Peer-Leading Margins and Brand Reinvestment Position Reckitt to Weather Weak Consumer Environment

The majority of Reckitt’s portfolio is well positioned in categories that benefit from secular growth drivers across consumer health and hygiene. The acquisition of Mead Johnson added a leadership position in infant nutrition, a segment with substantial pricing power. However, the timing of the transaction, ahead of a period of declining birthrates and intensified competition in China, posed significant challenges and has damped revenue growth in the last few years. Management sold the infant nutrition business in China in 2021, and the remaining US-focused infant nutrition business will likely be carved out once the uncertainty around the ongoing premature infant formula litigation is resolved. At the same time, we expect that further secular declines in birthrates in the US will continue to be a drag on the company’s mid-single-digit growth ambitions.