Just after Bayer announced fourth-quarter sales that fell 4% below consensus estimates on Wednesday, CEO Werner Baumann admitted the company is not doing a good enough job keeping up with rapidly changing consumer buying behaviors—particularly in the U.S. Revenues in the consumer health business dropped 9% during the fourth quarter of 2017 and 3% for the full year, the company reported.
“Consumer is a difficult business, particularly in the U.S.,” Baumann said in an interview on Fox Business Wednesday. “The consumer business overall is actually impacted … by fairly dramatic and rapid change in consumer behaviors,” including an increasing trend toward online buying, he said.
Baumann's admission comes as Bayer struggles to get its consumer health business in gear, even after expanding dramatically with the $14 billion acquisition of Merck & Co's consumer products in 2014. And it illustrates the difficulties in a market that was all the rage in pharma several years ago, but now has faltered to the point where Pfizer and Merck KGaA are apparently having trouble selling off their own consumer units.
Indeed, the willingness of consumers to buy over-the-counter drugs on the internet was made clear last week, when news broke that Amazon had introduced its own line of consumer health products, made by Perrigo and branded as Basic Care.
Amazon sells other companies’ OTC drugs on its site, of course, including Bayer’s, but if the online-shopping behemoth undercuts everyone else’s prices, that will only make life more difficult for the German company.
The difficult economics of selling OTC products online could be complicating the would-be deals in consumer health, too. Earlier this month, reports emerged that both Merck KgaA and Pfizer are having trouble offloading their consumer units. Reuters reported that Nestle has backed out of discussions with Merck, and Bloomberg said both Nestle and Johnson & Johnson lost interest in Pfizer’s OTC business.
As for Bayer, its efforts to boost growth in consumer health have no doubt been complicated by its impending megamerger with Monsanto. The $66 billion deal, which has been in the works since 2016, is expected to close by the end of the second quarter, the company said during its quarterly earnings report.
During the Fox interview, Baumann didn’t specify what, exactly, Bayer is doing to improve the outlook for the consumer health unit. The company expects revenues for the unit to come in around €5.5 billion this year, falling short of the average analyst estimate of €6 billion.
Bayer is working hard to figure out a strategy for the rapidly changing U.S. consumer market, he said. “We need to do this faster. We also need to step up our innovation capabilities, and that is what we are working on,” he said, “but clearly 2017 was not a good year for our consumer business.”