Tobacco-to-hotel major ITC Ltd announced its maiden acquisition of foreign brands in the FMCG space, buying domestic rights of Savlon and Shower to Shower from global personal and healthcare conglomerate Johnson & Johnson (J&J).
Tobacco-to-hotel major ITC Ltd announced its maiden acquisition of foreign brands in the FMCG space, buying domestic rights of Savlon and Shower to Shower from global personal and healthcare conglomerate Johnson & Johnson (J&J).
The two deals signals ITC's change in strategy by acquiring a larger pie in the Indian non-tobacco FMCG space, which so far was being achieved through development of own brands in organic way.
"The company entered into asset purchase agreements with Johnson & Johnson Ltd, India & Johnson & Johnson Pte Ltd, Singapore Thursday for purchase of Savlon and Shower To Shower trademarks and other intellectual property, respectively, primarily for use in India," ITC said.
"This is in line with ITC's aspiration to achieve a revenue of Rs 100,000 crore from the new FMCG businesses by 2030," an official spokesperson told dna indicating the company's eagerness to achieve the milestone sooner than later.
While ITC didn't disclose the deal value, J&J was looking for a valuation of around Rs 200 crore from these two brands after it turned non-core for its portfolio.
J&J in fact has been planning to sell these brands since August last year and several domestic players like Wipro and Emami had shown interest.
The acquisitions, interestingly, goes against ITC's stated policy of developing what its chairman Y C Deveshwar described as desi brands.
Till date, all of ITC's brands in the non-cigarette space have been developed organically in-house from John Player apparels to Classmate stationary to Bingo! snacks to Vivel soaps. The market seemed to be little enthused about the acquisition, with ITC closing the day with just 2% gains.
ITC's FMCG business excluding tobacco and which includes personal care and snack food and also garments clocked sales of more than Rs 2,300 crore in the third quarter while J&J's two brands didn't even cross Rs 100 crore, sources said.
"Given the size of the brands acquired, we do not expect the deal to have any material impact on ITC," analysts with Religare Capital Markets said.
Globally, Savlon has not been playing a major role in J&J's portfolio, and despite India being one of the largest market the brand is a distant second to Reckitt Benckiser's Dettol.
While the brand was initially launched as a woundcare liquid that heals without hurting, it was turned into an umbrella brand as soap and hand wash.
Shower to shower talcum powder and its variants also remained a dormant brand in J&J's India portfolio of products.
The acquisition comes at a time when cigarette sales, the major contributor to ITC's revenues, appears to be succumbing to successive price hikes.
The Kolkata-headquartered conglomerate earlier reported a poor 2% sales growth at Rs 8,800.22 crore during the third quarter as against Rs 8,623.11 crore a year ago mainly on the back of a meagre 0.6% growth in cigarettes sales at Rs 4,142 crore.
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