wRatings names the most competitive healthcare companies in the U.S. for 2009

6/29/2009

HERNDON, Va. —Johnson & Johnson’s pharmaceutical portfolio, Alcon, GlaxoSmithKline Consumer Healthcare and Walgreens all have one thing in common: They were each identified as the most competitive companies in their respective fields (pharmaceuticals, healthcare devices, over-the-counter medicines and retail pharmacy) earlier this month as part of the wRatings Corp.’s “Most Competitive Companies in America: Health Care 2009” report, which the company pulled together in collaboration with Strategos.

The report often is used as a tool for investors, as it identifies the companies that are building or extending their competitive strength over rivals, and are best positioned for earnings growth in 2009. And those rankings aren’t based solely on earnings. “Competitive strength is 50% economic profit and 50% [the company’s] ability to meet customer expectations,” wRatings CEO Gary Williams explained to Drug Store News.

For example, even though GSK’s consumer division generated less than 20% of the company’s overall sales, such venerable brands as Tums and Nicorette still resonate with consumers. wRatings identified three key sources around GSK’s advantages: identifying unique needs that are unmet in the OTC arena, the safety of the brands on shelf and a capacity to be first-to-market in addressing those needs. The switch of the weight-loss drug Alli to OTC is a perfect example of these capabilities, the report noted.

For a retailer such as Walgreens, that competitive strength has been augmented by the chain’s real estate savvy, securing prime retail locations along Main and Main. “This availability … gave [Walgreens] an economies-of-scale advantage,” wRatings noted. “Over time though, Walgreens lost its competitive edge. Today, [Walgreens] is regaining its power by reducing costs and innovating its supply chain.… This focus on cost should help increase economic profit.”

Walgreens also is making headway with its “Power” project, a workload-balancing program that offloads dispensing duties from individual Walgreens pharmacists to centralized processing centers, which Williams likened to a Henry Ford innovation: the assembly line. “The Power project, we do believe, could be a huge winner for [Walgreens],” Williams said, in that the initiative has the potential to save significant overhead and improve customer service in one broad stroke.

Overall, health care remains a solid investment, Williams noted. “We’re projecting through 2009 for healthcare [companies] and drug stores to actually emerge stronger from [the recession economy].”

A similar report released last month that measured competitiveness across the consumer packaged goods landscape identified Colgate toothpaste, Mountain Dew and Budweiser as the three most competitive products on the market.

Top 10 most competitive CPG products* Trailing 12-month revenues in billions of the parent company** wRatings arrived at its W Score by blending customer scores across 17 predictors of buying behaviors with an economic profit momentum scoreSource: The W Report sponsored by Fortna—Retail & Consumer Goods 2009
PRODUCTPARENT COMPANYTTM REV*W SCORE**
COLGATE TOOTHPASTECOLGATE-PALMOLIVE$15.392.6
MOUNTAIN DEW/DIET MDPEPSICO INC.43.392.0
BUDWEISER/BUD LIGHTANHEUSER-BUSCHNA91.2
VASELINEUNILEVER54.891.2
KELLOGG CEREALSKELLOGG12.891.1
SAM ADAMS/SA LIGHTBOSTON BEER0.490.5
WEIGHT WATCHERSWEIGHT WATCHERS1.690.4
KLEENEX TISSUEKIMBERLY-CLARK19.489.8
CLOROXCLOROX CO.5.488.6
GILDAN ACTIVEWEARGILDAN ACTIVEWEAR1.287.7

Barriers to entry: Moats

SUPPLY CHAINPRODUCTSDELEVERY CHAINSource: wRatings
Economies of Scale
Economies of Skill
Cost Containment
Design Dominance
Brand Perception
Routine Reliance
Channel Lock-Out
Switching Lock-In
Network Effect

To arrive at the rankings, wRatings asked consumers how well companies met their expectations every quarter. The consumer ratings are categorized by nine competitive “moats,” or barriers to entry companies create to protect against rivals taking their customers and, ultimately, their profits. Each W Score blends a company’s historical economic profit with its competitive consumer-driven moat scores.

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