Smithkline Consumer Products – The Contac® Relaunch

by: Stefan Schweig

Table of Contents

1. About Smithkline 3

1.1. ABOUT SMITHKLINE/BEECHAN GROUP 3
1.2. ABOUT CONTAC® 4
1.3. ABOUT THE HAPPENINGS IN 1986 4

2. Strategic Analysis 5

2.1. EXTERNAL ENVIRONMENT 5

2.1.1. Demand on the Product 6
2.1.2. Features of the Product 6
2.1.3. OTC – Over-the-Counter 6
2.1.4. Competition on the market 8
2.1.5. Tampering Incidents 9

2.2. FIRM INTERNAL 10

2.2.1. Finance 11

3. Suppliers 11

3.1.1. Marketing strategies 11

4. Strategy Formulation 12

4.1. BUSINESS LEVEL 12
4.2. SWOT ANALYSIS 13

4.2.1. Strength 13
4.2.2. Weakness 14
4.2.3. Opportunities 15
4.2.4. Threads 16

4.3. CORPORATE LEVEL 17

5. Strategy Implementation 17

5.1. ADAPT STRUCTURE TO STRATEGY 17
5.2. STRATEGIC LEADERSHIP 17

5.2.1. Detecting and Resisting Tampering 17

6. Glossary 19

6.1. PPA (PHENYLPROPANOLAMINE) 19
6.2. MYSTERY OF THE POISENED CONTAC 19

7. References 20

1. About Smithkline

1830 John K. Smith opens his first drugstore in Philadelphia; 1875 name changed to reward salesman Mahlon Kline), John Francis Marion (1980). (SmithKline Beecham - 1842 Thomas Beecham launches the Beecham′s Pills laxative business in England; 1989 -SmithKline Beckman merges with The Beecham Group plc; 2000 - SmithKline Beecham merges with Glaxo Wellcome), Anne Francis (1968). SmithKline acquires Allergan, an eye and skincare business, and merges with Beckman Instruments Inc, a company specialising in diagnostics and measurement instruments and supplies. The company is renamed SmithKline Beckman. John Vane of the Wellcome Research Laboratories is awarded the Nobel Prize, with two other scientists, "for their discoveries concerning prostaglandins and related biologically active substances."

1.1. About Smithkline/Beechan Group

The merger in 1989 of SmithKline Beckman and the Beecham Group to form SmithKline Beecham created a new company with one of the world′s biggest research and development organisations.
The combined product portfolio, pipeline and geographic networks positioned SmithKline Beecham at the forefront of the global healthcare industry. The new company reasserted its goal to become an integrated human healthcare company, covering prevention, diagnosis, treatment, cure and disease management, and creating customer healthcare solutions. In the 1990s, with the promise of "Striving to Make People′s Lives Healthier," SmithKline Beecham continued to launch new drugs such as Seroxat/Paxil (paroxetine hydrochloride) for the treatment of depression and Relifex/Relafen (nabumetone), an anti-inflammatory drug for the treatment of rheumatoid arthritis.

1.2. About Contac®

For more than 39 years, the Contac brand has been a trusted name in America′s medicine cabinets. Contac was introduced in 1961 as a revolutionary cold medicine which provided up to 12 hours of extended relief from cold/flu and allergy upper-respiratory symptoms. Contac is the cold remedy brand that delivers long lasting congestion therapy. The Contac line offers a variety of formulas for relief of cold/flu and allergy symptoms. All are multi-symptom remedies; each is designed to relieve a specific group of symptoms. Because symptoms can occur either alone or together, different aliments require different formulas.

1.3. About the happenings in 1986

Contac capsules have helped millions of Americans endure the sniffles, but in 1986 every store in the U.S. that carried the popular cold remedy was ordered to get it off the shelves. Manufacturer SmithKline Beckman of Philadelphia was forced to recall Contac and two other fast-selling encapsulated products, the antihistamine Teldrin, for allergies, and Dietac, for appetite control. The reason was familiar and chilling: a murderous blackmailer intent on intimidating a corporation by poisoning its products. A man calling himself Gary telephoned ABC News claiming he had placed 25 tainted Contac capsules in stores throughout the country. ABC Anchor Peter Jennings tipped off SmithKline while judiciously holding the story off the air. The next day, SmithKline got more calls, apparently from the same man. All capsules were unsafe, he said, and he wanted to get them off the shelves. The caller named stores in Houston and Orlando, where he said he placed capsules laced with cyanide or rat poison. Investigators initially found capsules spiked with sugar and cornstarch. The adulteration was easily detected. The man had crudely cut into the plastic blisters encasing the capsules. At first the company stopped short of a recall, telling retailers only to stop selling the drugs until further notice and warning consumers against using any of the capsules purchased after March 15. At week′s end, however, laboratory tests found nonlethal doses of warfarin, an anticoagulant used in rat poison, in two Contac and three Teldrin capsules. SmithKline was frightened into acting. The recall came barely six weeks after a 23-year-old woman from Westchester County, N.Y., died of cyanide poisoning after taking an Extra-Strength Tylenol capsule. In 1982 seven people died from cyanide-laced Tylenol capsules, but it was the most recent death that persuaded Johnson & Johnson to stop making capsules altogether and to reissue the remedy in a tamper-resistant "caplet" form. Whether SmithKline will also abandon capsules was not clear. Unlike Tylenol, the SmithKline products are "time-release" medicines, which break down slowly and work best in capsule form. Besides, Contac accounts for some $50 million in SmithKline′s sales, half of its over-the-counter drug business. Despite the drug′s wide popularity, it could conceivably fall victim to a single unbalanced terrorist.

2. Strategic Analysis

2.1. External Environment

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