Mumbai: Unilever Plc is in exclusive talks with GlaxoSmithKline Plc (GSK) to buy its nutrition business, which includes flagship brands such as Horlicks and Boost, two people aware of the development said.

Details of the valuation of GSK’s nutrition business could not be ascertained immediately. In India, GSK sells its Horlicks and other brands through its publicly traded unit, GSK Consumer Healthcare Ltd. The parent’s 72.5% stake in the local unit is valued at about $3 billion, according to current stock prices.

Even as the Indian market for malt-based beverages remained subdued in the last couple of years, Unilever could potentially grow the business multifold utilizing the vast distribution network of its local unit, Hindustan Unilever Ltd (HUL), analysts said.

“Foods portfolio for Unilever in India is much smaller as a percentage of sales compared to the global numbers. Globally, food is a big business for them. But the Indian market is not ready for a large part of their global portfolio," said Abneesh Roy, senior vice president at Edelweiss Securities. “Also, Indian tastes are different. So such bolt-on acquisitions are interesting for them to grow their food business."

GSK’s discussions with the Anglo-Dutch consumer giant come after months of starting the sale process, which was announced in March. According to two people aware of the development, Nestle, Coca-Cola and ITC Ltd were also in the fray.

Financial Times reported on Wednesday that Unilever beat a rival bid from Nestle, which was looking to “build on its market-leading position in powdered hot drinks, where it already sells Milo and Nesquik".

While a spokesperson for GSK declined to comment, Unilever did not respond to an emailed query.

Analysts say a deal will let HUL build its food portfolio that currently comprises only two popular brands, Kissan and Knorr. The company, however, has a strong presence in the refreshments category, with brands such as Bru, Brooke Bond, Lipton, Cornetto and Kwality Wall’s.

“Horlicks is a huge brand and one of the most profitable in the country," said Sanjay Manyal, an analyst at ICICI Direct. “The nutrition business should fit well into HUL’s portfolio, as besides Kissan and Knorr there are no other popular food brands in HUL’s entire portfolio, as the firm is largely into home care and personal care products."

The growth of malt-based drinks has slowed in the past few years. Manyal, however, said HUL could scale up the Horlicks and Boost brands multifold with its direct distribution, which reaches around 3.5 million outlets compared to GSK’s 1 million.

Citing reasons for the slowdown in growth of malt-based beverages, Manyal said: “This category has not really grown over the last two-three years and one of the reasons for that is that there are many other healthier alternatives like oats, muesli, etc. available in the market now. Earlier, malt-based beverages with their high sugar content were the only option. That is probably one of the reasons why people are switching over to newer and healthier options."

Growth of malt-based beverages in India has slowed down from 13.2% in 2014 to 8.6% in 2017, according to Euromonitor International. Also, the growth rate of supplement nutrition drinks fell from 21.3% to 11.5% during the same period.

A potential sale will help GSK fund the purchase of Novartis AG’s stake in its consumer healthcare joint venture, valued at $13 billion. In March, the company initiated “a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the (Novartis) transaction. The strategic review also includes assessment of the company’s stake in Indian entity", GSK chief executive Emma Walmsley said then.

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