johnsone/initiation · Datasets at Hugging Face

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relative to total company 3Y CAGR of +3.4%. Within the Self Care +8.6% 3Y CAGR,
volume growth contributed about 6.3% to the organic CAGR with price/mix
contributing about +2.5%. Impressively, the company􀋖s 3Y CAGR has remained
resilient sequentially through most of 2022 and even accelerated in 1Q23 behind higher
incidence of cold and flu in EMEA and inventory replenishment at retail.
Figure 15: Self Care Organic Growth Trends and Outlook
7.5%
4.4%
7.0%
1.7% 2.2%
3.3%
1.9%
1.5%
4.1%
6.4%
2.4%
1.5%
0%
2%
4%
6%
8%
10%
12%
2020 2021 2022 2023E 2024E 2025E
Volume Price/Mix
Source: Company reports and J.P. Morgan estimates.
Figure 16: Self Care 2022/2023E Organic Growth by Halves
10.9%
3.7% 4.5%
-0.9%
1.4%
6.6%
7.3%
5.4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
1H22 2H22 1H23E 2H23E
% volume % price/mix
Source: Company reports and J.P. Morgan estimates.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
13
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J PMORGAN
Following a strong three years of growth, which some could argue would have been
even stronger if not for supply chain challenges on Tylenol, and outlook for a fourth
strong year in 2023, we see the biggest question facing the segment as whether KVUE will be able to 􀋘comp the comp􀋙 and deliver on roughly +4.7% organic growth post-
2023 as the inflationary environment normalizes and the company contends with
lapping years of strong tailwinds to pain care and cough, cold & flu. That is, the question is whether the category growth trends normalize to historical growth levels or
have a reversion to the mean. While acknowledging the vagaries of virus/allergy
seasonal trends, there are a number of drivers both at the macro and company-level that provide a pathway to solid, albeit more normalized growth ahead.
Growth Is Not Only Driven by the Pandemic...
In pain care, KVUE should see ongoing tailwinds from deeper penetration for its brands
given unmet medical needs of consumers and wide gap between the number of
consumers using some form of pain relief vs. those using acetaminophen (active ingredient in Tylenol) exclusively (i.e., some consumers using NSAIDs or a combination of sometimes NSAIDs/sometimes acetaminophen). As we noted above, in
the U.S. there are roughly 26M consumers with chronic health conditions using
exclusively acetaminophen vs. 118M consumers with chronic health conditions using
some form of pain relief (i.e., NSAIDs or dual-users of NSAIDs or acetaminophen). We expect the company to prioritize the opportunity for household penetration and usage expansion in North America (usage gap vs. overall pain care) and APAC (middle class
becoming more open to Western medicine) over the next few years. There should also
be growth opportunity through form factor extensions that provide ease of use/
convenience for consumers (e.g., dissolvable tablets) and line extensions targeted at specific indications (e.g., arthritis, back pain).
...Strong Growth in Allergy Medicines Proves Power of Brand Equity and
Innovation
In allergy, KVUE should benefit long term from increasing allergy incidence (e.g.,
number of allergy days per season has grown by over 20 days from 1990-2018 given
impacts from factors like climate change, and pollen concentration has increased 21%
over the same period) and penetration in the U.S. (through Zyrtec) and China (through
Rhinocort). Like in pain care, we also expect form factor extensions to aid in driving
growth; for example, the company introduced Children􀋖s Zyrtec Chewables to enhance the consumer experience and drive adoption given challenges many children have with
swallowing pills. This innovation helped to drive accelerated category growth for
pediatric allergy (U.S. growth accelerated 5x for 2H22) with Zyrtec the #1 brand in
pediatric allergy.
Smoke Cessation Benefits from Self-Care Tailwinds Prior to the Pandemic and
Accelerated Post COVID-19
In other self-care categories, KVUE should see continued benefit from quit attempts in
smoking cessation supported by new scientific claims, products (e.g., Nicorette QuickMist and app), and marketing campaigns (e.g., 􀋘Do Something Incredible􀋙
campaign drove 74% improvement in media ROI and 2.6 points of market share gains
globally), as well as potential entry into vaping cessation. The company also plans to
selectively invest to drive growth in digestive health through ORSL.
This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.
14
Andrea Teixeira, CFA AC
(1-212) 622-6735
andrea.f.teixeira@jpmorgan.com
North America Equity Research
29 May 2023 J P M O R G A N
Skin Health & Beauty (29% of Sales, 18% of OI, OSG +0.1% 3-
YR CAGR)
Skin Health & Beauty (􀋘SHB􀋙) generated sales of $4.4 billion in 2022 (~29% of FY22
sales) and $0.7 billion in adjusted operating income (16.3% margin and 18.1% of

relative to total company 3Y CAGR of +3.4%. Within the Self Care +8.6% 3Y CAGR,

volume growth contributed about 6.3% to the organic CAGR with price/mix

contributing about +2.5%. Impressively, the company􀋖s 3Y CAGR has remained

resilient sequentially through most of 2022 and even accelerated in 1Q23 behind higher

incidence of cold and flu in EMEA and inventory replenishment at retail.

