GLAXOSMITHKLINE has put iconic drinks Lucozade and Ribena under review and announced plans to save £1bn a year.
The UK’s largest drugs giant, which employs more than 1,200 in Barnard Castle and Ulverston, will consider all strategic options for the brands, which are primarily sold in western markets. It did not disclose the options under review, but it is likely they will include new ownership for the brands “to ensure their continued growth.”
Chief executive Andrew Witty also announced a 5% drop in operating profits to £7.4bn for 2012, following a 3% drop in turnover to £26.4bn.
This has prompted the company to announce a further restructuring of its European pharmaceuticals operations while it looks for cost savings of £1bn a year by 2016 as it faces increasing pressure on prices. It has not said how this will impact on jobs.
In 2010 the company announced plans to cut more than 4,000 jobs to help cut costs. As part of that, it lost 200 staff at Barnard Castle.
Glaxo expects charges of about £1.5bn related to its expanded cost-cutting programme, which will focus on the European business, where sales fell 7% amid pricing pressure.
The programme will also look at simplifying supply chain processes and building capacity in manufacturing and research, the company said. Lucozade and Ribena, which were owned by Beecham prior to its merger with SmithKline, date back to 1927 and the 1930s respectively. They form part of Glaxo’s consumer healthcare division, which also includes the brands Horlicks and Panadol, and posted a 5% rise in annual sales to £5.1bn.
Lucozade achieved strong growth in emerging markets, with low single- digit percentage growth in Europe resulting in a 4% rise overall for the final quarter of 2012.
Glaxo said: “These brands are iconic and the review will look at the best ways to ensure their growth.”
In research and development, the company said it had made significant progress, with six new products now under regulatory review.
Glaxo said sales and profit will rise this year as the company awaits regulators’ approval of six drugs which it hopes will revive its fortunes.
Glaxo shares declined in 2012 as the company missed profit and revenue estimates in each of the first three quarters of the year.
The company said it expects to repurchase between £1bn and £2bn in stock this year, compared with repurchases in 2012 that totalled almost £2.5bn.
The company increased its stake in an Indian consumer- health subsidiary to 73% from 43%, and also is buying shares in its Nigerian unit.
After years of job cutting, the company said last year it would invest £500m in the UK, which the company says will create 1,000 jobs, and includes making its Barnard Castle plant the group’s dermatology manufacturing centre of excellence.