Episode 04 | Global Brand Management in Consumer Healthcare: The Breathe Right Success Story

Speakers

• Sergio Correia – Senior International Business Developer – Ceuta Group
• Paul Widdop – International Business Controller – Ceuta Group
• May Petracco – CFO – Foundation Consumer Healthcare

Summary

In this episode, May Petracco, CFO at Foundation Consumer Healthcare, joins Sergio Correia and Paul Widdop from Ceuta Group to discuss the remarkable journey of Foundation Consumer Healthcare’s Breathe Right brand since its acquisition and their partnership with Ceuta Group.

Global Brand Expansion in Consumer Healthcare is not a challenge to be taken lightly. May and Paul explore the challenges they faced, strategies employed, and the pivotal role Ceuta’s turn-key solution played in accelerating Breathe Right’s global success.

Transcript

Sergio Correia 00:12

Hi, I’m Sergio Correia, International Senior Business Development Manager at Ceuta Group and you’re listening to the original Ceuta Group Podcast. Today I’m joined by International Controller at Ceuta Group, Paul Widdop, and the CFO at Foundation Consumer Healthcare, May Petracco.

We’ll be discussing how to successfully globalise a Health & Wellness brand, a challenge not to be taken lightly and one that Foundation Consumer Healthcare has recently met and accomplished with a global healthcare brand, Breathe Right. So happy to have you both here.

May, tell us a little bit more about Foundation Consumer Healthcare’s journey with Breathe Right and how you came to work with Ceuta Group.

May Petracco 00:51

Great, yeah, it’s a special story for sure. So in the middle of COVID, it was April 2020, we were conducting diligence with GSK on the Breathe Right brand. And Breathe Right had a global footprint, Foundation Consumer Healthcare was a US-only company. And so as we were working through diligence, we started to reach out to find who could help us go from zero to 21. And when I say zero to 21, it’s zero markets to 21 international markets.

Our lead investor at the time had a connection with Ceuta. They had worked with them in the past with other portfolio companies, and it was a match made in heaven, quite frankly, because we were, you know, a company with no physical presence. We needed everything from start to finish and we needed it to be turnkey.

And the most valuable thing in the process was the diligence they provided us. We were able to value the international market and quite frankly, we were able to transition it a little faster than normal, because of all the work we put in upfront, and then execute. So you know, it’s been a great marriage. We’re really fortunate. Yeah, that’s kind of the backstory.

Sergio Correia 02:21

Why did you decide to seek an outsourcing partner?

May Petracco 02:24

Setting up a physical presence in 21 countries would have been a huge undertaking. As part of our bid to GSK, we needed to swiftly transition the market and quite frankly, we wanted to focus on our core competency, which is the US marketplace, so an outsource partner made a tonne of sense.

The trick, though, in my mind, is finding somebody that can also support you from a regulatory standpoint, from a quality standpoint. So it’s truly end to end, not just sales and marketing. There are a lot of sales and marketing brokers out there, but Ceuta is unique in that they have a full service. And they have the right partners. They have connections with distributors in each and every market, so they’ve been able to make that connection for us, which is super important.

Sergio Correia 03:26

You talk about a turnkey solution. Can you tell me a little bit more about that?

May Petracco 03:30

Yeah, turnkey. It’s definitely a buzzword here at Foundation, because we are a very streamlined organisation, which is a benefit to us. We can make decisions swiftly. And we needed a partner that could do the same.

Turnkey, to me, means a lot of things. The first thing is, from a financial standpoint, the distributor agreements that we set up were set up in a way where it was a Buy-Sell agreement. And what that means is that the distributor takes the financial ownership of the inventory and therefore, the ongoing liability. That was really important to us, because again, we are a US-based company and we weren’t looking to own inventory internationally, because there are a lot of things that go along with that once you start owning inventory. So that’s the first part of turnkey, which was super important to us.

And as part of that, when the distributor actually owns the inventory, they also need to make sure they have enough stock, so that was the second part that was really important to us. We wanted to make sure that they were willing to have the wherewithal to hold upwards of 10 weeks of safety stock. I mean, that’s a huge financial liability on their part, so that was the second thing.

