GlaxoSmithKline (GSK) has sold off two of its most iconic consumer brands to a Japanese food and drink company as it attempts to simplify it consumer health division.
Suntory Beverage & Food paid £1.35bn in cash to acquire the drinks Lucozade and Ribena, which had combined annual sales of about £500m during 2012.
GSK said the decision followed a strategic review of the two brands as part of wider plans to focus its consumer health business on a “core portfolio of healthcare brands, with a particular emphasis on emerging markets”.
These plans were first made public in April 2011 when GSK said it intended to sell off several over-the-counter (OTC) brands, including weight-management drug Alli and the painkillers Solpadeine, BC and Goody’s, claiming they lacked “sufficient critical mass”.
The company struggled to find a buyer for all the products put up for sale, however, eventually agreeing a deal in December 2011 to sell several non-core brands to Canadian firm Prestige Brands Holdings for £426m.
This was followed in March 2012 by the sale to Belgian company Omega of brands such as Lactacyd, Abtei, Solpadeine, Zantac, Nytol and Beconase for £391m and then a month later it offloaded several other products to to Aspen Pharmacare for £164m.
The deal involving Lucozade and Ribena is the biggest yet in GSK’s consumer sell-off – both brands achieved great success in the company’s home UK market but failed to achieve global penetration.
Suntory, which achieved net sales of £12bn last year, is well-placed to grow the brands in Asian markets, where its existing beverage portfolio includes green tea brand Iyemon, BOSS coffee and the soft drink Orangina.
“We believe the future of Lucozade and Ribena is in good hands given Suntory’s established beverages business, ambitious growth plans and also their recognition of the strong performance and capability of the GSK employees working on these products,” said David Redfern, chief strategy officer, GSK.
Regarding the manufacture of the product, Suntory will take over GSK’s site in Coleford, UK, with the vast majority of employees to be kept on under the new company.
In Nigeria, where both products are also manufactured, GSK will continue to manufacture and distribute Lucozade and Ribena under licence from Suntory.
The decision to sell off the two products is part of wider pharma industry moves to streamline their business to focus on innovative medicines.
This includes the decision by Abbott to split its business into two companies, with AbbVie to focus on new pharma products and Abbott to deal with diagnostics, medical devices, nutritionals and branded generics.
Pfizer sold off its nutritionals business last year and recently announced plans to separate its generic and branded medicines business, with some investors calling for the company to sell off its consumer health division.