The fight for the nutrition business of GlaxoSmithKline (GSK) Consumer, including brands Horlicks and Boost in India, was never going to be easy, given its size and valuation. At Rs 317 billion, Hindustan Unilever (HUL) earlier this month said was merging GSK Consumer with it, making the former the largest food company in the country with a turnover of Rs 107 billion. The development came as parent Unilever globally said it was acquiring Horlicks and other health food drinks from GSK in over 20 markets for £ 3.1 billion.
The transaction had three parts including GSK picking up a 5.7 per cent stake in HUL, valued at Rs 230 billion (£2.6 billion). The other two parts included GSK’s 82 per cent stake in its Bangladesh unit, which would be paid in cash (£150 million) and sale of brand rights and operations in other countries, also in cash (for £416 million). While Unilever was one among many suitors in the initial stages, it wasn’t the favourite to bag the deal. Instead, archrival Nestle, which had entered the final lap along with Unilever, was. There were clear reasons for this. There was a greater fit between Nestle and GSK Consumer in terms of profile, portfolio and positioning.
But there is a popular saying: Fortune favours the bold. Unilever kept its sights at its target despite the odds stacked against it. While the Anglo-Dutch major is a big player in foods, it has no meaningful presence in health food drinks. In many respects, the latter will be a new category for it and its Indian unit HUL, fighting incumbents such as Mondelez (Bournvita) and Zydus Cadila Group (which has Complan) besides Nestle. There are other challenges too, including a slowing category and alternatives to health food drinks, that are slowly emerging.