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With GSK buy, HUL also wins access to key pharmacy channels in India

Beauty and personal care sales contribution coming from the pharmacy channel is pegged at around 15-20%

Viveat Susan Pinto  |  Mumba 

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(HUL) acquiring (GSK) Consumer will not only give the Indian consumer goods company a portfolio of health food drinks such as Horlicks and Boost but also access to the key pharmacy channel in the country.

According to the deal announced on Monday, HUL has decided to undertake distribution of GSK Consumer’s over-the-counter (OTC) products, including Iodex, Eno, Crocin, and Sensodyne, for a period of five years.

These products were earlier distributed by as part of an arrangement with its parent, which owned the brands. While GSK will continue to own these brands (they are not part of the Horlicks deal), HUL has replaced as the distribution partner. This is something, said analysts, HUL could have done without, owing to its lack of expertise in selling pharmaceutical products.

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Beauty and personal care sales contribution coming from the pharmacy channel is pegged at around 15-20 per cent, according to industry estimates. Packaged food, on the other hand, is about 8-10 per cent in terms of sales contribution from pharmacies.

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Overall, the chemists’ channel, which is 5 per cent of the FMCG trade universe of 10 million outlets in India, contributes around 6-7 per cent in terms of sales to today. This channel has also been amongst the fastest growing in the last three years for FMCGs, touching 12 per cent per annum in terms of growth rate, industry experts said. According to Sumit Malhotra, MD, Bajaj Corp, which sells hair oils such as Bajaj Almond Drops, the chemists’ channel provides a sense of reassurance to consumers. “The general perception is that chemists will not stock fake or spurious products, which could happen in the case of kiranas. The display is also good in pharmacies.”

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Mehta indicated on Monday that the option of renewing the five-year distribution agreement existed if GSK was keen to do so after completion of the first term. While GSK Consumer’s merger with HUL will see the revenue contribution of the latter’s food and refreshment business go up to 27 per cent (from 19 per cent now), beauty and personal care will still remain HUL's largest vertical, contributing 47 per cent to the top line, experts said. Homecare, which includes HUL’s detergents business, contributes 33 per cent to the company's top line.

First Published: Tue, December 04 2018. 22:16 IST
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