Mumbai: India’s biggest FMCG firm, Hindustan Unilever, has announced the country’s largest deal within consumer goods market involving the merger of GlaxoSmithKline Consumer with itself for a transaction worth Rs 31,700 crore.
The all-equity merger deal includes GSK’s entire operations of nutrition business and contract to distribute the latter’s over-the-counter (OTC) and oral care brands such as Sensodyne, Eno and Crocin.
“With this proposed strategic merger with GSKCH India, we will be expanding our portfolio with great brands into a new category catering to the nutritional needs of our consumers,” said HUL chairman Sanjiv Mehta adding that the merger will create significant shareholder value through both revenue growth and cost synergies. “The turnover of our food and refreshment business will exceed Rs 10000 crore and we will become one of the largest F&R businesses in the country.”
Horlicks is the market leader in the malted beverages segment with 43% market share followed by Mondelez International’s Bournvita, which has around 13% share. The business generated £550 million in 2017 and roughly 80% of the sales came from India.
In March, GlaxoSmithKline Plc chief executive Emma Walmsley had announced a strategic review of Horlicks and its other consumer healthcare nutrition products, adding that the company was exploring a partial or full sale of its stake in Indian subsidiary GSK Consumer Healthcare by the year-end. This was triggered by GSK looking to help fund its $13-billion buyout of the Novartis stake in their consumer healthcare joint venture. GSK Consumer India business had a turnover of about Rs4200 crore in the year ended March 2018, primarily through its Horlicks and Boost brands.
For Unilever, food is a core growing business and was the second-largest category for Unilever until last year, contributing euro12.5 billion to its overall sales. After Unilever merged it with the refreshments portfolio, the combined business accounts for 41% of sales, and is headed by former Hindustan Unilever CEO NitinParanjpe.
The growth of malt beverage segment has slowed down over the past few years in India as consumers increasingly shift to specialised products made by nutraceuticals companies such as Abbott and Danone that sell brands such as Ensure, Pediasure and Protinex.
Horlicks came to India with the British Army after the end of World War I after Indian soldiers of British Indian Army brought it back with them as a dietary supplement. Since then, the brand has been marketed, first as a family beverage mostly for affluent Indians and later as a nutritional drink for children.