Consumer BehaviorKey Issues in Horlicks Case

10/21/2013Section-BPunit Nema

FT142109

Brief History

Since decades Horlicks has been a health drink brand, especially in southern and eastern parts of the country where you won’t find any small eatery that doesn’t sells Horlicks. It holds 50% market share of milk beverage market of India that is around 2300 Crores (source: The Nielsen Company). Product’s Parent company GlaxoSmithKline Consumer HealthCare(GSKCH) produced such a strong brand. Barriers to entry created by GSKCH prevented other strong players such as Nestle and Dabur from selling their products.

Under able leadership of India MD Zubair Ahmed it made Constant innovation in products as well as marketing strategies as its main. Further leveraging the exiting hit brand horlicks GSKCH launched new products in different categories like biscuits for children, a new drink for women, an energy bar and chilled milk, utilizing the strong brand equity of Horlicks to promote its products.

Having a look at market saturation Marketers were left with strategies either to increase the existing market share or to do expand the market and for obvious reasons they choose later. As you can easily promote the usage of a product as one grows in life but asking to increase usage is difficult. Products such as Mother Horlicks, women Horlicks Horlicks Lite and Horlicks NutriBar are symbol of products line extension with reference to age of consumers.

As dairy based products are on a hit for high selling and after looking at sales figure of AMUL as a brand in such products GSKCH also launched Horlicks Chill Dood worth 250 crore. In 2003 the brand was re-launched to make it more tastier with two new flavours honey and vanilla.

Key Issues

The Horlicks case finds diversifications at its centre, GSK has built a good brand out of Horlicks and is taking steps to leverage the goodwill to extend its reach in the market. Before we get into Horlicks we will take a look at the ways in which diversification can be done and the advantages & disadvantages of the same.

Enlisted are the different paths to diversification:

• Brand Extension1. Through sub-brands, example: Fair & Handsome from Fair & Lovely2. To related categories, example: Adidas from footwear to apparels3. To not so related categories, example: Wipro from consumer products to IT

services and Healthcare

• Product line extension, providing multiple variants under the same brand, example: Colgate

Going further let us understand how brand extensions are evaluated by a consumer? Below are the parameters that drive the evaluation:

• Perceived quality of the Parent Brand• Brand loyalty• Trust in parent brand’s competence in the new product or category• Perceived fit of the product or category with the brand• Positive brand associations• Consumer’s attitude towards the brand.

Advantages and disadvantages of brand extension strategy:-

The strategy of diversification through brand extension is more common because it entails lower risks and is not as costly as establishing a new brand, in other words

the economic advantage drives brand extension-- Leslie de Chaternatony, Malcolm McDonald and David Taylor.Advantages are:-• Cost saving:

1. No cost required for branding2. Low advertising cost than that required for a new brand

• Source of energy: The image of the parent brand resonates with the extension i.e. the new product and acts as a source of energy for it. The energy is provided in the means of frequency of brand being associated with high quality & service, large range of products and innovations.

• Visibility of the brand: A trusted brand being available across fields could be a better approach in terms of effectiveness and efficiency as compared to extensive advertising. The relationship with customers is strengthened when they use the extension relating it to the parent brand.

• Trust: The extension benefits from the trust built by the parent brand over the years, the fame and the goodwill of the brand helps in pitching the extension as a compelling value proposition. The satisfied customer of the parent brand will be willing to try the extension of the same brand, example: a customer who has trust in Adidas footwear will opt for sports equipment from the same brand.

• Knowledge: The parent brand is a strong player and can be used to promote the extension and helps in awareness. The association provided by the parent brand reduces the effort drastically and concentration can be kept on communicating through advertising and promotional drives.

• Defensive approach: Extensions increase the presence of the brand in different fields and prevent competitors to some extent from gaining a foothold or exploiting its position in the market.

Disadvantages are:-

• Dilution of brand image: Example, Gucci.• Cannibalization of the existing products.

SWOT Analysis:

HorlicksHorlicks is a brand under GlaxoSmithKline which has through decades built the trust, association and goodwill for its name as a malted milk drink. In 1990’s attempts were made to diversify into fields that are not so related to its existing home ground like Aquafesh toothpaste and Ribena, a black currant drink. Basically the idea then was to move into the FMCG and utilize the brand name there. But both these products bombed, were withdrawn in 2001 and since then Horlicks is reluctant to try to diversify again.

In last few years Horlicks has made attempts to move into FMCG aggressively and has taken the risk of failing again, the new offering under the umbrella are listed below.