And then the third from a turnkey standpoint is everything after that, right? It’s making sure that they’re feeding forecast properly, making sure that we’re following any rules and regulations, you know, we have a medical device, and we have a drug product, making sure that they have the right connections with the trading partners so that we can promote it. From a marketing standpoint, understanding from a local standpoint, the expertise within marketing within the market to ensure that we are placing the right advertising.

So to me, that’s what turnkey means. And again, it’s financial, but then it’s operational as well. And, you know, Ceuta has been able to provide us with the right distributors through their Alliance Network to make that happen for us.

Paul Widdop 06:04

I think everything May’s covered off throughout, everything she classes turnkey is the same as what the Ceuta International Alliance and the Ceuta Group brings to the market, that it brings something that is completely unique.

There’s no other organisation that I know that can offer the same service level that we can, having the background and the understanding of all of our International Alliance partners. Their capabilities, and their understanding in-market allows us to be able to feed back to May and the team at Foundation to understand those local nuances just from a — as May said — from a regulatory standpoint, from an advertising standpoint, from a positioning standpoint. There are so many elements that are, even though we’re in similar markets, for example, if you take the examples of Spain and Portugal, they are quite similar in regards to their geography, they’re quite similar in regards to the sort of countries in themselves, but the marketplaces are completely unique and completely different.

You cannot just take one idea and think, okay, well, this is going to work everywhere. So having that infrastructure in place that the Ceuta International Alliance brings gives the confidence when we’re talking to the likes of Foundation about a global proposition that we know the individual countries will be able to deliver back the expertise and the support that we believe and we communicate to Foundation that they do. And that’s what they have done from day one. We have been able to go through the whole process with Foundation to allow us to transition very quickly into 21 interim international markets.

Sergio Correia 07:45

Because I think it’s understanding the market dynamics, and how you use Portugal and Spain as an example.

Paul Widdop 07:51

Yeah.

Sergio Correia 07:52

Very, very, very similar in terms of food, what XYZ, but in terms of business—

Paul Widdop 07:56

Yeah, completely different.

Sergio Correia 07:57

— Worlds apart. So it’s having somebody that understands that sort of culture allows you to engage with that business quick, you know what I mean? So it’s like, well, no, you can’t do that. You can’t push that.

May Petracco 08:11

Yeah. So yeah, it’s Ceuta’s rich understanding of the local markets, distributor, and the proactive management of the distributor. So you know, when you go to the table with them, you know how to present it, you know how to work with them to achieve success.

Paul Widdop 08:31

But I think that the difference with it as well is that when you, as you said I think, that there are similarities between Portugal and Spain, but there are a lot of differences as well. And I think having specialised organisations in each country who understand that local nuance allows us to then learn from them and have a broader understanding across the globe.

We’re never going to know the details and that’s the whole point of having a specialised partner in each individual country, because they’re the ones who know their markets inside out. They’re the ones who’ll be able to tell you all the specifics in regards to regulatory or marketing requirements or restrictions. Whereas, we understand it from a broader picture to be able to say, well, okay, look, we know in multiple markets, there are these regulations, but we’re always learning and we’re always trying to understand more. So we’re trying to learn every time we talk to the distributors. We’re trying to learn every time that we talk to our clients, to be able to say, okay, well, we know more today than we knew yesterday, but we’ll know more tomorrow.

Sergio Correia 09:33

Okay, so you believe your team having that knowledge and an understanding of different markets allows you to prepare and engage on a quicker transition for any business that’s incoming to Ceuta?

Paul Widdop 09:46

100%. I think that having that expertise locally, but also the broader knowledge globally, allows us to speak with confidence when we’re talking to a new client.

For example, when we’re speaking to somebody in regards to a proposition saying, well, we want to be able to go into these markets, we can look at a brand, we can look at the distributor we’ve got. Now, there may be an occasion where it just isn’t a fit for a number of different reasons. I think that’s when you’re looking at a brand launch, if you take it away a little bit from Breathe Right in regards to that it was already established in markets, we knew it was there.

