Johnson & Johnson Touts Innovation
To Fend Off Start-Up Competitors
By John Karolefski
Digitization continues to upend the CPG business by enabling nimble start-up companies to chip away at the business of traditional powerhouse companies like Johnson & Johnson, the global marketer of over-the-counter (OTC) medications and beauty brands.
These new companies can launch businesses much more easily and faster than ever before, said Alison Lewis, Global Chief Marketing Officer for Johnson & Johnson, whose dozen mega-brands (over $1 billion in annual sales) include Tylenol, Motrin, Pepcid, Zyrtec, and Listerine, among others.
“We’re competing with large multinational companies,” she said. “Those are still super important ‘because they are scaled businesses, but we’re also competing against these start-ups who are driving a lot of the growth. They use digital technology to market directly to prime prospects through a digital ecosystem, and ultimately capture them and convert them,” Lewis said in a presentation recently at the Consumer Analyst Group of New York (CAGNY) conference in Boca Raton, Fla.
She explained that traditional barriers to entry in the CPG business have been large in-house research and development organizations, owned-assets in the supply chain, large listing fees to allow placement on the shelves of retailers, and large media budgets to create broad-based awareness and reach.
“With digital and technology, new businesses can outsource those things that traditionally used to be competitive advantages,” she said. “They can buy them on the outside. They seek out that little teeny tiny white space in the market and build an entire business around it. And finally, they use performance marketing versus pure brand marketing. And what do I mean by that? Well, they really think like a retailer.”
Johnson & Johnson can compete effectively in both worlds, Lewis said, by following five key principles:
- Innovation: “We still have large global breakthrough platforms for innovation. These are things that have significant science behind them.”
- Product and Package: This “heart of consumer packaged goods” must be balanced with digital services that bring unique value propositions to life.
- Modern Marketing: “We want the brand to be the brand everywhere around the world. We balance that with intense local execution and amplification so that the brand feels very much like it was made for you in the country in which you reside.”
- Win in New Retail: Winning in the traditional channels of food, drug and mass must be balanced with winning in e-commerce and in specialty channels.
- Evolve Work Processes: “We have to operate at scale, but we also have to be nimble like a start-up, and that is really important as we think about shifting our culture.”
She boasted that the company’s turnaround strategy last year yielded a 3.2 percent growth, along with a growth in margins.
“We're looking to continue to grow our sales competitively within the market,” she said, and expand margins faster than sales. But importantly doing that while continuing to invest in innovation.”
Lewis reported that 70 percent of the growth came from innovation. She singled out three products. The Tylenol rapid release gels and Rhinocort nasal spray for allergies were the largest innovations in the company’s OTC business in the US and in China. HydraBoost was a “terrific example” of a platform innovation in the beauty category.
“Innovation is super critical to our growth,” she said. “If you look at our innovation agenda, we had three times as much innovation versus the industry.”
Lewis said Johnson & Johnson relies on four pillars for innovation:
- Digital technology and data
“Our innovation program is really important for driving our top-line growth competitive with the marketplace,” she said. “It also allows us to build value into our brand, so that we continue to premiumize and drive pricing in the marketplace. We also make sure with all of our innovations that we execute with excellence so we can drive maximum value from each of those innovations.”
Editor’s Note: This story is based partially on a transcript provided by Seeking Alpha (www.seekingalpha.com).