GSK Consumer eyes acquisition to boost growth

GSK Consumer eyes acquisition to boost growth

New Delhi: Glaxosmithkline Consumer Healthcare is looking to acquire brands as it chases growth in India but is wary of the high valuations sought by potential targets, a top official said on Tuesday.

GSK Consumer, which makes malted beverages ‘Horlicks’ and ‘Boost’ and distributes over-the-counter products ‘Crocin’, ‘Eno’ and ‘Iodex’, is looking to expand its portfolio by acquisitions in its core categories and those which are synergistic.

“In the nutrition area, if I can get an acquisition which is synergistic, which is not in the powder (form, as Horlicks), where we are the leader,...definitely we will be interested," Zubair Ahmed, managing director, told Reuters in an interview.

Consumer goods firms in India have been rapidly expanding, launching new products and snapping up brands locally and overseas. GSK Consumer’s Horlicks and Boost compete with ‘Complan’ of H.J. Heinz , and ‘Bournvita’ of Cadbury, which was bought over by Kraft Foods last year.

“There are opportunities coming up either in ‘pain’ category or ‘wellness’ category or in the ‘nutrition’ category but again when you go into the due diligence, some targets don’t work out because GSK works to very, very high standards," Ahmed said of the potential deals.

Ahmed said while some deals get ruled out because of regulatory issues, the ‘single-biggest’ challenge for an acquisition is the high valuations sought by potential sellers.

“Financials right now do not make sense from a valuation perspective and from a payback perspective. But we are always on the market if something comes up, definitely," he said, adding funding a deal was not an issue for the company.

Last year, GSK launched products in six new catgeories, including instant noodles and biscuit, and plans to launch products in more categories this year, Ahmed said.

Horlicks Foodles, GSK’s noodles brand, has captured about 3.5% share in a market dominated by Nestle’s ‘Maggie’. Similarly, it has recently launched ‘Iodex Headfast’ for headache, and antacid Eno in new flavours.

“The idea is to continue investments in maintaining leadership position and also take these brands in other relevant synergistic categories," Ahmed said, adding the intention is to take brands to new categories as well as new formats.

Recent media reports have said GSK Consumer is planning an entry into breakfast and mid-day meals under the Horlicks brand. Ahmed did not confirm this but said the company keeps evaluating opportunities in all categories.

Ahmed admitted stubbornly high inflation was a concern but said the company has partly offset its impact by introducing operational efficiencies and thus raised prices by only about 3.5% last year. The company has no plans to raise prices as of now, he added.

Indian fast-moving consumer good firms have been battling strong inflation in commodity-sensitive categories as prices of agri and crude related inputs surge.

India’s food inflation has remained high for more than a year and had been the key contributor to its headline inflation. The food price index rose an annual 10.05% in the week to 12 March, higher than a 9.42% rise in the previous week.

Shares in GSK Consumer, valued at about $2.1 billion, ended flat at 2,250 on Tuesday in a flat Mumbai market.