If we’re looking at the saline proposition, there is a competitive category there already. We know it’s there. We need to appreciate that we can’t just… even though Breathe Right’s the strongest brand in its category within every market that we trade in, for a new product coming to market, there is already a competitive set there, you have competitors on-shelf. You can’t just expect that because we’re Breathe Right, we can go and do whatever we want.

You have to be understanding of the competitive set, understanding of pricing matrixes, what the competition is doing, what the competition is saying, what we are going to be doing or saying different, how we are going to be priced differently, to be able to, when the distributors have a conversation with the trade, to say, well, actually, you know what, there’s a reason why we should be on-shelf, not only that it’s associated with Breathe Right, but also the fact that we’re actually offering a point of difference. Our pricing, the margins are all correct, it’s what the distributors need to have to be able to offer back to the trade, but having a point of difference to go to market is imperative.

You can’t have just a new product that’s the same as something else and twice the price because of the brand name. It doesn’t warrant that with the trade anymore. You need to have the right story to be able to go to the trade and explain, this is why you should have us. There is a reason why we should exist alongside what you already have or potentially replace one of your slower-selling lines, because what we’re offering is not only a brand that’s known and well known by consumers, but also a product that’s offering something completely unique and different to what’s currently on shelf at the moment.

May Petracco 11:44

And the same applies in the US market. I mean, having a unique selling proposition is key. And that’s why the saline makes a lot of sense. We have a unique aspect to that saline. But the same applies in the US. Yeah, there’s something that, you know, a reason to believe, a unique selling proposition. You can’t be a me-three brand in the marketplace. So same applies.

Paul Widdop 12:14

And I think that’s the thing. I’m not speaking for the Foundation team, but I know from the visits you’ve had over to Europe and visited a lot of the markets when we’ve gone out and seen the differences between Switzerland and Sweden or Greece or whichever other markets we’ve been to. And I think the marketplace here, there are a lot of similarities between the US and Europe in regards to the way you work and the way you work with the trade, but I think there are complete differences in the way the structure of the markets are over here. I think it was Steve who said when we were in Spain, it was almost like, this is like the US 20 years ago, with how the pharmacy channel still exists predominantly within European markets, especially where Breathe Right is sold. That’s not how the business is done in the US, it’s done through CVS and Walmart and everybody else in the big, big retailers that you have there. Whereas, in Europe and in Asia, it’s predominantly sold through the pharmacy channel, so it’s a very different positioning to the US, even the same product, same communication, but it’s a different conversation with the distributors and the markets here than you may have in the US.

May Petracco 13:15

And that’s another reason why the Alliance was so important, because in Europe and countries surrounding it, it appears to be much more fragmented. You know, in the US, you’re dealing with the big five, and they’re doing 90% of your business. So to distribute directly to them is a lot easier than to distribute to a number of pharmacy chains, much, much more fragmented. So I think it makes the selling role, you know, quite complicated. And that’s why the Alliance, again, and the turnkey solution makes so much sense for us.

Paul Widdop 13:59

And again, that’s why we hold seminars with all of our distribution partners, especially around marketing, sharing best practices with all of our partners, because we have been on this journey for the past three and a bit years and everyone’s still learning. We still learn every day. We’re learning, okay, we’ll try this different type of advertising, we’ll try this type of display, and we’re bringing all the distributors together for a half-day virtual conference to be able to share best practices from each individual market. Say, this has worked from our point of view, this has got us out of the drawer in a pharmacy onto the shelf, allowing self-selection by consumers rather than a consumer having to go in and ask for it.

That learning has benefitted all of our distributors. And we continue to roll that out to make sure that everyone can learn from each other, because everyone, even though they manage their own markets, there are similarities there and differences, but they can still pick and choose little bits. And oh, this advertising went well for us. Okay, well, we could do that, but as I said, having consistent brand positioning and consistent marketing materials across all markets means that it can be adapted very quickly. You said earlier, they’re adapted very quickly to be able to have them executed in a consistent way in the marketplace, even though there may be some slight differences.

Sergio Correia 15:09

So this goes beyond introducing a brand to a global network of distributors.

May Petracco 15:16

Yeah, absolutely. I mean, because every market has a different approach, right? You know, there are a lot of different ways to go to market globally. One is, you know, pushing from the top down, and another is allowing the local market to provide their expertise and make recommendations based on your global footprint. And we chose the latter. And I think it was a really smart decision.

