Indian destocking hits GSK consumer health care business

Lack of preparedness by the trade in the run-up to the GST caused a holding back on purchase orders

GlaxoSmithKline’s (GSK’s) consumer health care unit reported a decline in worldwide sales growth on a constant exchange rate (CER) basis in the second quarter of 2017. Retailer destocking in India was a major reason for this.

The decline is of 200 basis points (bps), GSK said of this business, which makes health food drink Horlicks, among other products. Lack of preparedness by the trade in the run-up to the Goods & Services Tax (GST) caused a holding back on purchase orders during the period, it said.

Apart from trade destocking in India, another key reason for a drop reported in consumer health care CER growth in the  quarter was divestment of its beverage business in Nigeria.

GSK is the second multinational corporation, after British consumer goods major RB (formerly Reckitt Benckiser), this week to report an impact on its India business due to trade destocking.

On Monday, RB said growth declined in the India market in the second quarter as some customers delayed orders ahead of the implementation of GST on July 1. Like-for-like growth in hygiene, the category where Dettol sits, declined by one per cent during the quarter, RB said, due to a slowing in India sales. As with Horlicks, largest brand for GSK Consumer Healthcare in India, so is Dettol for RB India, ranked among the top hygiene brands in the country, along with Unilever's Lifebuoy.

RB also said sales in India and the rest of the world were hit by the ransomware attack it suffered a month before, impacting growth during the quarter. 

At a category level, GSK reported a sharper slide in its nutrition business within consumer health care, with growth declining  1,100 bps, as destocking and competitive pressure for Horlicks in India took a toll in the quarter under review.

Last week, Unilever, Johnson & Johnson and Colgate-Palmolive had similar views, with sector analysts saying the trend could continue into the September quarter as well.