GSK buy thrusts emerging markets under spotlight

India is not the only market where the London-headquartered GlaxoSmithKline (GSK) Plc has said that it would increase its stakeholding. The British major has also said that it would take up its ownership to 80 per cent in its Nigerian consumer business.

Analysts see this as a move by the British company to consolidate its presence in emerging markets in consumer healthcare — a segment that gives GSK nearly 20 per cent of its $44 billion revenues. This segment has played a key role in GSK's push into emerging markets. India, for instance, is the third largest market for the pharma giant’s global consumer business after the UK and US.

The Indian subsidiary —GlaxoSmithKline Consumer Healthcare —has achieved this by growing consistently at about 18-19 per cent per annum in the past few years, touching a turnover of nearly Rs 3,000 crore in the process. It now proposes to touch Rs 8,000 crore by 2016, driven by brands such as Horlicks, Boost, Eno, Crocin, Iodex and Sensodyne.

In a conversation with Business Standard, David Redfern, chief strategy officer, GSK Plc, said that the firm would continue to look at organic growth opportunities in markets such as India. In the past 10 years, GSK has wrapped up just one acquisition - that of Maltova and Viva from Jagatjit Industries — in an attempt to grow its health food drink portfolio, which has a market share of about 67-68 per cent, according to industry estimates.

The Indian subsidiary has pushed its core brand Horlicks, which gives it revenues of nearly Rs 1,500 crore, into areas such as noodles, oats and biscuits. It proposes to launch more such variants as it explores segments in the packaged foods space. But all this, according to Zubair Ahmed, managing director, GSK Consumer, will happen on the nutrition platform as the company looks to own this space. “With an iconic brand like Horlicks, we are in a position to do that,” Ahmed said.

More options in breakfast and a foray into meals such as lunch have been on the cards, but Ahmed declines to give details. The company also proposes to strengthen its presence in oral healthcare and wellness — two of its other categories besides nutrition in India. Globally, GSK has a strong portfolio in oral healthcare. A few brands could find their way into India, says Ahmed.

“But we will not play in competitive and crowded segments. It will be niche areas, where there is a felt need for a product,” he adds.

Sensitivity, at eight per cent of the Rs 3,000-crore toothpaste market currently, is one such area. It has almost doubled in the last year-and-a-half since GSK launched Sensodyne (this was in January 2011). Analysts say sensitivity can no longer be ignored given the investment that both the GSK and Colgate-Palmolive (India) have made in market expansion.

“The noise levels around sensitivity in the last one year have been very shrill,” says Anand Shah, fast moving consumer goods (FMCG) analyst at Mumbai-based brokerage Elara Capital.

This brand-building activity has also pushed GSK ahead of the pack in sensitivity. It has a market share of 25 per cent in the Rs 240-crore category. Colgate does not give a break-up of its toothpaste numbers based on product segments.