Amid reports of its interest in GSK brand Horlicks, Coca-Cola India dismissed them as mere speculation. Dabur declined an official comment, but a person close to the Indian company indicated that the malt-based hot drink brand would not fit into its portfolio. For Dabur, the focus is on Ayurveda-based products.
Globally, Unilever, Danone, Nestle, and Mondelez have been pegged as front-runners for Horlicks, with recent reports from India suggesting that ITC, Dabur and Coca-Cola may also join the race. Horlicks is the dominant brand in the Indian market and, hence, its relevance is restricted to the country. Most companies that were reported to have bid declined to comment. As for GSK, the British company said it was in the middle of a strategic review of its nutrition brands which would only conclude by the end of the year.
Various analysts that
“It’s a deteriorating brand ,” said an FMCG industry veteran, pointing out that Horlicks’ value cannot be stretched beyond the Indian subcontinent and the UK. Even the category is losing relevance. Malted food drinks were consumed heavily in India as a supplement in an era of milk shortages. Now, when milk is aplenty, and there are specialised supplement health drinks, the category has seen a fall.
Euromonitor International data corroborates the slow growth. Malt-based hot drinks recorded retail sales of ₹7,250 crore in 2016, and grew a mere 8.5 per cent at a time when some FMCG categories in India are clipping along at double digits.
“Consumers are becoming more interested in specialist products offering added protein, meal replacement or an energy boost. Furthermore, consumers who purchase these products for taste are shifting to other alternatives such as chocolate and vanilla syrups,” said Devchandan Mallick, Research Analyst (Drinks & Tobacco), Euromonitor International.
According to Abneesh Roy, Senior Vice-President (Institutional Equities), Edelweiss Securities, “The reason the category has been facing challenges is largely because it has not seen a lot of action in terms of innovations, deepening penetration in rural regions or focus on lower-unit packs.” Even though GSK has tried various things — extending the brand to biscuits, launching variants aimed at women and so on — marketers feel it has not done enough.
Roy points out how GSK Consumer Healthcare launched Horlicks Protein Plus recently, which it should have done much earlier. Similarly, it hasn’t yet launched the ready-to-drink format, like Nestle has done with Milo.
The right fit
A few analysts point out that Horlicks could be of interest to French giant Danone, which could piggyback on the great distribution network to build its struggling network in India. However, Danone has its own Protinex brand in a category that is showing better growth. For HUL, which many feel will focus more on the food business going forward, Horlicks could be a good fit.
ITC and Coca-Cola, both of which are trying to de-risk their core businesses of tobacco and cola respectively, could have an interest in a new business, but the question is whether they want to spend so much. As for Kraft Heinz, the reports are that it has put Complan (which it acquired from GSK) on the block and therefore looks an unlikely bidder.
However, Edelweiss’ Roy says: “It makes sense for all the names that have been speculated, given the low penetration of the category, as there is huge headroom to grow.”
And even if the category has lost focus, India is still by far the leading consumer of malted hot beverages. According to global research firm Mintel, India accounted for 19 per cent of all the malted hot beverages launched in 2017, which makes it the global leader.
With inputs from the Delhi bureau