Executive Summary / Key Takeaways

• Haleon plc ($HLN) is solidifying its position as a specialized leader in the expanding global consumer healthcare market, driven by a focused strategy on innovation, premiumization, and expanding access to lower-income consumers. The global consumer healthcare market is projected to grow from $667.56 billion in 2024 to $821.44 billion in 2025, at a compound annual growth rate (CAGR) of 23.1%, fueled by an aging population, wellness focus, and digital health integration.
• Despite a challenging North American market, Haleon delivered 3.5% organic revenue growth in Q1 2025 and 0.8% volume growth in H1 2025, with strong performances in Oral Health and Digestive Health. The company has upgraded its full-year 2025 organic operating profit guidance to high single-digit growth, demonstrating strong margin expansion and productivity gains.
• Haleon's commitment to science and innovation is a core differentiator, exemplified by its significant R&D investments, the successful rollout of the Sensodyne Clinical platform, and strategic initiatives like the new £130 million Global Oral Health Innovation Centre.
• The company is actively managing its portfolio, including strategic divestments and increasing ownership in its China OTC joint venture, while maintaining a strong balance sheet with net debt reduced to 2.9x EBITDA and a £500 million share buyback program.
• Key risks include continued softness in the U.S. market, competitive pressures in certain categories, and the inherent volatility of consumer confidence, necessitating sustained investment in brand building and innovation.

A Focused Vision in a Growing Market

Haleon plc, a global leader in consumer health, operates with a clear purpose: to deliver better everyday health with humanity. Spun off from GSK (GSK) in 2022, the company inherited a rich heritage dating back to 1715, establishing itself as a specialized entity in the dynamic consumer healthcare sector. This strategic separation has allowed Haleon to sharpen its focus on its core portfolio, which spans six major categories: Oral Health, Vitamins, Minerals and Supplements (VMS), Pain Relief, Respiratory Health, Digestive Health, and Therapeutic Skin Health and Other.

The global consumer healthcare market is experiencing exponential growth, projected to reach $821.44 billion in 2025 from $667.56 billion in 2024, driven by an aging global population, increasing focus on wellness and prevention, and the expansion of e-commerce and digital health solutions. This robust market backdrop provides a fertile ground for Haleon's strategy, which centers on three key growth drivers: closing the incidence treatment gap, driving premiumization through innovation, and expanding reach to lower-income consumers. The company's ability to harness data and leverage AI for personalized health solutions is also becoming a critical differentiator in the market.

Haleon's competitive positioning is defined by its strong portfolio of trusted brands, built on science and deep human understanding. While competing with diversified healthcare giants like Johnson & Johnson (JNJ), consumer goods behemoths such as Procter & Gamble (PG), and pharmaceutical powerhouses like Pfizer (PFE), Haleon differentiates itself through its exclusive focus on consumer health. This specialization allows for streamlined product development and market positioning, potentially offering greater agility in responding to evolving consumer needs compared to its broader-portfolio rivals. For instance, Haleon's brands often achieve higher perceived quality in health-specific categories, leveraging its expertise in therapeutic formulations. However, larger competitors benefit from greater scale, wider market reach, and more diversified revenue streams, which can translate to stronger pricing power and more stable financial performance.

Technological Edge and Innovation as a Growth Engine

Innovation is the cornerstone of Haleon's business and a critical competitive advantage. The company consistently invests in research and development (R&D), with an annual budget of approximately £300 million. This commitment is evident in its strategic R&D initiatives and new technological developments. In January 2025, Haleon announced a $54.2 million investment to expand and modernize its R&D facility in Richmond, Virginia, which is one of its three global R&D centers of excellence. This investment aims to enhance capabilities for developing innovations across ingredients, formulations, flavors, formats, and packaging for its Over-the-Counter (OTC) and VMS categories. Further underscoring this focus, in July 2025, Haleon broke ground on a new £130 million Global Oral Health Innovation Centre in Weybridge, Surrey, designed to enhance science capabilities and accelerate innovation. The appointment of Carl Haney as Chief R&D Officer in August 2025, a leader with significant experience in driving transformative innovation, further signals Haleon's dedication to this area.

A prime example of Haleon's technological differentiation is the Sensodyne Clinical White platform. This innovation is scientifically developed and clinically proven to whiten teeth by up to two shades without worsening or causing sensitivity. This is a significant advantage in the whitening toothpaste category, where many products can exacerbate sensitivity. The product offers 24/7 sensitivity protection in an enamel-safe formula, free from hydrogen peroxide, a common sensitivity trigger. This technology allows Haleon to capture market share in the fast-growing whitening segment while addressing a core consumer need for sensitivity relief. The Clinical White platform is being rolled out in approximately 12 more markets in 2025, alongside the launch of Clinical Repair and Clinical Enamel Repair, demonstrating a continuous pipeline of science-backed products.

