Horlicks-Unilever Agreement: Why Horlicks may not be such a good bargain for Unilever

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By David Fickling and Nisha Gopalan

Unilever NV buys the best drink of India at GlaxoSmithKline Plc. Let's hope that the global consumer giant did not pay too much.

According to the Financial Times, GSK has entered into exclusive negotiations for the sale of its nutrition business to Unilever. This includes Horlicks, a malted milk drink, considered a staple for children from more mobile families in India. What the Anglo-Dutch giant has proposed remains unclear, but GlaxoSmithKline Consumer Healthcare Ltd., a company listed on the Bombay Stock Exchange, listed on the Bombay Stock Exchange, has a market value of $ 4.2 billion. GlaxoSmithKline Bangladesh Ltd., which, according to the Financial Times, would also be included, represents a value of 15.7 billion taka ($ 187 million).

According to Euromonitor, Horlicks ranks 56th worldwide in the health and wellness drinks category (with Red Bull and Gatorade in the lead), but in India it is No. 1, ahead of Cadbury by Mondelez International Inc. Bournvita and the other GSK malt beverage (popularized by cricket player Kapil Dev). Unilever, whose many distribution channels include training local women as rural sales agents for its soaps and shampoos, will have the kind of sales network that GSK Consumer could only dream of.

But Horlicks faces a challenge even in India. The drink is losing its star status as a "healthy" morning drink and choice after school, pushed by Indian parents to their kids. In the worst case, it could end up with the image it has in the UK, its home market: a drink that sleeps the bed for the elderly.

He has other problems to solve. Indians have always been big buyers of so-called dietary drinks – a market that GSK Consumer controls at half – as companies have been able to present their products as essential nutritional supplements. This is happening in a country where about a quarter of the world's undernourished population lives.

Horlicks' current advertising campaign highlights that the drink "contains bioavailable nutrients, which are absorbed into the bloodstream and thus make children bigger, stronger and stronger," said Vivek Anand, Chief Financial Officer of GSK Consumer. , at a call from investors earlier this month.

The vertiginous growth of incomes in India introduces a new set of health problems. A powdered milk drink from Horlicks contains about one fifth of the sugar – and diabetes is the fastest growing health condition in India and affects 10.4% of the adult population. According to current trends, the disease may soon be more dead than undernourishment, which affects 14.8% of Indians.

graph "title =" graph "/> <figcaption/> </figure> </p> <p> To understand how this changes the game, consider what happened the last time GSK sold one of its reputed British drinking products. Suntory Beverage & Food Ltd. paid 1.35 billion pounds ($ 1.7 billion) for Lucozade and Ribena in 2013 as it tried to reduce its reliance on the Japanese market, but brands have always difficulties. </p> <p> In 2016, the British government announced its intention to introduce a tax on sweetened soft drinks, prompting Suntory to reformulate its recipe to reduce its sugar content by about 50%. </p> <p><figure clbad= French-graph 2 "title =" graph-2 "/> <figcaption/> </figure> </p> <p> It may have been unavoidable, but the move did not facilitate the sale of products whose image is partly based on their sweet taste (Lucozade was originally known as Glucozade because of its glucose content). Even before the entry into force of the sugar tax this year, Suntory's UK unit revenue fell by around 6% in 2017. Sales of the leading brand Lucozade Energy have still down 12% from the previous year in March this year, the company said. a winning call in May. </p> <p><figure clbad= 1 "graph-1" title = "graph-1" /> <figcaption/> </figure> </p> <p> To get an idea of ​​the damage that government action can cause in India, let's look at the Bihar case. One of India's poorest states banned the sale of Horlicks earlier this month as a result of a dispute over whether the drink was wrongly marketed as vegetarian (the ban was temporarily suspended while the case is decided). </p> <p> Sugar tax does not yet exist, but even in that country, central government sales tax reforms have imposed 40% punitive taxes on soft drinks, encouraging some manufacturers to increase the fruit content of their drinks to enjoy lower rates. </p> <p> Even though manufacturers may repel the government's action, consumer tastes may change. Among the middle clbades in India, malt beverage brands have also changed. Last month, Kraft Heinz Co. sold Indian brands, including the Complan malted beverage, at a price about a third lower than expected. </p> <p><figure clbad= French for "graph-c" title = "graph-c" /> <figcaption/> </figure> </p> <p> Despite these headwinds, linking GSK's still powerful brand with Unilever's unrivaled local distribution network seems to be the best way to secure the future of this business. With a price / earnings ratio lower than the growth rate of its net profit, GSK Consumer does not seem particularly onerous for an Indian food and beverage company. Hopefully, this Horlicks Cup will give its new owner a younger energy, rather than a geriatric sleep.<br /> </p> </div> <p><script></p> <p> if (geolocation && geolocation! = 5) { ! function (f, b, e, v, n, t, s) {if (f.fbq) return; n = f.fbq = function () {n.callMethod? n.callMethod.apply (n, arguments): n.queue.push (arguments)}; if (! f._fbq) f._fbq = n; n.push = n; n.loaded =! 0; n.version = 2.0 & # 39 ;; n.queue = []; t = b.createElement (e); t.async =! 0; t.src = v; s = b.getElementsByTagName (e) [0]; s.parentNode.insertBefore (t, s)} (window, document, & quot; script & # 39; & # 39; https: //connect.facebook.net/en_US/fbevents.js&#39;); fbq (& # 39 ;, & # 39; 338698809636220 & # 39;); fbq ("track", "Pageview"); }</p> <p></script></pre> </pre> [ad_2] <br /><a href=Source link

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