Reckitt Has a Strong Portfolio of Brands but the Nutrition Business Is a Major Drag on Performance

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 has added to its portfolio 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 dampened revenue growth in the last few years. Management sold the infant nutrition business in China in 2021, and the future of the remaining core infant nutrition business remains uncertain, especially given the ongoing premature infant fomula litigation in North America. At the same time, we expect that further secular declines in birthrates in the US will continue to be a drag to the company’s mid-single-digit growth ambitions.