1. Horlicks Women – Targeting the nutritional need for the women, especially mothers.

2. Horlicks Lite – Targeting aged and diabetic people, positioned as “With zero added sugar, zero cholesterol and all the nutrients”

StrengthStrong brand recallStrong brand association in kidsHigh investment in R&DOn the track of innovationLeadership ready for risk

WeaknessPoor distribution channels.Not very efficient supply chain.Low presence in North and West.Competition with the Biggies of FMCG like HUL, ITC and Nestle.

Opportunity

Finding newer customers by catering the unmet needs through innovation.Leveraging the Brand Horlicks.

Build on the surging profits & CAGR.

ThreatMissing out on understanding the consumer behaviour.Some of the newly introduced product already not being accepted well by the customers.Competition might go for a kill and Horlicks will then be in trouble as a whole.Uncertainty about the acceptance of its niche products Price war.SWOT

3. Junior Horlicks – Targeting children falling in the age group of 2-3 years4. Horlicks Asha: Targeting BOP5. Horlicks Gold: Premium with better test and aroma.6. Nutribar – Chocolate7. Foodles – Nutritious noodles8. Lucozade – Sports energy drink9. Sensodyne – Niche toothpaste 10. NiQuitin11. Alli12. Horlicks biscuits13. Breathe Rite – Nasal strips14. Oats – Breakfast substitute15. Possible offerings in future

1. Fizzy Eno2. Newer formats of Crocin.

In addition to all the above, different flavor like honey, chocolate and vanilla have been brought in to provide tasty nourishment. It has also changed its logo and packaging to be better seen as a unified identity and today, approximately 9 per cent of the total sales of Horlicks are contributed by the newly launched products.

The support from its rich heritage, tested product quality and performance can be a good enabler to help these extensions grow by increasing the chances of trial. Horlicks has been traditionally targeting kids in India. They have a strong association with kids and this might be an aspect that would prevent adults to try the brand’s extensions.

The major reason why Horlicks is trying to diversify its product portfolio is, to sustain the pressure from competition and stay alive, they must be innovative and be updated with their offerings both with respect to the competition and the consumer needs. A study by Khicha in 2011 states that this can be done in two ways:

• Brand extension

• Product line extension

According to Shubhajit Sen, Executive Vice President of Marketing at GSK, they have three levels of strategies:

1. Invest more in research and development in the main product i.e. original Horlicks to keep the standard improving.

2. Second, product line extension into new health drink sectors to tap all the uncovered consumer segments that may not be using the category. For example, Junior Horlicks, Women‘s Horlicks, Mother‘s Horlicks, Asha, Horlicks Lite etc.

3. Third, brand extension to new product categories like Noodles (Foodles), cereal bars (Horlicks NutriBar), ChillDoodh, Horlicks biscuits etc.

(Above is quoted from an interview read online at Economic Times)

CONCLUSION The importance of innovation in terms of product line extension and brand extension for sustaining products in a company is incomparable. But these innovations should focus on the requirements and latent needs of consumer keeping in mind how the brand is perceived. Dilution of brand personality is damaging and should not be done in the name of product development. Brand extension on the outlook seems very attractive. But from what we have seen

Horlicks has been investing heavily on R &D and not giving much importance to consumer behaviour, this was one of the main reasons why the earlier extension attempts failed and it is again doing the same mistake. Unless the products it launches are pitched in a way consumers are able to connect with them, no matter how niche and good the product be, with the competition playing the marketing game using consumer behaviour GSK will not be able to make its presence counted. Proper distribution system and right product choice is what horlicks and GSKCH crave for at this point of time.

Advertisements: Horlicks Milk Advert: http://www.youtube.com/watch?v=mu_Ei7By0ZY

Horlicks Gold Commercial: http://www.youtube.com/watch?v=D-O9lSD_3tA

Horlicks kids: http://www.youtube.com/watch?v=K1u5T5eRK_c

Womens Horlicks TVC: http://www.youtube.com/watch?v=F1a5IvkH7J0

Horlicks TVC - Ram Bharose : http://www.youtube.com/watch?v=xUTX-ZE8lKU

Horlicks Foodles: http://www.youtube.com/watch?v=DBqkFa26NCc

Horlicks Nutribic-Maximum Nutrition@work: http://www.youtube.com/watch?v=wMXoJlSUfKc

References:1. How do consumers evaluate brand extensions-research findings from India, an empirical

study by Thamaraiselvan, N & Raja J.2. http://www.gsk.com/ 3. http://en.wikipedia.org/wiki/GlaxoSmithKline 4. http://www.mbaskool.com/business-articles/marketing/5195-should-horlicks-extend-to-

new-catagories.html5. http://marketingpractice.blogspot.in/2011/11/brand-update-horlicks-extends-to.html