J&J Sees Things Clearly

1 March 2009 (Last Updated March 1st, 2009 18:30)

Johnson & Johnson's eye care division has an impressive global presence and a successful strategy of honing in on the most profitable localities. Natalie Coomber looks at how it has penetrated key markets to become one of the industry's biggest success stories.

J&J Sees Things Clearly

Johnson & Johnson (J&J) Vision Care is one of the many subsidiaries of consumer health, pharmaceutical and medical device giant J&J. But instead of flaunting itself, it hides behind its most successful brands and further ancillary firms. The curious consumer looking for its website is automatically redirected either to that of acuvue, one of J&J's (and the world's) leading contact lens brands, or acuvue manufacturer Vistakon. But new figures released from Global Markets Direct in its J&J Vision Care Medical Equipment Company Share Analysis show just how valuable the division is to J&J as a whole.

Despite extraordinary financial events, J&J finished 2008 with strong figures on the balance sheets. J&J net earnings for the fourth quarter rose to $2.714bn or $0.97 per share from $2.374bn or $0.82 per share in the same period in 2007, beating forecasts.

Looking ahead to 2009, the company announced an expected dilution of between $0.03 and $0.05 per share principally because of the acquisition of Mentor Corp.

J&J Vision Care designs and manufactures eye care products. The company's merchandise includes disposable contact lenses and spectacle products.

While Vistakon manufacturers acuvue soft disposable contact lenses, the company's Spectacle Lens Group produces the next generation of multifocal spectacle lenses, which are now sold to Essilor International. The company's products are marketed in more than 70 countries and in the fiscal year ending 2007 total revenue reached $2,209m – an increase of 17.6% over 2006 figures.

J&J Vision Care operates under the J&J Medical Devices and Diagnostics segment that also includes Cordis' circulatory disease management products, DePuy's orthopaedic joint reconstruction and spinal care products and Ethicon's wound care and women's health products. It first launched the acuvue brand in 1988, adding a product for astigmatism suffers in 2004 and in 2005 released acuvue oasys and hydraclear plus products into the market.

J&J market penetration

The success of J&J Vision Care's business model is only fully grasped when its market penetration across the globe is examined. With a host of strong competitors such as Bausch & Lomb, Carl Zeiss Meditec and CIBA Vision, J&J still manages to maintain a market share of at least 16% throughout Asia-Pacific, Europe and the Americas while only dropping to 12.7% in the Middle East and Africa.

"With a host of strong competitors J&J still manages to maintain a market share of at least 16% throughout Asia-Pacific, Europe and the Americas."

According to research firm Global Markets Direct, the company has greatest success in North America where its products account for 20.9% of the total spend across the region. In 2007, North America's revenue totalled $1,235m, of which 97% was in the US and just $34m in Canada. J&J's domination in the US makes it the most profitable locality for the company, even beating the total revenue garnered from across Europe in 2007. During that year, European revenue totalled $1,114m, equal to 92% of the US figure.

J&J's exposure in Europe is fairly sporadic, with the largest revenue being drawn from German consumers where the company totalled $315m (a 21% market share) in 2007. At the other end of the scale is the Turkish market where only $4m was made. Although the latter is a significantly smaller market, J&J's market share in Turkey stands at 12.1% and therefore has much room for improvement.

The other areas where J&J has failed to extend its presence correspond to those markets that are also small in their overall potential revenue. For example, Global Markets Direct data shows the biggest market in the Middle East to be Israel, but even that has a total market of just $61.9m, with the United Arab Emirates even smaller at $12.6m.

The strategy of concentrating its marketing to areas where there are the most profits to be made is also the case in Asia where the Japanese market – which holds the biggest market potential by far – is the country where J&J has greatest domination. A new advertising campaign in Thailand is aiming to increase brand awareness there.

"The other areas where J&J has failed to extend its presence correspond to those markets that are also small in their potential revenue."

For J&J Vision Care its strategy seems to be working even in tough economic times. Global revenue from its Vistakon business rose 13% in 2008 to $2.5bn and through a series of clever acquisitions its parent company should be guarded against patent expiries and the credit squeeze.

At the Q4 earnings call in February, J&J CEO Bill Weldon said: "Many of us are going to remember 2008 as a year of extraordinary economic events that shook our financial markets and global economy.

"With that backdrop as context, I'm extremely proud of J&J's accomplishments in 2008 and the way our people met our commitments with continued sales and earnings growth, with significant progress in our pipelines and product launches and with continued investments in the future growth of our business."

Things may not seem so rosy for staff at its Jacksonville manufacturing plant which announced redundancies in January, or for another 25 workers who are to be laid off across varying offices. For the company as a whole, however, it seems there are bright times ahead and growing profits to be made.

To purchase the J&J Vision Care Medical Equipment Company Share Analysis, click here.

More Global Markets Direct reports are available at www.global-market-research-data.com