SmithKline buys Maltova, Viva brands for Rs 86 cr

SmithKline buys Maltova, Viva brands for Rs 86 cr
ENS ECONOMIC BUREAU

MUMBAI, FEBRUARY 8: British multinational, SmithKline Beecham Consumer Healthcare (SBCH) has acquired health drinks brands - Viva and Maltova from Jagatjit Industries Ltd for a consideration of Rs 86.25 crore. Viva and Maltova is expected to add around Rs 72 crore to SBCH's topline.

The deal marks SBCH's first major brand buyout in the recent past after Complan (an erstwhile Glaxo brand) slipped through to Heinz. Arthur Andersen were advisors to SBCH in this pure brand buyout deal. No transfer of sales force is planned.

Indications are that the Viva-Maltova deal includes a non-compete clause and envisages the continuation of production of the two products by Jagatjit Industries on a toll-manufacturing basis for the British giant. SBCH already has facilities at Nabha and Rajahmundry, besides another unit at Sonepat, Haryana.

Industry sources say that both Viva and Maltova will be priced at the lower end of the segment, thus ensuring a presence in both the upper and lower end of the market and reducingthe risk of cannibalisation.

Chief of equity research at Inquire, Nishid Shah, said: "The deal will help consolidate an already strong market position for SBCH. It also solves the problems of capacity constraints, given that Jagatjit's facility has a capacity of 12,000 to 13,000 tonnes which can be further expanded. Overall, it is extremely positive on a long-term basis".

Marketmen were also relieved that apprehensions that the acquisition (and hence the rights to the brands) would be routed via the group's wholly-owned arm, SmithKline Beecham Asia Pvt Ltd were misplaced.

SBCH's Horlicks is already the market leader in the nutrition drinks segment and controls over 54 per cent of the market, while its choco-malt drink Boost (with a market share of roughly 10 per cent) competes with other popular brown drink brands like Nestle's Milo and Cadbury's Bournvita. Viva and Maltova, control close to nine per cent of the market, predominently in northern India.

Boost, on the other hand, controls roughly 50 percent of the Tamil Nadu market, while it accounts for around 45 per cent of the overall market in southern India. Boost accounts for just 10 per cent of the national market.