In the VMS category, Haleon leverages scientific claims from studies like COSMOS, which showed that Centrum Silver improves cognitive function by 60% when taken daily. This quantifiable benefit provides a strong differentiator for Centrum Silver, which accounts for about 50% of Haleon's U.S. Centrum business. Such evidence-based claims are crucial in a category where consumer trust is paramount. Haleon's R&D strategy also extends to expanding access to lower-income consumers through tailored product offerings, such as the INR 20 Sensodyne pack and INR 10 ENO pack in India, and the Sonridor brand in Brazil, which utilizes Panadol's Optiol technology for systemic pain relief. These initiatives demonstrate how technological innovation is directly linked to market expansion and financial performance, enabling Haleon to command premium pricing in certain segments while also addressing broader market needs.

Financial Performance and Strategic Resilience

Haleon's financial performance in 2024 and the first half of 2025 reflects a business demonstrating resilience amidst a volatile macroeconomic environment. In 2024, the company achieved 5.0% organic revenue growth, with 71% of its business gaining or maintaining market share. This was supported by a 10.2% increase in Advertising & Promotion (A&P) investment, reaching 19.2% of sales. The company's adjusted operating profit grew 9.8% to £2.5 billion in 2024, driven by gross margin expansion and productivity savings.

Entering 2025, Haleon delivered 3.5% organic revenue growth in Q1, comprising 2.4% price and 1.1% volume mix. However, reported revenue in Q1 2025 declined 2.3% due to a 2.9% drag from disposals and translational foreign exchange. The first half of 2025 saw a group volume performance of 0.8%, with EMEA, LatAm, and Asia Pacific regions showing accelerating volume growth, while North America experienced a 0.6% volume decline.

North America proved to be a "clear outlier" in Q2 2025, with a nearly 2% organic sales growth decline. This was attributed to a challenging consumer environment, a shift to value channels, and ongoing inventory pressures from drug retailers. Haleon's consumption in North America, while growing ahead of the market (up 0.5% versus the market's 0.5% decline), was not significantly strong. The Smokers' Health business, representing 5-6% of the U.S. business, was a significant drag, impacting total group growth by 60 basis points in Q2 2025.

Despite these regional headwinds, Haleon's overall profitability remains robust. Organic operating profit grew 9.9% in H1 2025, an improvement of 140 basis points, driven by a 160 basis point gross margin improvement. This margin expansion is a direct result of supply chain productivity initiatives, including SKU reductions in 2024, and easing cost inflation. The company's A&P spend increased by 130 basis points to 20.8% of sales in H1 2025, with a 4% improvement in ROI, demonstrating effective investment.

Haleon's liquidity and capital resources are strong. Net debt has reduced to 2.9x EBITDA, and the company returned $700 million to shareholders in H1 2024, supported by strong cash flows and proceeds from divestments. A £500 million share buyback program was announced for 2025, reflecting confidence in the company's outlook and cash generation. This disciplined capital allocation strategy, prioritizing investment in growth, bolt-on M&A, and shareholder returns, positions Haleon for continued financial health. The company also sees a "large opportunity" for further working capital efficiencies, particularly in inventory optimization.

Outlook and Risks

Haleon maintains a confident outlook for 2025, guiding for organic revenue growth of around 3.5% and an upgraded high single-digit organic operating profit growth for the full year. This guidance anticipates a stronger second half, driven by innovation momentum, continued healthy investment in A&P and route to market, and the expectation of a normal cold and flu season after a soft end to 2024. The company does not, however, foresee a significant improvement in the U.S. environment and expects continued inventory pressure from retailers.

Strategic initiatives like the reactivation of Centrum Silver with a new claim ("slows cognitive aging by 60%") and new Advil media campaigns are expected to improve share positions in the back half of 2025. Emerging markets, particularly India and China, are expected to continue their strong performance, with India benefiting from anticipated government stimulus in H2 2025. The global consumer healthcare market is expected to continue its exponential growth, driven by digital health solutions, personalized healthcare, and a focus on mental wellness.

Despite the positive outlook, several risks warrant investor attention. The challenging consumer environment and retailer inventory pressures in the U.S. remain a significant headwind, particularly impacting categories like smoking cessation, where trade-down to private labels is observed. The VMS category is considered more discretionary and has experienced softness. While Haleon is proactively managing its phenylephrine product inventory ahead of a potential FDA decision on efficacy, regulatory changes always present a degree of uncertainty. The early trial results for Eroxon, a new erectile dysfunction OTC product, have been slower than expected, highlighting the challenges of launching new products in new categories. Currency fluctuations are also expected to present a headwind, with an estimated 2% impact on revenue and 3% on adjusted operating profit for 2025.

Conclusion

Haleon plc stands as a compelling investment proposition within the resilient consumer healthcare sector. Its strategic focus on science-backed innovation, premiumization, and market expansion, particularly in high-growth emerging markets, underpins its long-term growth trajectory. The company's ability to consistently deliver strong gross margin expansion through productivity initiatives provides the financial agility to invest heavily in R&D and A&P, reinforcing its competitive moat. While facing headwinds in the North American market and navigating competitive pressures from diversified rivals, Haleon's disciplined portfolio management, robust cash flow generation, and commitment to shareholder returns demonstrate a well-managed enterprise. The ongoing investments in R&D and the successful rollout of differentiated technologies like Sensodyne Clinical White are critical drivers of future performance, positioning Haleon to capitalize on evolving consumer health trends and solidify its leadership in everyday wellness.