Just to give you an example, you know, we produced an advertisement. And we shot it and then we changed the language voice over so that each and every market had the ability to have the same shot for Breathe Right, but in their local language. The words changed, because there are some nuances locally, but the product is the same. It’s one global footprint, one brand packaging, one name, and from a product use standpoint, it’s somewhat similar. So that’s an example of, you know, where it’s beyond just introducing a brand. It’s figuring out how the local market runs and then leveraging the expertise of the distributors and leveraging the global brand in a way that makes a lot of sense. So that’s one example that kind of comes to mind.

Paul Widdop 16:57

I think the starting point is always to go back to the basics of what it is, and it is, how do we sell this product in the market? We had to transition out of GSK, so that came with multiple different challenges. It came in regards to brand names and individual countries, so there were various different elements that had to be looked at in individual countries, where the brand name was no longer Breathe Right, it had been transitioned into a bigger GSK brand. So we had to then move that back to Breathe Right, so again, that came from a regulatory standpoint to make sure that there was consistency in the branding of the name globally in 21 markets, which ranges from South America to Australasia and then throughout other markets in Europe. So there’s a lot of different regulatory bodies that we have to look into in regards to the TGA in Australia or various other different sorts of regulatory bodies throughout Europe. So we had to make sure that the brand names and everything else aligned and stood together.

Then, as May’s just said, I think, going into the branding part of it is trying to get that consistent messaging. It’s taking 21 markets with all different languages to have a consistent message, look, and feel that’s been built up across the entire portfolio to make sure that on-shelf, the packaging looks the same, so you’ve got consistencies. If you’re a consumer from Spain, for example, who goes to Australia or Germany or Sweden, you walk into a store, even though it’s not in your mother tongue, you will still recognise a product on-shelf because it looks pretty much exactly the same as yours does in your own market, it just has a different language on it.

So I think those elements just as a starting point, before you even get into the levels of distribution of how we then sell to the trade, and everything else is a standard distribution thing that you would work on, these elements had to be worked on and built. And that, as May mentioned, I think the advertising part of it is trying to utilise the best communication message that’s consistent across markets. So again, you could be a foreigner in a country and see an advert on TV and recognise it just through the imagery or the look and feel that’s been developed. So the consistencies of the marketing and the support behind the brand, to keep that consistent is key to allowing consumers to understanding who we are wherever they are in the world.

May Petracco 19:06

Yeah, we were really excited when we launched the consumer advertising programme, because one, that we were able to launch from a consumer standpoint, because we believe that’s at the heart of everything. But two, we were able to do it in a way that’s like a test and learn and have so many efficiencies and roll it out to multiple markets, so test and learn is always best. And we had so many good results in a number of markets, so then we could continue to reinvest.

And that’s another thing that I think is great about Ceuta is, you know, you treat our bank account like it’s your own, and you understand the need for return on investment. And if there isn’t a return, we’ve got to pull back and pivot. And I think you guys have done a really nice job with that. Again and that’s what we mean by turnkey, like when I talk about from a financial standpoint, you know, the inventory, but it’s owning the full profit and loss (P&L), having the full P&L ownership. And so I think that was really important to us.

Paul Widdop 20:11

Yeah, no, it is key where we look at our business planning process and everything we do on a regular basis with all our marketplaces, looking at, okay, if somebody isn’t performing to what we expected, then we invest behind them to allow them to grow the brand. And there are challenges in markets out there and we know there’s a financial crisis in a lot of countries at the moment and a lot of financial challenges for consumers, so people are reigning back in, but there is an investment level that’s adjacent to the business proposition.

And we know that, again, when we talk to you regularly about this, it’s saying, look, well, this market isn’t performing, we think we’re going to miss it. What do we want to do? Do we want to carry on with the investment level, which, in fairness to you and the Foundation team, you’ve backed the distributor to say, look, no, we understand that it’s challenging out there, so we’re willing to, even though they’re not going to quite get to where we thought, we’re going to continue to invest behind them and support them in the development of the budgets we agreed.

