MICHEL MARTIN, HOST:
Walk into any store, a bottle of Tylenol will cost you a few bucks. We also know the price tag for the company that makes Tylenol - almost $49 billion. Consumer products giant Kimberly-Clark said Monday it was buying Kenvue, which makes Tylenol and also Band-Aids and Listerine. Why is this deal happening now, especially after President Trump said, quote, "taking Tylenol is not good"? Trump blames the drug for causing autism without clear scientific evidence that it does.
I'm going to ask Erin Lash, director of consumer equity research at Morningstar, which is an investment research company. Good morning. Thanks for joining us.
ERIN LASH: Thanks for having me.
MARTIN: So why would Kimberly-Clark want to buy Kenvue right now?
LASH: Growth across the consumer products space has been quite tepid of late. It's been very difficult to drive volumes, given the financial constraints consumers are under. And so this could be a mechanism through which to try to drive that growth.
MARTIN: Did Kimberly-Clark get a good deal because Kenvue's stock fell after Trump's comments about Tylenol?
LASH: Kenvue's stock has been troubled for some time. Since Kenvue was spun out from Johnson & Johnson two years ago, the business has really been challenged to operate as an independent organization. It has a solid brand portfolio, but they haven't been able to effectively compete as an independent organization. And so, yes, this has been a business that's been in a turnaround. And thus, we do think that Kimberly got a fair price for this business.
MARTIN: Why have they struggled to function as an independent entity?
LASH: When you're combined with a health care arm of Johnson & Johnson that's obviously incredibly large and powerful in its own right, being separate and having to compete with other behemoths in the consumer products space like Procter & Gamble, like Colgate and Unilever - businesses that have operated independently understand the routes to market, how to work with their retail partners, the importance of innovation and marketing, the importance of data and analytics on consumers. All of that is something that wasn't maybe fully appreciated at Kenvue as it was at their singularly focused, nationally branded peers across the consumer products space.
MARTIN: Well, you know, Johnson & Johnson has been the target of multiple lawsuits alleging its baby powder had asbestos. And Johnson & Johnson is covering Kenvue's liability in those cases, but is this still an issue? For - is this an issue for Kimberly-Clark as the buyer?
LASH: I think that there still is litigation risk. Even if not from a financial perspective for Kimberly-Clark, there is that overhang on shares that could persist as long as the issues around talc and Tylenol persist.
MARTIN: Could a purchase like this help Tylenol's brand reputation? Hard to assess whether it's been damaged or not by the president's comments because, you know, people take his comments in all different kinds of ways, but what do you?
LASH: I think that in aggregate, thinking about the Kenvue brand portfolio, I think it could be advantageous to be within the Kimberly umbrella. Kimberly has a very focused portfolio across diapers, adult care and feminine care. And bringing in other personal care categories can drive further insights around category reach and consumer trends and preferences that could aid their brand portfolio.
MARTIN: And quickly, what about for consumers? Do you think prices will rise? I think that's the question most of us would have.
LASH: I don't think that prices will rise. There isn't a direct overlap between any of the categories that they really play in, so we don't expect higher prices.
MARTIN: All right. That's Erin Lash, who's director of consumer equity research at Morningstar. Thank you so much.
LASH: Thank you.
MARTIN: This is MORNING EDITION from 91ÖÆƬ³§ News. I'm Michel Martin. Transcript provided by 91ÖÆƬ³§, Copyright 91ÖÆƬ³§.
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