With China yet to approve the deal, Reckitt had slated the acquisition to close by the end of 2017’s third quarter on Sept. 30. The merger is now expected to close by June 15, reports the Financial Times.
Diversifying Into Developing Markets
The maker of iconic consumer health and hygiene products including Clearasil, Durex and Dettol, plans to sell its food business as part of the deal, including its Frank’s Red Hot sauces and French’s mustard brands. The company foresees the infant formula segment to grow at a rate of 3% to 5% per year in the medium to long term, driven by a growing demand for premium nutrition, special health needs and changing consumer trends in developing countries such as China, where more mothers are choosing to work instead of stay at home and the government has dropped its one-child policy. Reckitt also hopes the acquisition of the baby formula maker will help the firm boost its presence in emerging markets, as consumer packaged goods makers face a challenging market in developed countries. (See also: Durex Wants to End India’s Condom-Buying Taboo.)
“Mead Johnson’s geographic footprint significantly strengthens our position in developing markets, which account for approximately 40% of the combined group’s sales, with China becoming our second largest ‘Powermarket,'” said Reckitt Chief Executive Officer (CEO) Rakesh Kapoor.
As consumers shy away from major brands toward alternative, natural and premium products, leading global firms have struggled to boost their top lines. According to Nielsen Co., first-quarter unit sales of hair care, cereal, beverages and snacks all experience declines in the U.S. over Q1, with purchases of consumer packaged goods down 2.5%. Mead Johnson’s push outside of its core business and into China reflects the entire industry’s desperation to revamp sales and diversify into new high-growth categories. (See also: The Consumer Staples Industry Is in Trouble.)