Abbott Targets Pediatric Nutritional Market With New Beverage

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ABT: Abbott Laboratories logo
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Abbott Laboratories

For some time, Abbott Labs (NYSE:ABT) has been desperately trying to regain its lost market share in pediatric nutritional market. In a bid to advance its plans, the company has launched nutritional beverage, targeting kids who are picky eaters. [1] Not long ago, the company faced a setback when its infant formula Similac failed to qualify national safety standards in huge Chinese market.  Abbott is a diversified healthcare major and is involved in the development, manufacturing and marketing of pharmaceuticals and other medical products, including nutritionals and diagnostics. Its major competitors include Johnson & Johnson (NYSE:JNJ) and Merck (NYSE:MRK). Below we take a look at how it could impact the company’s value.

Our price estimate for Abbott Labs stands at $66, implying a premium of about 5% to the current market price.

See our complete analysis for Abbott Labs

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The nutritional industry is highly fragmented, and many large pharmaceutical companies and packaged food and beverage companies compete for the same consumer base. Competition is mainly based on price, quality and availability of new products. The new nutritional beverage “PediaSure SideKicks Clear” will expand Abbott’s product line in pediatric nutritional market.

The product gives the company an exposure to potential huge market of picky eaters, who are difficult to feed healthy food. Abbott believes the beverage could help fill in the nutritional gaps, while the kid-friendly packaging makes it easy to make an impact in kids’ mind. If the product makes a lasting impact in the market,  this could significantly affect the value of nutritional division, which contributes about 13% of our current price estimate of the company.

In the last few years, the company has lost significant market share to Mead Johnson and Nestle. Its infant formula Similac took a brand hit following a voluntary recall. Further, the formula failed to meet Chinese national safety standards.

But, we believe the company should be able to leverage its global presence and increased penetration in emerging markets to boost sales. Abbott has opened six manufacturing and R&D facilities in its nutrition and pharmaceuticals businesses in the Asia Pacific region during the past three years, which could help the company capture market share.

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SideKicks ® Clear for Picky Eaters

Notes:
  1. Abbott Launches PediaSure SideKicks® Clear for Picky Eaters, Abbott Press Release, May 16 2012 []