Shares of Hindustan Unilever Limited (HUL) hit a fresh 52-week high on Friday after the FMCG major unveiled a plan to foray into the health and wellbeing segment by investing in two D2C brands - OZiva and Nutritionalab. The investment is in line with HUL’s attempt to increase its presence in the health and wellness segment post acquisition of Horlicks. This will boost the company’s presence in the Vitamin, Minerals and Supplements (VMS) space, which has a potential market size of ₹30,000 crore over the next 5 years.
The Mumbai-headquartered consumer goods company will acquire a 51% share in Zywie Ventures, which owns the brand OZiva, for ₹264.28 crore, while it would invest 70 crore in Nutritionalab (Wellbeing Nutrition) for 19.8% shareholding.
Boosted by the development, HUL share price opened 0.9% higher at ₹2,724.50, against the previous closing price of ₹2,701.30 on the BSE. During the session so far, the index heavyweight gained as much as 1.5% to hit a new 52-week high of ₹2,741, while market capitalisation rose to ₹6.4 lakh crore. The largecap stock has risen 44% in the last six months, from its 52-week low of ₹1,901.80 on March 8, 2022.
HUL, the country’s sixth most valued listed company by market capitalisation, has delivered nearly 17% returns to its shareholders in the past one year, while it has risen more than 24% in a six month period. In the last one month, the FMCG major has gained nearly 9%, whereas it added 5.5% in a week.
In an exchange filing on Thursday, HUL said it has entered into agreement to acquire 100% shareholding in Zywie Ventures Private Limited in n 2 tranches. It will acquire 51% stake in the first tranche by January 2023, and the balance 49% in the second tranche, which will take place at the expiry of 3 years from the date of completion of the first tranche, subject to certain conditions. The total consideration for the acquisition of the first tranche is ₹264.28 crore, while the acquisition cost of the second tranche is to be determined at the end of three years.
In a separate development, HUL inked a pact with Nutritionalab, a health and wellbeing company, to buy a minority stake of 19.8% for ₹70 crore. The strategic investment is part of the company’s plan to enter into the health and wellbeing sector.
Analysts view on HUL’s entry into ‘health & wellbeing’ business
According to domestic brokerage JM Financial, the investments by HUL indicate the company’s serious intent to build a ‘health & wellbeing’ portfolio. HUL estimates total VMS market potential (Vitamins, Minerals, Supplements) to be ₹30,000 crore and looks to build a play in high growth benefit spaces like sleep and stress, women’s health, gut health, beauty from within, plant-based, etc, it said in its report.
“While this may appear to be an ‘extension’ of the earlier Horlicks malted food drinks acquisition, the foray is also a global phenomenon (Unilever has itself acquired 7 such brands over the last 4 years and built a €1bn business there from - Equilibra, Smartypants, Liquid IV etc – in line with its strategic priority of focusing on high-growth spaces) and Health & Wellbeing is also far more premium in terms of price-point (8x ASP vs base Horlicks).”
“The immediate opportunity, we believe, would be to leverage its deep consumer insights to drive market development & expand penetration and reach from D2C to marketplaces and onwards to modern-trade, chemist outlets and then to broader general grocery stores once the category has broader acceptance and usage,” the agency said in its report.
Analyst at Prabhudas Lilladher opines that the move is in line with HUL’s attempt to increase presence in the wellness segment post acquisition of Horlicks.” We believe HUL will use its vast distribution network, technology & expertise of Unilever and its strong presence in MT/E-comm to grow the business further,” said Amnish Aggarwal, Head of Research, Prabhudas Lilladher.
“HUL is currently present at the mass end in supplement and wellness space through Horlicks (GSK acquisition), these acquisitions will help grow presence in the premium segment (8x realisation in OZiva vs base variant of Horlicks). Although these businesses won’t turn the needle for a company with the size & scale of HUL, However, the move shows HUL’s intent to grow into emerging growth segments in health, wellness, and nutrition,” Aggarwal added.
