Nestle is close to acquiring India's popular malt drink Horlicks in a record deal. The global food giant has been in talks with GlaxoSmithKline India's consumer healthcare division that includes the Horlicks brand, which is the dominant children's malt-based health drink in India.
"We are conducting a strategic review and expect to conclude that by year-end," a GSK India spokesperson was quoted by Economic Times as saying when asked about the likely deal with Nestle. The newspaper, however, quoted Nestlé India as saying, "We do not wish to comment on the speculation."
After the acquisition, Nestle is unlikely to merge GSK with its own India subsidiary whose major brands include market leaders like the Maggi range of products, according to Economic Times. Nestle's own Milo and Nesquick brands will have to compete with Horlicks if the acquisition goes through.
Nestle faced stiff opposition from Unilever and Coca-Cola for GSK's India business, valued at $4.2 billion, because of the attraction of Horlicks whose sales topped $700 million last year with a 44 per cent market share of nutritional drinks. Financial Times had reported in October that Unilever was on the verge of clinching a deal with GSK India after exclusive talks began.
The Anglo-Dutch parent company owns 72.5 per cent stake in the GSK India subsidiary, according to reports. The deal was expected to include GSK's Bangladesh business, some say.
Global food giants have been eyeing the emerging market in India because of its growth potential when compared to China with a comparable population. Indian processed food market is now only one-fifth of the Chinese market but growing income profiles are changing consumption patterns.
Financial Times points out that GSK is selling the business because its priorities have changed under chief executive Emma Walmsley. GSK's recently concluded a $13-billion acquisition of Novartis' stake in its own consumer health joint venture after the Swiss drugmaker decided to exit.
GSK exited its Horlicks franchise in the UK last year but has held on to the brand in India where it has a special place as a nutritional supplement for children.
The discussions are seen as a part of the continuing consolidation of India's process food market which is growing at a fast clip as income levels rise. Kraft Heinz sold its Complan and Glucon-D to Zydus Wellness for $628 million last month.