Recognising the gradually changing consumer preference for healthier beverages over fizzy drinks, Coca Cola is now reportedly trying to grab a foothold in the nutrition space. According to The Economic Times, the beverage company is set to join a $4 billion-plus pursuit to buy GlaxoSmithKline's (GSK) consumer nutrition business.
Nestle, Danone and Hindustan Unilever (HUL), among other firms, are reportedly also in the race for GlaxoSmithKline Consumer Healthcare (GSKCH), whose product line-up includes Horlicks, Boost, and Maltova among others.
Sources told the daily that this marks an entirely new foray for the Atlanta-headquartered company and could give it bandwidth to play in the pure health-nutrition space aimed primarily at children.
"The evaluation work had begun even though the sale process is yet to formally launch. It will be a large transaction, so work has already begun," said an official, adding that "This also marks the company's return to big bang M&A in a market like India." Coke has reportedly mandated Citi to help them in the competitive bidding process expected to launch next week.
Back in March, GSK, Britain's biggest drugs company, had announced in a statement that it "is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products" to fund its $13-billion buyout of Novartis' stake in their Consumer Healthcare Joint Venture. The company had said that its 72.5 per cent stake in (GSKCH), which is the category leader in Indian health food drinks industry, would be a part of the strategic review, too.
In fact, combined sales of Horlicks and GSKCH's other nutrition products were pegged at approximately 550 million pounds in 2017, a majority of which was generated in India. Moreover, the Horlicks and Boost brands have reportedly cornered a 70 per cent share of the domestic Malted Food Drinks (MFD) market. So GSKCH, with a current market cap of Rs 26,280 crore, seems to be quite a feather in any buyer's cap.
The outcome of the strategic review is expected to be concluded by the end of this year but GSK has made it clear that there can be "no assurance that the review process will result in any transaction".
If Coca Cola does manage to bag GSKCH, it will be its second acquisition in India. In the early 1990s the company had acquired Parle's portfolio - including the popular Thums Up - and gained access to its nationwide bottling and distribution infrastructure. This had given it a significant edge over its rivals.
However, it won't be Coca Cola's first play in the more health-oriented space. The company has previously launched several products, including no-sugar variants of Coke, Sprite and Thums Up, Vio dairy drink, Zico coconut water, Aquarius fortified water, Fuze iced tea, glucose and fruit juice drink Aquarius Glucocharge and Minute Maid Vitingo for micronutrient deficiency and malnutrition, besides hyperlocal variants of juices and juice-based drinks and Kinley water.
The daily added that in recent years Coca-Cola has acquired or invested in several millennial-friendly brands such as Honest Tea, organic tea brand Suja Life, a cold-pressed juice maker, and AdeS, a soya-based beverage brand.
Last month, Coke president T. Krishnakumar told the daily that it planned to also launch electrolyte hydration drinks to be sold over-the-counter at pharmacies. He added that "so far we have been very active in the refreshment space; we now want to be a serious player in nutrition."