Nestle, Unilever & Coca-Cola make bids for GSK's India Horlicks business

GlaxoSmithKline (GSK) has shortlisted Nestle, Unilever and Coca-Cola for the second round of bidding for its Indian nutrition business, which includes the Horlicks brand. GSK will sell 72.5% stake in its Indian subsidiary.

The auction process had witnessed some of the world's biggest food and drinks companies including PepsiCo, General Mills, Reckitt Benckiser, Danone, and Kellogg's compete alongside homegrown ITC and private equity buyout funds such as KKR to purchase the GSK's consumer portfolio.

Earlier, ITC has withdrawn itself from the bidding race as it is of the view that the brands do not fit its portfolio.

Some bidders have opted out of the race while others were not shortlisted for the second round. It's not clear how many bidders are still in the race.

GlaxoSmithKline Plc CEO Emma Walmsley had earlier said, "The company is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products, and that it's exploring partial or full sale of its 72.5% stake in its Indian subsidiary GlaxoSmithKline Consumer Healthcare."

Cereal maker Kellogg and British healthcare company Reckitt Benckiser Plc have entered the race to buy GlaxoSmithKline's (GSK) consumer nutrition business, which includes Horlicks. Other major players said to be looking at acquiring the Horlicks brand include Nestle, Unilever, Mondelez and Coca-Cola.

Both companies have completed their initial evaluations of the deal. Rothschild is advising Kellogg and Goldman Sachs is advising Reckitt Benckiser. While Kellogg’s entry into the competition is seen as a surprise, Reckitt Benckiser has been growing inorganically across the world with its last acquisition in India being Paras Pharmaceuticals eight years ago.

Reckitt said, “The Mead Johnson acquisition has taken RB into a global market leader in consumer health and foods. Mead Johnson’s geographic footprint significantly strengthens our position in developing markets, which account for approximately 40% of the combined group’s sales.” 

If Reckitt Benckiser is successful in acquiring GSK's Horlicks, then it is likely to reformulate the brand beyond just a milk-based beverage and sell it at chemists and pharmacies instead of traditional grocery. There are also product synergies between Reckitt Benckiser's products and GSK's over-the-counter (OTC) offerings such as Crocin, Sensodyne and Eno.

A top industry executive, closely associated with the company, said, “Kellogg India doesn’t have the resources to push such a mega deal. Besides, historically, it hasn’t been aggressive in India, and neither has it explored acquisitions, instead, basing its strategy only on localisation, pushing small packs and moving beyond breakfast to cereal-based snacking, which is witnessing intensified competition.” 

Food Security and Standard Authority of India has ordered the testing of various noodles, pasta and macaroni brands, including Top Ramen, Foodles and Wai Wai, manufactured by seven companies to check compliance of norms in the wake of Maggi controversy, reported PTI. The food safety body has also has to test different variants of Maggi Pazzta along with tastemakers.

"Various test results on Maggi and some other similar products have raised serious health concerns. In view of the same, it would be advisable to draw regulatory samples for similar products for which product approvals have been granted by the FSSAI. These samples should be sent to the authorised labs for testing," said YS Malik, CEO, FSSAI in a letter to Commissioners of Food Safety in all states and UTs.

As per FSSAI order, the companies whose products have been listed for testing are Nestle India, ITC, Indo Nissin Food Ltd, GSK Consumer Helathcare, CG Foods India, Ruchi International and AA Nutrition Ltd.

The regulator has ordered the testing of products registered with it.

The products include Wai Wai noodles and bhujiya chicken snacks by CG Foods; Koka instant noodles from Ruchi International, Foodles by GSK Consumer Helathcare and Nestle's Maggi instant noodles with nine variants.

Others in the list are Indo Nissin's Top Ramen Aata Masala, ITC's three variants of instant noodles and Yummy chicken and vegetarian noodles of AA Nutrition.

When contacted CG Foods CEO GP Sah said: "Our brands meets all regulatory standards as listed by Food Safety and Standard Authority of India. We are not closed to any tests and will cooperate with authorities if required."

Comments from other companies could not be obtained immediately.

The development comes after the Indian unit of the Swiss multinational recalled Maggi from the markets after several states banned the famous '2-minute' instant food brand as tests showed them containing taste enhancer MSG (Mono Sodium Glutamate) and lead in excess of the permissible limits.

Meanwhile, FSSAI on Friday banned all variants of Maggi noodles terming them as "unsafe and hazardous" for human consumption.