Retailers May See Permanent Gains from Tylenol Recall

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August 10, 2010

Johnson & Johnson’s recalled brands –– Tylenol, Motrin and Benadryl –– will return to store shelves shortly, but industry observers say they will not achieve their former market share dominance, paving the way for permanent store brand gains.

"I think those brands are in jeopardy," branding expert Alan Siegel of branding firm Siegel & Gale, told CNN. "The definition of a 'brand' is consistency in quality, safety and efficacy. Tylenol has been a household staple for years. For all these recalls to happen to a Johnson & Johnson brand is astonishing to me."

Shaking off the stigma of the broad recalls is no easy task, an opportune time for store brands to gain momentum and permanently hold a good portion of the share gains.

"Over the last four months, there's been rather high demand from our retail clients to increase production,” said Doug Boothe, CEO of Actavis Inc., a U.S. division of Iceland-based Actavis Group, the fourth-largest maker of private label prescription and generic drugs.

Meanwhile, Actavis has ramped by five fold its private label drug manufacturing capacity compared to a year ago to meet the needs of clients such as Walmart, Walgreen’s and CVS, Booth told CNN.

"If you walk in the analgesic aisle, one of the busiest in a drug store, there are lots of gaps on shelves," Boothe said, referring to recalled drugs like Tylenol and Motrin. "This is not good for consumers or stores."

CVS spokesman Mike DeAngelis told CNN the chain is still "experiencing shortages" of Tylenol and other branded drugs affected by the recalls. "We are meeting customer demand with CVS private label products," he said. "We want to encourage our customers to try our brand and stick with it."

Retailers with strong OTC private label programs are being very aggressive with advertising to encouraging customers to switch.

"Retailers are capitalizing on the situation," said Robert Passikoff, branding expert with Brand Keys Consulting. "Strategically it makes good sense. When a truly competitive brand is vulnerable, it's an opportunity for rival brands to steal market share. That's what I would do."

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