So having a client like you that we work with is great for both me and Sergio in regards to the work that we do. And as much of a challenge as it is, as we said earlier, we’re in this together and we’re here fighting to make sure that we deliver the best results possible for the business. And having the support from you and the team just, it doesn’t make it easy, unfortunately, but it does make it easier.

May Petracco 21:23

Agreed. Agreed. Yeah, our goals are aligned, which is, you know, important in any partnership. And we’re fortunate. We have investors who believe in the brand. We bought the brand to grow the brand, not to sit on it and harvest it, like many other large companies may do, but we actually want to support it and we’re hoping to double it in the next couple of years, with all the claims work, the line extensions in adjacent categories, and then entering a new market. So, you know, this is an important brand in our portfolio.

And again, it has broad shoulders. That was one of the exciting things when we bought it, you know, and you talked a little bit about the diligence upfront, and the diligence upfront was understanding the P&L, right, how much money can we make because our go-to-market strategy is different from GSK? But second was conducting the research and just understanding, like, what does Breathe Right mean to consumers in these markets, understanding if there is an opportunity to grow, and that was part of our valuation and how we priced the deal. So, you know, it’s finding a partner to be in it with you from the start all the way through is a huge advantage.

Sergio Correia 22:54

What are the plans for Breathe Right in the future? What are the next steps?

May Petracco 22:57

Well, I’m happy to report that Breathe Right globally has over $100 million in sales, which is, you know, enormous. And we’re in 21 markets.

Um, our next steps are, you know, Breathe Right has broad shoulders. The name allows you to extend into adjacent categories and so forth. And we know that a lot of users of Breathe Right are also users of nasal sprays or other therapies. The fact that Breathe Right is drug free allows for that. It’s an interesting product from that standpoint and a lot of concomitant usage, so, you know, number one is absolutely continue to line extend and leverage the power of the brand name into adjacent categories. And the second is to penetrate markets that haven’t been tapped into to continue to extend the brand name.

Number three is from a clinical and from a claim standpoint, we’re doing market research so that we can tell the consumer how the product works, why it’s important, and leverage different usage occasions. So to me, it’s not just about nasal congestion or sleeping, it’s about breathing better, and what that means in terms of quality of sleep, or quality of your day, or quality from a performance standpoint. And so that’s really kind of the next step from a marketing and claim standpoint. So again, I go product, market, and then from a claim standpoint, kind of where we can extend, you know, to help the consumer understand how the product works.

Paul Widdop 24:59

And I think from that aspect as well, I think the benefit we have with the Alliance is that when we’re looking at the saline spray or range extensions, with the expertise our partners have in the markets, we’re able to go out to them and say, look, what do you think of this opportunity? What does your market look like? We get local understanding and local knowledge on a far broader discussion.

If we’re looking at potential pack transformations going through in the next few years, getting that local understanding of okay, what are the challenges of this packaging within your market? It may be different from one market to another, but the benefits we have with the Alliance is we have that very special expertise and knowledge base to be able to give us very robust feedback, whether it’s from a consumer level or whether it’s from their own personal and trade level and their expertise in the marketplaces.

And I think, coming on from the whitespace point of view as well, is the benefit, again, with the Alliance is we know if we go to another market that we’re not currently represented in, we have a distribution partner in place who is the same as the distribution partners we’re already using with Breathe Right. So Foundation know from from a Ceuta point of view that the people that we’re going to bring to the table will be able to deliver a new market launch, will be as capable and as good as the great partners we have in place, who are already delivering great results on the Breathe Right business.

Sergio Correia 26:14

So if you guys had one last message for the people who are listening to us today, what would that message be?

May Petracco 26:20

From my standpoint, it would be that Ceuta is not a group that just sits back and provides advice. They proactively manage our distributors, you know, they understand the local markets, they roll up their sleeves and get the job done, which I think is unique, because it’s what’s required, quite frankly. We’re dealing with a lot of different issues in each and every market. And if you’re not on top of it, it could definitely get away from you, so not advice, it’s more of a proactive management.

