GlaxoSmithKline Sells Lucozade and Ribena in £1.35bn Deal

UK company GlaxoSmithKline (GSK) has sold its range of Lucozade and Ribena drinks brands to Japanese food and beverages group Suntory of Japan, as part of GSK’s effort to focus on its core pharmaceutical and healthcare businesses.

GSK said that it had agreed to sell the two brands to the Japanese consumer goods group for £1.35bn (US$2.12bn).

The Ribena blackcurrant drink dates back to 1938 and was distributed freely during the Second World War as a source of Vitamin C. Lucozade, originally known as Glucozade, launched in 1927 as an aid to recovery and later became popular as a sports drink.

Osaka-based Suntory is known for producing Japan’s first whisky and its subsidiaries extend to food, supplements, flowers, and fitness.

Diversity versus Complexity

Commentary on the deal was offered by Warwick Business School associate professor of strategic management, Dr Christian Stadler, who researched GSK for his book Enduring Success, which examines the success strategies of long-established corporations.

“This is a question of how do you structure your portfolio, and I think this is a good idea for GSK,” said Stadler. “A company is constantly assessing its portfolio and research shows that diversification into related products is best for profit.

“The big question for any company, though, is what are related products? And GSK have decided that their core business should be in prescription drugs and consumer healthcare brands such as Panadol and Aquafresh rather than consumer goods.

“Looking at GSK’s long history, since New Zealander Joseph Edward Nathan founded what was to become Glaxo Laboratories in 1861, it started out producing milk powder while Ribena was launched in the 1930s, and Lucozade in the 1920s, but the sale of them today completes a transition for GSK that started in the second half of the 20th century.

“It has moved further and further into the prescription drug market and that is now its core business, with healthcare products added alongside them. I don’t think it is a sign that Ribena and Lucozade have been doing badly, rather that they are really consumer goods, which are more suited to a pure consumer company that operates in that market, like Suntory.

“By having a wider diversity you increase the complexity to manage the company, so by focusing more on prescription drugs and healthcare products it will make it easier to run the company.”