P&G Divests Clearasil, Boots Healthcare Gains Access To U.S. Market

Boots Healthcare International's acquisition of the Clearasil acne prevention and treatment brand could be a springboard for creating an OTC marketing presence in the U.S.

Through two wholly owned Boots subsidiaries, Boots Healthcare USA and Hermal Kurt Herrmann, BHI is purchasing Clearasil from Procter & Gamble for $340 mil., the Nottingham, England-based retailer and marketer announced Oct. 17.

BH-USA was created at the time of the Clearasil agreement to work directly in the U.S. market. The Hermal company is Boots' German skincare subsidiary.

Acquiring Clearasil "will make BHI's leading-edge acne and skincare technology more accessible to a broader consumer base," BHI said, including entry into the U.S. and Japan - two of the largest global markets previously untapped by the company.

Marketing of Clearasil in the U.S. and Germany will be handled by the local operating companies. BHI is seeking U.S. distribution partners for Clearasil and additional products to come. BHI's central office in Nottingham will continue to direct international marketing.

Currently sold in over 50 countries, Clearasil is the acne market leader in eight of those countries, including the U.S., Germany and the U.K.

Clearasil global sales for 1999-2000 were $137 mil., of which U.S. sales accounted for 39%, Boots reported. According to Information Resources, Inc. (Chicago), Clearasil led the category in U.S. food, drug and mass outlets with sales of $53.4 mil. and a 17.2% dollar share for the 52 weeks ended Sept. 10. However, the brand's share fell 12% in the period.

BHI plans to revitalize Clearasil, most likely through a new advertising campaign and line extensions.

The firm also intends to launch additional skincare products in the U.S. Introductions could be composed of entirely new products or expanded distribution of existing European brands.

BHI is the OTC division of The Boots Company PLC. The division's product portfolio includes international dermatological skincare products, analgesics and cough and cold remedies.

Clearasil will join the company's Lutsine dermocosmetics skincare line for acne, which is sold in several European countries as well as in Boots retail stores in the U.K. Other BHI skincare products include treatments for eczema and psoriasis. Leading Boots skincare brands are E45, Onagrine, Xeramance, Balneum and aQeo.

"Skincare products account for some 36% of BHI's turnover," the company noted.

BHI has become Europe's fastest-growing self-medication business, the firm said. The company employs over 2,300 workers in 23 operating businesses around the world and sells its products in 130 countries. About 75% of the firm's business is conducted outside of the U.K.

BHI's consolidated sales increased 8.5% to $520.1 mil. for the fiscal year ended March 31. BHI's skincare products increased 3.4% to $175.4 mil. (Figures based on 1.59 exchange rate for March 31.) The company launched 33 new products in Europe and introduced line extensions in Eastern Europe and Asia during the fiscal year.

P&G's divestiture of Clearasil is part of the consumer product firm's ongoing brand review that is refocusing marketing support to 10 core brands with revenues over $1 bil., including Crest toothpaste (¹ (Also see "P&G Focuses On 10 Profitable Brands, Including Crest" - Pink Sheet, 7 Aug, 2000.)).

P&G's 10 most profitable brands represent 50% of sales and more than half of earnings. Clearasil accounted for less than 2% of P&G's worldwide sales of $7.39 bil. for fiscal 2000 ended June 30.

The Clearasil sale closely follows P&G's divestiture of the Chloraseptic throat spray line to Prestige Brands International (² (Also see "Chloraseptic" - Pink Sheet, 18 Sep, 2000.)).

P&G stock rose 1.37 to 73.31 on Oct. 17, on the announcement of the Clearasil sale. The firm's stock has been on the rise since the company announced its plan to cut less successful brands and implement cost-saving strategies (³ (Also see "P&G Brand Refocusing Meets With Wall Street Approval, Stock Rises 17%" - Pink Sheet, 9 Oct, 2000.)).