Number two is transparency of information, which is super important. I’m the head of Finance and Operations here at Foundation, so understanding what’s going on and having that level of transparency, whether it’s good news or bad news, allows me to do my job better, you know. Bad news is just as important as good news is, because I can make some adjustments on our side, on the US side of the business, if there’s a deficit, so, you know, I think they’ve been a really good partner from a transparency standpoint.

And number three, because of our structure, the way that we, you know, are so streamlined, number three was we were really just looking to have, like, one or two touch points. We only have a few individuals on our side who manage the rest of our business, so we wanted to keep it, from that standpoint as well, very turnkey and streamlined. We wanted a few individuals we could go to that were managing the business from the top and Ceuta has been able to provide that for us. So again, proactive management, you know, with all the distributors, transparency, and turnkey and streamlined management approach, I would say. So we’ve been very fortunate to find this marriage, and we’re kind of looking forward to continuing not only to grow Breathe Right but also acquire more assets together.

Paul Widdop 28:43

I think from my point of view, I think it’s very much, do your research. I think with anything like this, as May touched on earlier, is that doing the initial research before the brand was even acquired, was a key element to validate almost the decision, saying, well, we have had the research done to validate what we’re doing.

It isn’t an easy process, launching a brand internationally is not easy. There are so many different variables you have to take into consideration. Having a local expert in that market and a distributor who can deliver everything that you would want to deliver yourself in your home market is key and they are difficult people to find. I’ve worked in the industry or worked in international business for 26 years and there’s a lot of OK distributors out there, but very few that are very, very good. And I think the benefit we have from the International Alliance is having some of the very best distributors in each individual country, that we spend our time to understand exactly what they can do and what they can’t do. So it means that when we’re speaking to Foundation and when we’re speaking to other clients, we have full confidence when we say we can deliver this in a multitude of markets, whether it’s 10, 15, 20, 100. We could do it with confidence, knowing that every partner we’re introducing our new clients or current clients to will offer the same messaging and the same capabilities within each individual market.

May Petracco 30:07

Yeah, and one other thing to add, I think, that makes this relationship so special, and I touched on it, is that we closed on the Breathe Right acquisition in the middle of COVID. I think we went two years without a face-to-face, yeah, which is pretty extraordinary, you know, that we were able to transition 21 markets, 120 SKUs in a matter of, you know, five to six months, get them on our books, get the distributor signed up, and start placing advertising swiftly after that, without ever meeting face-to-face.

Certainly, the face-to-face contact since then has just made the relationship even stronger. I’m a firm believer in building relationships, so, you know, doing it virtually for two years was quite difficult, but honestly, it was very successful. So I think that’s just a testament to Ceuta and the group that they had in place running our business, and again, the proactive management. If you’re not proactive with communication and everything, it could have easily fallen apart, so I think that was another really big part of this transition and a big part of our relationship.

Paul Widdop 31:47

No and I think it’s been through choppy waters, let’s say, we’ve had a lot of challenges, a lot of sleepless nights, late nights, continuous late nights.

May Petracco 31:56

Early mornings for us.

Paul Widdop 31:57

Yeah. And it never stops. But we work closely as a team. We see ourselves as part of the Foundation team. Yes, we’re employed by Ceuta and we work for Ceuta, but our roles and the team that I work with within Ceuta are all dedicated to the Foundation business.

So we have a team of people working every day to deliver the rest of our project for Foundation. And I think that’s where we see ourselves as part of the Foundation team. We work closely, speak daily most of the time, to be able to talk through, as you said, good news is great, bad news is not great, but it’s as important to make sure that we’re all aligned on what we can or can’t do and how we can deliver the results that Foundation want, that Ceuta want, and everybody’s aligned with, okay, we understand the challenge there, but how do we work as a team, both Foundation and Ceuta, to overcome the challenges we have and actually get to where we want the business to be?

May Petracco 32:50

Yeah, agreed, agreed. And once I figured out that I could put Teams on my phone versus my computer, that was big, especially with the early morning wake-ups. So yeah, it was a success. So agreed.

Sergio Correia 33:07

Well, I think that brings us to a close on this interview. I’d like to thank you both for joining us. And thank you.

Paul Widdop 33:17

Thanks.

May Petracco 33:17

Thanks.