Ovaltine and Isostar up for sale

Ovaltine and Isostar no longer figure in the strategic plans of Novartis swissinfo.ch

The Novartis group in Basel has announced it intends to sell off some of its well-known brands to focus on its core healthcare business.

Among the brands up for sale are Ovaltine (Ovomaltine in Switzerland), Isostar and Céréal.

Generations of children in Britain may remember that there used to be a club called the Ovaltineys and an accompanying radio programme.

Novartis said in a statement on Monday that its Consumer Health Sector intended to divest its Health and Functional Food business, furthering the group’s strategic focus on healthcare, with pharmaceuticals at the forefront.

Novartis spokesman Mark Hill explained to swissinfo how health and functional foods just “didn’t fit” into the refocused Novartis.

“Novartis announced some time ago that we will be intensifying our focus on our core healthcare businesses,” said Hill. “Basically the health and functional nutrition brands we are selling don’t fit in our main market segments and they only have limited synergies with our core businesses.”

The chairman and CEO of the company, Daniel Vasella said that the group’s strong performance over the past year reflected the strategic focus on the healthcare business.

Good strategic fit

“Our Health and Functional Food brands are strong and well established, and we believe their growth can be accelerated in companies where there is a good strategic fit,” he commented.

“The realignment of our Consumer Health Activities into business units will increase our customer focus, allow rapid decision making and create entrepreneurial opportunities to stimulate further growth,” he added.

The Consumer Health Sector has been aligned into six global businesses: Over-the-counter medicines (OTC), Infant and Baby (including Gerber), CIBA Vision, Animal Health, Medical Nutrition and, until divestment, Health and Functional Food.

The Health and Functional Food business consists of three groups of brands which had combined sales last year of about SFr850 million ($494.76 million).

The Food and Beverages Group includes the Ovaltine, Caotina and Lacovo brands. The Health Food and Slimming business comprises Céréal, Gerblé, Gerlinéa, Modifast, Dietisa, Pesoforma, Leconiva and Milical brands. The Sports Nutrition group includes Isostar, Powerplay and Mineralplus.

The only surprise was that Novartis is keeping its infant and baby food business centred on the Gerber brand.

“Gerber is growing well and at the moment it’s a market leader in the US,” noted spokesman Mark Hill. “One of the things we made quite clear is that pharmaceuticals is our core business and the other businesses in the portfolio should either support pharmaceuticals – ie have synergies – or be leaders in their own fields.”

Hill also commented that the money raised from the sale would be ploughed back into Novartis’s core business.

Brands and customer needs

“The new organisation of Novartis Consumer Health into business units will centre our business activities on brands and customer needs, replacing the regional emphasis and providing greater flexibility to adapt to the fast-paced, global marketplace,” commented Paul Choffat, the newly appointed head of Novartis Consumer Health.

Novartis has commissioned Credit Suisse First Boston in London as an adviser to coordinate the divestment programme.

In June last year, Novartis withdrew so-called functional foods from trial markets in Switzerland, Austria and Britain. The company shelved high-nutrition products, including the “Aviva” drinks line, Gutzi biscuits muesli and Riegel energy bars.

A company spokesman told swissinfo that there had been a lack of response from consumers for reasons of pricing and taste.

Functional foods have “scientifically proved benefits” and contain added ingredients to improve health, he added.

One market analyst described the Aviva line launch as a key step in a bold bid by Novartis to build a consumer healthcare powerhouse using premium-priced nutritional products as a complement to traditional over-the-counter medicines.

No rift

There had been some talk on the market that the Ovalitine division was being hived off because of a row between itself and Novartis’s genetic food division.

Mark Hill denied this.

“That’s a confusion that a lot of people have had. I don’t think there’s been any conflict in this area and it has nothing to do with the strategy to divest these brands,” explained Hill.

swissinfo with agencies