For generations, Complan, Glucon-D, and Nycil have been household names in India. Now, they’re truly desi.
On Oct. 24, an Ahmedabad-based company acquired the brands from their owner Heinz India, after pipping multinationals, including Coca-Cola. Heinz India is the local arm of Chicago-based consumer goods giant Kraft Heinz, in which the legendary American investor Warren Buffett owns a stake. Zydus Wellness has bought the stake jointly with Cadila Healthcare.
The new owner, Zydus Wellness, is an arm of Cadila Healthcare, India’s fourth largest pharmaceutical firm. Besides the malted drink, Complan, Glucon-D energy drink, and Nycil talcum powder, Zydus will also add Sampriti ghee to its portfolio from Heinz.
The deal, valued at Rs4,595 crore ($630 million) will close by March 2019, Zydus Wellness said in a filing to the stock exchange (pdf).
Zydus Wellness’s existing portfolio includes packaged foods like the low-calorie sweetener Sugar Free and the butter alternative Nutralite, besides grooming brands like EverYuth. With the four new brands in its kitty, Zydus now expects its consolidated annual revenues to more than triple to Rs1,700 crore.
As for Kraft Heinz, which will retain its popular Heinz ketchup brand, the sale will let it focus more on its core segments. “The sale of this niche business fits into our overall global growth strategy and our focus on investing in and growing brands within our core categories,” Bernardo Hees, CEO of Kraft Heinz, said on Oct. 24.
Heinz ketchup is a core category the company plans to grow in India, it said.
In line with the new strategy of fewer brands and more focus, the world’s fifth-largest food and beverages firm has for some time been looking to offload its Indian assets. In the fray to acquire Heinz India’s prized possessions were local fast moving consumer goods (FMCG) giants Emami and Dabur, and private equity firm Carlyle, besides Coca-Cola.
Having pipped them all, the spotlight is now firmly on the relatively small player in India’s $30 billion FMCG market.
Though it has a history dating back to 1988, Zydus Wellness has not built a large portfolio. Its modest annual revenues of over Rs500 crore for the financial year 2018 pale in comparison to those of market leader Hindustan Unilever (HUL), with a turnover of Rs35,288 crore in the same period.
Parent Cadila Healthcare, the flagship of the Zydus group, though, is a globetrotter. It has a presence in over 25 markets and interests in vaccines, consumer wellness, health care, and animal health products.
“Zydus doesn’t want to stay a small player in FMCG segment that’s why they have chosen a path of inorganic growth,” Harminder Sahni, founder at the consulting firm Wazir Advisors, told Quartz. “The option of launching and building brands organically is always there but acquisitions allow a head start of decades sometimes.”
Complan will give it a chance to shake up the dormant Indian malted drinks category. ”Zydus will be in better position to strengthen its core business of health, food, and nutrition, which contributes to more than 80% of its business, with Complan and Glucon-D,” Abneesh Roy, senior vice-president at Edelweiss Securities, said in a note.
The buyout will also give Zydus access to two manufacturing facilities. ”The acquisition will create enhanced infrastructure and distribution reach which will have a combined strength of five manufacturing facilities, 1,800 distributors, and nearly two million customer touch points,” the Edelweiss note said.
The acquisition comes at a time when investor interest in Indian consumer businesses is high. Boosted by the consumer goods and retail sector, deal-making in India rose seven times year-on-year to touch $34.8 billion in the June quarter this financial year.
British drug maker GlaxoSmithKline’s Indian nutrition business, too, is on the block. The company is looking for potential suitors to buy its portfolio including malted drinks Horlicks and Boost.