Figure 15: Self Care Organic Growth Trends and Outlook

7.5%

4.4%

7.0%

1.7% 2.2%

3.3%

1.9%

1.5%

4.1%

6.4%

2.4%

1.5%

0%

2%

4%

6%

8%

10%

12%

2020 2021 2022 2023E 2024E 2025E

Volume Price/Mix

Source: Company reports and J.P. Morgan estimates.

Figure 16: Self Care 2022/2023E Organic Growth by Halves

10.9%

3.7% 4.5%

-0.9%

1.4%

6.6%

7.3%

5.4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

1H22 2H22 1H23E 2H23E

% volume % price/mix

Source: Company reports and J.P. Morgan estimates.

This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.

13

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

North America Equity Research

29 May 2023 J PMORGAN

Following a strong three years of growth, which some could argue would have been

even stronger if not for supply chain challenges on Tylenol, and outlook for a fourth

strong year in 2023, we see the biggest question facing the segment as whether KVUE will be able to 􀋘comp the comp􀋙 and deliver on roughly +4.7% organic growth post-

2023 as the inflationary environment normalizes and the company contends with

lapping years of strong tailwinds to pain care and cough, cold & flu. That is, the question is whether the category growth trends normalize to historical growth levels or

have a reversion to the mean. While acknowledging the vagaries of virus/allergy

seasonal trends, there are a number of drivers both at the macro and company-level that provide a pathway to solid, albeit more normalized growth ahead.

Growth Is Not Only Driven by the Pandemic...

In pain care, KVUE should see ongoing tailwinds from deeper penetration for its brands

given unmet medical needs of consumers and wide gap between the number of

consumers using some form of pain relief vs. those using acetaminophen (active ingredient in Tylenol) exclusively (i.e., some consumers using NSAIDs or a combination of sometimes NSAIDs/sometimes acetaminophen). As we noted above, in

the U.S. there are roughly 26M consumers with chronic health conditions using

exclusively acetaminophen vs. 118M consumers with chronic health conditions using

some form of pain relief (i.e., NSAIDs or dual-users of NSAIDs or acetaminophen). We expect the company to prioritize the opportunity for household penetration and usage expansion in North America (usage gap vs. overall pain care) and APAC (middle class

becoming more open to Western medicine) over the next few years. There should also

be growth opportunity through form factor extensions that provide ease of use/

convenience for consumers (e.g., dissolvable tablets) and line extensions targeted at specific indications (e.g., arthritis, back pain).

...Strong Growth in Allergy Medicines Proves Power of Brand Equity and

Innovation

In allergy, KVUE should benefit long term from increasing allergy incidence (e.g.,

number of allergy days per season has grown by over 20 days from 1990-2018 given

impacts from factors like climate change, and pollen concentration has increased 21%

over the same period) and penetration in the U.S. (through Zyrtec) and China (through

Rhinocort). Like in pain care, we also expect form factor extensions to aid in driving

growth; for example, the company introduced Children􀋖s Zyrtec Chewables to enhance the consumer experience and drive adoption given challenges many children have with

swallowing pills. This innovation helped to drive accelerated category growth for

pediatric allergy (U.S. growth accelerated 5x for 2H22) with Zyrtec the #1 brand in

pediatric allergy.

Smoke Cessation Benefits from Self-Care Tailwinds Prior to the Pandemic and

Accelerated Post COVID-19

In other self-care categories, KVUE should see continued benefit from quit attempts in

smoking cessation supported by new scientific claims, products (e.g., Nicorette QuickMist and app), and marketing campaigns (e.g., 􀋘Do Something Incredible􀋙

campaign drove 74% improvement in media ROI and 2.6 points of market share gains

globally), as well as potential entry into vaping cessation. The company also plans to

selectively invest to drive growth in digestive health through ORSL.

This document is being provided for the exclusive use of DAVID WANG at MARLOWE PARTNERS LP.

14

Andrea Teixeira, CFA AC

(1-212) 622-6735

andrea.f.teixeira@jpmorgan.com

North America Equity Research

29 May 2023 J P M O R G A N

Skin Health & Beauty (29% of Sales, 18% of OI, OSG +0.1% 3-

YR CAGR)

Skin Health & Beauty (􀋘SHB􀋙) generated sales of $4.4 billion in 2022 (~29% of FY22

sales) and $0.7 billion in adjusted operating income (16.3% margin and 18.1% of