Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
SmithKline Consumer: The waiting bride - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 18, 2000

    SmithKline Consumer: The waiting bride

    The worldwide merger of Glaxo and SmithKline Beecham has sparked off an interesting twist on the Indian horizon. SmithKline is present in India in two segments, one in pharmaceuticals (as SmithKline Pharma) and the other in the malted beverage segment (as SmithKline Consumer Healthcare). While it makes sense for both Glaxo and SmithKline to merge their pharma operations, the business profile of SmithKline Consumer (SBCH) doesn’t quite fit into this jigsaw. So what do they do with SBCH?

    There are several possibilities. For one, they can quite simply merge the company into the group and let it run as an independent entity. But this will take a little bit away from Glaxo’s pharma focus for which it is known. Earlier, Glaxo had sold off its Farex brand (baby food) to Heinz because it did not fit their business profile.

    A second possibility also exists. SBCH operates in Rs 7 bn malted food drink market (estimated at 60,000 tonnes). The market can broadly be classified into white beverages (65%), brown beverages (35%) and soya-based beverages (negligible). SmithKline Consumer commands 65% of this market with its brands Horlicks and Boost. If Glaxo-SmithKline combine decide to sell off this malted beverage giant, the picture could be interesting.

    Among the first one to show interest should be India’s No. 1 FMCG company Hindustan Lever Limited (HLL). The company is facing stagnant growth in turnover and pressure on margins. It is focusing on the food segment for improving its margins. It doesn’t have a presence in the malted and health beverage segment and the buyout of SBCH will give it a ready entry in this segment.

    Another likely suitor seems to be Nestle. Nestle is India’s third largest food product company. It has a dominant presence in the culinary segment. However, Nestle already has presence in the brown beverage segment with ‘Milo’. Incidentally, Milo is the largest chocolate energy drink in the world. But Nestle introduced this brand only in 1997 and Milo has not made a significant impact in the Indian market. So for Nestle also, it makes sense to buyout SBCH (if its up for sale), as SBCH’s Horlicks (white beverage) will complement Milo (brown beverage). It will make it the undisputed king of India’s malted beverage market.

    Till now, the malted drinks were used as milk substitutes and taste modifiers. The market is now skewed towards nutritional and nourishment value. The penetration rate is poor, as it is an expensive product. However, with competitive pressures on children on the rise, an increasing number of households (mostly urban) are buying these products for their children, based on health platform.

    So it is an interesting scenario. SBCH, if put on the block will see a lot of competing suitors apart from Nestle and HLL. But these two companies seem like the frontrunners in that future race, as apart from the will to buy, these companies also have the necessary cash to back it up.



    Equitymaster requests your view! Post a comment on "SmithKline Consumer: The waiting bride ". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.

    GSK Consumer: Slowdown in demand impacts sales (Quarterly Results Update - Detailed)

    Oct 5, 2016

    GSK Consumer Healthcare has announced the first quarter results of the financial year 2016-2017 (1QFY17). The company's sales declined by 1.4% YoY while net profit rose by 2.9% YoY during the quarter.

    GSK Consumer: A Forgetful Year (Quarterly Results Update - Detailed)

    Jun 1, 2016

    GSK Consumer Healthcare announced its results for the quarter and year ended March 2016. During the quarter, sales and profit came in lower by 9% YoY and 8% YoY respectively.

    GSK Consumer: Feeling the Growth Pressures? (Quarterly Results Update - Detailed)

    Feb 15, 2016

    GSK Consumer Healthcare announced its results for the quarter ended December 2015. While revenues were up by 2% YoY, profits were higher by 37% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in GSK CONSUMER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts