Unilever to process Horlicks in GSK’s closed pharma factory

Unilever Consumer Care Limited is now going to use its shuttered factory in Chattogram for processing and packaging Horlicks.

This factory was once used by GlaxoSmithKline (GSK) for pharmaceutical production.

According to the company's Dhaka Stock Exchange (DSE) filing on Tuesday, the commercial operations of this factory are set to start from today.

Rather than producing Horlicks in Bangladesh, Unilever imports it in bulk from India and packages it here. Earlier, the company used to process and package Horlicks by using the factories of other companies through contract manufacturing.

"A part of the pharma factory is currently being used for producing health food. Horlicks will be processed there," Masud Khan, chairman of Unilever Consumer Care, told The Business Standard.

"The Horlicks processed from this factory will cover only the Chattogram and Sylhet regions. In other regions, we will use the Horlicks processed through contract manufacturing," he said.

"We are now trying to curb our operating costs. So if we use our own factory for packaging, costs will reduce a bit," he added.

Back in 2018, GSK shut down its pharma plant in Bangladesh as the company was unable to do well in the country's competitive pharma industry. But the company retained its health food business then.

But later, it decided to exit the health food business as well and as part of this, the company sold all its shares to Unilever in 2020 for around Tk2,100 crore.

Now, all the assets of GSK in Bangladesh are under Unilever.

As per rules, if production is stopped in a pharmaceutical factory, the factory has to be kept in an abandoned state for a certain period, also known as the decontamination period. Currently, GSK's pharma factory has completed the decontamination period.

Masud Khan also said that Unilever is yet to decide what to do with the remaining portion of the factory.

Unilever has managed to weather the inflation storm as people keep buying Horlicks despite the pressure of rising commodity prices.

According to the company, people include Horlicks in their diet to meet their nutritional needs. As such, Horlicks sales did not decline amid the inflationary pressure. The company focused on the sales of Horlicks mini packs.

Despite the increase in production costs, the price of mini packs has not been increased, whereas the prices of its larger packets have been raised by about 5%. And by relying on the sale of the mini packs, the company did not allow inflation to affect the sales of Horlicks, the company said.

According to data from the Bangladesh Bureau of Statistics (BBS), inflation was more than 9% in August and September this year.

In May 2011, the highest rate of inflation was 10.2%. Since then, inflation has not exceeded 9%.

Unilever Consumer Care's July-September quarter revenue fell by just 5% year-on-year to Tk107.74 crore. However, despite the increase in production costs, the company's profit increased by 15% to Tk18.72 crore.

And in the first nine months of 2022, its revenue increased by 1% to Tk319 crore and profit rose by 40% to Tk54 crore.

Earlier, Masud Khan told TBS that the high inflation pushed average consumers to prioritise their food and beverage items and a large number are spending less on health drinks nowadays.

"Still, a glass of Horlicks with milk and sugar is costing consumers 23% more than that a year ago. However, the Horlicks programme to reach 4-5 million new households in a year is helping the company offset declining sales by focusing on the stressed segment of consumers," he added.

During the hard times for consumers, the company, despite its market dominance, is not passing on all the costs on to consumers, he said, adding, it is instead focusing on maximum operational efficiency to control costs.

In 2021, Unilever Consumer Care made a profit of Tk52.76 crore and paid a 440% cash dividend to its shareholders.

Its share price is stuck on the floor at Tk2,849 each at the DSE.