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Consumer group Reckitt has launched a strategic review of its infant formula business Mead Johnson and announced plans to sell a large portfolio of its home care brands, including Air Wick and Cillit Bang, in an effort to streamline the business.
Mead Johnson has been plagued by mishaps since Reckitt acquired it in 2017 for $17bn, most recently facing litigation in the US over a premature infant formula product, which has led to calls for the company to revisit a sale.
As well as the exit from its slower-growing homecare brands and a potential sale of Mead Johnson, the company announced a wide-ranging restructuring, which would remove a number of management layers and reduce its fixed cost base that has been criticised for being too high relative to peers.
The company will in the future report as three divisions: Reckitt, which includes the best-performing brands such as Nurofen and Gaviscon; Essential Home, with the lower-growth homecare brands; and Mead Johnson.
The sale of the homecare portfolio, which brings in revenues of £1.9bn, and a potential sale of Mead Johnson would leave Reckitt with net revenues of £10bn, compared with £14.6bn for the whole group in 2023.
Reckitt may struggle to find a buyer for Mead Johnson given the US litigation. An Illinois court in March awarded $60mn in damages to a mother whose child died after consuming a Mead Johnson formula. The decision wiped £5bn off the company’s market value.
Reckitt already sold Mead Johnson’s Chinese unit for $2.2bn to local private equity group Primavera in 2021 and later tried unsuccessfully to offload the rest of the baby formula business for $7bn-$10bn. In 2020 Reckitt announced a $5bn writedown on the acquisition, blaming falling birth rates and local competition in China.
In an echo of Unilever’s strategy launched last year, Reckitt said it would focus on its high-growth, high-margin “power brands” and described the Mead Johnson business as “non-core”. The company added that it was considering “all strategic options to maximise shareholder value”.
Reckitt also said it would launch a reorganisation and cost-saving programme that would incur a one-off cost of £1bn. The group cut its sales growth expectations for this year, forecasting revenue to rise by 1 per cent to 3 per cent in 2024, down from previous expectations of 2 per cent to 4 per cent.