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Leader in health food drinks market…
We met the management of GSK Consumer Healthcare (GSKCH) to
understand the current business environment, future growth
opportunities and its strategy to overcome the current challenge of
slowing growth in its base business. GSKCH is the largest company in the
malt based beverage market with brands like Horlicks, Boost, Maltova and
Viva. The company is the market leader in health food drinks (HFD) and
has a value market share of 57.5% and volume market share of 65.1%
(June 2014). GSKCH generates 94% of revenues from malt/cereal based
beverages and 6% from foods. The company generated | 168.1 crore
from auxiliary service income (commission for Crocin, Iodex, Eno &
Sensodyne), which contributes 4-5% to its PBT. In 2009-10, the company
entered the foods business with the introduction of premium, high
margin biscuits & cookies market, instant noodles and snack bars. GSKCH
spends ~16% of its sales on advertisement and promotion expenses, of
which ~30% is used for promotion and ~70% for advertisement. The
company witnessed 20.4% CAGR sales growth in CY08-FY14 (FY14
numbers adjusted for 12 months) with 24.6% CAGR in EBITDA in the
same period.
Dominant play in HFD
With brands like Horlicks, Boost, Viva & Maltova, GSKCH dominates the
HFD market. These brands together command ~65% market share in
volume terms. Though volume growth of base brand Horlicks (white HFD)
saw a significant slowdown, growth in new variants like Junior Horlicks,
Women’s Horlicks, Mother’s Horlicks and Horlicks lite are helping GSKCH
gain market share in MFD business. In brown HFD, Boost (that commands
13-15% market share) is facing stiff competition from Complan and
Cadbury’s Bournvita. Though the foods business contributes 5% to
revenues, it has been growing at more than 20% in last 10 quarters.
Increasing penetration, premiumisation to drive growth
With low penetration (~25%) of HFD in India, there is immense
opportunity to grow the market by penetrating into semi-urban and rural
areas. The company derives 26% of its revenues from rural and 74% from
urban India. With direct reach of 8 lakh retailers and indirect reach of 2.5
million retailers, it has an effective distribution network. It plans to
increase its direct reach to 8.5 lakh retailers and indirect reach of 3 million
retailers by the end of 2015. Similarly, it is taking an initiative towards
increasing its rural reach to 22000 villages by the end of 2014 and 40000
by the end of 2016 from the current 10000. Though initiatives towards
premium products have not been a success, the introduction of sachets
has helped the company to penetrate rural areas.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
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Leader in health food drinks market…
We met the management of GSK Consumer Healthcare (GSKCH) to
understand the current business environment, future growth
opportunities and its strategy to overcome the current challenge of
slowing growth in its base business. GSKCH is the largest company in the
malt based beverage market with brands like Horlicks, Boost, Maltova and
Viva. The company is the market leader in health food drinks (HFD) and
has a value market share of 57.5% and volume market share of 65.1%
(June 2014). GSKCH generates 94% of revenues from malt/cereal based
beverages and 6% from foods. The company generated | 168.1 crore
from auxiliary service income (commission for Crocin, Iodex, Eno &
Sensodyne), which contributes 4-5% to its PBT. In 2009-10, the company
entered the foods business with the introduction of premium, high
margin biscuits & cookies market, instant noodles and snack bars. GSKCH
spends ~16% of its sales on advertisement and promotion expenses, of
which ~30% is used for promotion and ~70% for advertisement. The
company witnessed 20.4% CAGR sales growth in CY08-FY14 (FY14
numbers adjusted for 12 months) with 24.6% CAGR in EBITDA in the
same period.
Dominant play in HFD
With brands like Horlicks, Boost, Viva & Maltova, GSKCH dominates the
HFD market. These brands together command ~65% market share in
volume terms. Though volume growth of base brand Horlicks (white HFD)
saw a significant slowdown, growth in new variants like Junior Horlicks,
Women’s Horlicks, Mother’s Horlicks and Horlicks lite are helping GSKCH
gain market share in MFD business. In brown HFD, Boost (that commands
13-15% market share) is facing stiff competition from Complan and
Cadbury’s Bournvita. Though the foods business contributes 5% to
revenues, it has been growing at more than 20% in last 10 quarters.
Increasing penetration, premiumisation to drive growth
With low penetration (~25%) of HFD in India, there is immense
opportunity to grow the market by penetrating into semi-urban and rural
areas. The company derives 26% of its revenues from rural and 74% from
urban India. With direct reach of 8 lakh retailers and indirect reach of 2.5
million retailers, it has an effective distribution network. It plans to
increase its direct reach to 8.5 lakh retailers and indirect reach of 3 million
retailers by the end of 2015. Similarly, it is taking an initiative towards
increasing its rural reach to 22000 villages by the end of 2014 and 40000
by the end of 2016 from the current 10000. Though initiatives towards
premium products have not been a success, the introduction of sachets
has helped the company to penetrate rural areas.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
LINK
http://content.icicidirect.com/mailimages/IDirect_GSKConsumer_MgmtNote.pdf
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