A number of food and cola companies and pharma players are working towards expanding their core brands as the consumer beverage preferences are shifting to low-sugar or functional options.
Coca-Cola and Zydus Cadila Group are leading in a race for acquiring the consumer portfolio of Kraft Heinz in India that makes childrens milk drink Complan, reported The Economic Times quoting people aware of the development.
Both companies are expected to submit binding bids in the coming days. Tata Group, Wipro Consumer, Dabur India and Danone are among other food and consumer companies which have been shortlisted by Kraft Heinz for the second round of talks.
Kraft Heinz is seeking about USD 1 billion for the assets. However, potential bidders feel brands such as Complan and Nycil talcum powder may find it hard to catch up with shifting consumer tastes and preferences. Thus, the bids are expected to be in the USD 550-600 million range, sources told the paper.
While Coca-Cola declined to comment, Zydus Cadila did not respond to emails sent by the paper.
A number of food and cola companies such as PepsiCo and Coke or even over-the-counter (OTC) pharma players like Zydus Cadila are working towards expanding their core brands as the consumer beverage preferences are shifting to low-sugar or functional options such as juice and juice drinks, flavoured water, dairybased beverages and tea.
An acquisition of Kraft Heinz brands in India will help Coca-Cola as well as Cadila to use these products to populate their existing shelves.
Coca-Cola recently acquired the Costa Coffee chain from UK leisure group Whitbread last week in a USD 5.1 billion deal to take on Starbucks, Nestl and JAB Holdings. The company is also in talks to buy GlaxoSmithKline Plcs consumer nutrition business, which owns malted milk brand Horlicks, for about USD 4 billion.
The Atlanta-headquartered cola giant is expected to emerge as the highest bidder as the firm aims to establish a high potential brand in the non-soda beverage space.
In India, as is the case globally, the core soft drink sales business remains sluggish. The strategy is to acquire established or high potential brands in the non-soda beverage space, to take share in fast-emerging spaces of health-based hydration, an executive familiar with Cokes plans told the paper.
In the case of Zydus Wellness, the listed consumer business subsidiary of Pankaj Patel-led Zydus Cadila Healthcare, the Kraft Heinz business will add to its existing portfolio of personal and skin care, sugar substitutes and health foods. This segment of Zydus Cadila accounted for 4 percent of the Zydus Cadila Groups total revenue, growing 7 percent in FY18.
Sugar Free, Everyuth, and Nutralite are the three mainstay brands of Zydus, which registered faster growth despite challenges such as the rollout of the goods and services tax (GST).
Sugar Free maintained leadership position in the artificial sweetener category with a market share of 94.2 percent, a decline of 30 bps YoY, Edelweiss Securities analyst Deepak Malik told the paper.
Experts, however, believe that the acquirer may face headwinds related to taxation and labour unrest.
(c) 2018 Future Publishing Limited Quay House, The Ambury, Bath BA1 1UA. All rights reserved Provided by SyndiGate Media Inc. (Syndigate.info).