or acquiring/divesting brands. Recent examples include the merger of Bayer’s and Merck’s OTC businesses, the joint venture between GlaxoSmithKline’s and Novartis’ consumer health units, and Sanofi’s upcoming acquisition of Boehringer-Ingelheim’s OTC unit. With acquisitions come synergies, such as more media buying power, widened retail distribution, and competitive strengths across more OTC categories. However, mergers and joint ventures can also lead to increased costs of raw materials, packaging, and processing to manufacture a larger array of products. Increased marketing expenditures in support of newly acquired brands also impacts profitability, with the longer term goal of increasing sales and market share. Sales growth of acquired brands can help offset additional costs in cost of goods sold (COGS) and marketing. Continue reading