Perrigo's Infant Formula Looks to Be Improving, but Many Other Questions Still Surround the Firm

Perrigo is the largest private-label over-the-counter consumer healthcare product manufacturer in the US, supplying over half of the market on a volume basis. While we believe the retailer often wields more negotiation leverage in a fragmented OTC market due to a number of manufacturers competing for the same set of retailers, we expect Perrigo’s market share to be stable thanks to the company’s long-standing record of reliability, large-volume manufacturing capacity, and expertise in shelf space management. Private-label brands are typically significantly discounted compared with store brands, so they generally see higher growth under challenging macro conditions. We expect Perrigo’s private-label business to grow by low single digits over the next five years from both price actions and modest volume growth.