A growing consuming class in emerging markets who are more health-conscious will drive the growth of Abbott in the years to come, executives of the company believe.
Vision of a 126-year healthcare company
Consumers in these emerging markets are demanding for a better access to high-quality and strong science-based products and services, which they previously lacked, according to a study conducted by McKinsey & Co. This comes from the desire to increase the quality of life in a sustainable manner. Also, with expanding buying power, health-care spending is most responsive to income increases in these economies.
These global trends were also reaffirmed by Abbott's chief financial officer Thomas Freyman in an op-ed written on CNBC.com. He wrote that one of the first priorities of these nations in emerging markets is improving their people's access to health care as they move up the income curve. Therefore, "multinational companies have to invest in these countries to win in the global market", he stated.
Not only to capture the opportunity of heightened health-care demand in emerging markets but also to carry its commitment to improve people's health and well-being around the world, Abbott has taken further steps to enhance its presence in these economies through numbers of strategic deals.
Abbott has conducted a series of smart acquisitions, and built an innovation strategy that helped the company develop a leading position in several healthcare solution categories.
Most recently, on June 23, Abbott acquired Veropharm, a leading Russian pharmaceutical company, which will enhance its manufacturing presence in Russia. A month earlier, it acquired CFR Pharmaceuticals - a Latin American pharmaceuticals business. This acquisition will more than double Abbott’s branded generics pharmaceutical presence and immediately establishes Abbott among the top 10 pharmaceutical companies in the region.
Such acquisitions have allowed Abbott to continue introducing locally-relevant products, build strong distribution systems and forge new partnerships to better serve local consumers.
Impressive growth confirms a smart strategy
The significant presence in the fast-growing emerging markets has not only offered a strong sales performance for Abbott but also reshaped its businesses for continued success.
According to its latest earnings announcement, the company reported $5.55-billion worldwide sales in the second quarter. Sales in emerging markets accounted for more than 40 per cent of total sales, increased 7.7 per cent on an operational basis and 4.1 per cent on a reported basis, growing across segments particularly in nutrition, diagnostics and established pharmaceuticals.
In detail, the Established Pharmaceuticals sales grew 2.3% on a constant currency basis, driven by almost 10% sales growth in emerging markets. Meanwhile, the double-digit growth in emerging markets had positively impact the increasing of worldwide Nutrition sales.
Company’s executives believe strong sales in the second quarter for emerging markets were the result of increasing investment in these markets and keeping pace with the healthcare demand of a growing consuming class. Also, the company’s recent M&A decisions have been in line with its long-term vision to focus on emerging markets.
Strategic M&A transactions will continue to drive Abbott's sustainable growth, and consumers in these emerging markets can benefit from diversified and strong science-based products that are easier to access in their communities.