Johnson & Johnson (JNJ) is probably one of the world's most recognizable multinational corporations. The New Brunswick, New Jersey, based company has been in business for more than 130 years and employs over 130,000 individuals. With operations in 60 different countries, it is one of the world's largest health and wellness companies. Some of its iconic brand names can be found in households across the world, including Band-Aid, Listerine, Visine, and Tylenol. But just how did this company become the corporate giant that it is today? This article looks at the history of the company and some of the strategies it uses to make itself a household name.
Johnson & Johnson: A Brief History
Johnson & Johnson has been in business for more than 100 years. The company was founded by pharmacist Robert Wood Johnson and his brothers James Wood and Edward Mead Johnson in 1886 with just 14 employees. It was the first company to mass-produce sterile surgical supplies.
Two years after the company was established, the brothers released a guide outlining the treatment of wounds and complete first-aid kits. In 1894, the company launched kits to be used during childbirth along with one of its most iconic products—baby powder.
The company went public on Sept. 24, 1944, and trades on the New York Stock Exchange.
Over the years, the company pushed further into the health and wellness industry by developing, innovating, and marketing new and improved products aimed at consumers. Johnson & Johnson’s array of consumer goods isn’t merely wide, but dominant. This includes skin care products, over-the-counter drugs, smoking cessation aids, shampoos, soap, pharmaceuticals, and medical devices.
Even though Johnson & Johnson is a behemoth in consumer goods, the company is first and foremost a medical devices supplier. You probably don't think of knee implants and catheters as carrying corporate brand names the same way that shampoos or antihistamines do, but they are every bit as much Johnson & Johnson products as the latter.
Part of Johnson & Johnson's success has to do with its successful line of brands. If you’ve ever bandaged a wound, rinsed your mouth, applied lotion, sanitized your hands, battled a headache, substituted sugar, or treated heartburn, there's a very good chance that you did so courtesy of Johnson & Johnson’s research and development.
Some of the most popular names in the company's portfolio include Band-Aid, Listerine, Aveeno, Stayfree, Lubriderm, Visine, Tylenol, Zarbee's, and Bengay—all household names.
Marketing is key for the company. It caters to consumers' emotions and sensibilities. For instance, marketing for the Neutrogena brand focuses on the empowerment of women. Johnson & Johnson also launched a social media campaign for Band-Aid products by creating a special hashtag #CoveringIsCaringEffort.
Another key strategy that keeps Johnson & Johnson front-and-center on consumers' minds is acquisitions. After all, its revenue stream isn't derived organically. In those instances where Johnson & Johnson doesn’t innovate in its crucial fields of interest, it uses its substantial financial muscle to acquire.
For instance, Johnson & Johnson finalized its $21.3 billion purchase of Synthes in 2012, a Swiss manufacturer of implements that treats traumatic injuries. That was Johnson & Johnson’s largest purchase since it bought Pfizer’s (PFE) consumer health care unit in 2006, which instantly positioned Johnson & Johnson as a certifiable consumer products titan.
Johnson & Johnson boasts no fewer than 275 subsidiary companies. These include McNeil Nutritionals, the maker of artificial sweeteners, and Ethicon, a provider to the laparoscopic surgery industry.
The company reported $82.1 billion in sales for the 2019 fiscal year. That was a jump of 0.6% over the year. The majority of the sales came from the United States to the tune of $42.1 billion. The company's pharmaceuticals segment continues to dominate its revenue stream, with $42.2 billion in sales, followed by medical devices and consumer products. These two divisions brought in $26 billion and $13.9 billion respectively.
Even though Johnson & Johnson develops and sells some of the best-known over-the-counter drugs on the market, the true profit centers are the company’s higher-margin specialty pharmaceuticals. These include Remicade, Simponi, and Stelara. These drugs, that suppress autoimmune ailments like arthritis and Crohn’s disease, can cost more than $20,000 per year per patient. Another drug is Zytiga, which fights particularly resilient forms of prostate cancer and which sells for around $95 a pill.
Given the slow pace of drug approval in both the United States and Europe, the profits realized by Johnson & Johnson today are the result of years and billions of dollars’ worth of research previously undertaken. The company acknowledges that it files for approval for new drugs and line extensions of existing drugs up to four years in advance, and that lag doesn’t even include how long it takes for them to appear on pharmacy shelves.
And consider this. A Johnson & Johnson Attune knee replacement package can sell for around $10,000, not counting the price of professional surgical insertion. With over 23,000 such packages now joining various thighs to lower legs around the world, it’s easy to see how, it expects each to have more than $1 billion peak revenue potential in 2021.
Being a giant doesn't come without certain complications. On Dec. 14, 2018, Reuters reported that Johnson & Johnson executives were aware that the company's baby powder contained asbestos but continued to sell and advertise it anyway.
The special investigation, which looked at company documents and trial testimonies, showed that Johnson & Johnson officials, mine managers, doctors, and lawyers knew that the company's raw talc powder tested positive for small quantities of asbestos between 1971 and the early 2000s. Johnson & Johnson shares dropped nearly 10% following the report.
The Bottom Line
Johnson & Johnson provides some of the most vital products in the world, from reducing the impact of AIDS, combating diabetes, even helping the deaf to hear and the lame to walk. Now well into its second century, Johnson & Johnson remains one of the most robust components of the Dow Jones Industrial Average (DJIA), and one of the most influential and profitable companies in existence.