Do not be surprised if your grandmother, while adding a spoon of Horlicks in your glass, recalls how she has been following the routine since the time your father was a kid. For, the malt food drink has been available in India even before 1930s. Having established itself as a leading brand in the health drinks category, the brand in the recent past has made slow yet steady entry into the health food categories such as biscuits, packaged noodles and oats while some newer extensions are still being planned. The success of these extensions can be gauged from the fact that today, brand Horlicks brings in R2,000 crore for its parent GlaxoSmithKline (GSK).
According to GSKs annual report of 2011, sales from packaged foods like noodles, oats and biscuits stand at R168 crore. Sales from malt based food, cereal based beverage and protein rich food is R2655 crore. Horlicks (health food drink) grew by 17% last year with all its variants registering double digit growth. The extensions notwithstanding, the mother brand, the health drink, still accounts for lions share in the overall revenue. It is also the fastest growing segment in the Horlicks portfolio. Yet, the company feels entering new categories and building them is the way forward.
Says Jayant Singh, marketing director - GSK Consumer Healthcare (GSKCH) India, A large part of GSKs revenue continues to come from its nutrition business which includes Horlicks and Boost. Now we would like to focus on extending our core into other categories. And this is possible because the promise of providing scientifically proven nutrition does not need to be restricted to powdered food drink but it is something that can be extended to other categories like oats, noodles and biscuits.
According to Pratichee Kapoor, associate vice president, food services and agriculture at management consulting firm Technopak Advisors, brand extension is the best way to leverage the credibility of an established brand. At the same time, there is an inherent risk of not being perceived as better than what the competition has to offer. Besides, there are many complexities related to the setting up of manufacturing processes, she says.
Kapoor points out while frequent product innovation may not be possible, FMCG players use packaging innovations as a key differentiator without loosing out on margins by keeping things cost effective.
In fact, GSKCH kicked off its extension exercise by tweaking the basic health food drink and launching products for specific target groups like women (especially pregnant and lactating) and children (toddlers and elder children). The company has been selling Horlicks Biscuits since the 80s. After having deliberately chosen to stay away from premium cream biscuits, Horlicks is focused on pushing biscuits for on-the-go nourishment. We are only present in milk biscuits. As opposed to metros, milk biscuits tend to do well in lower SEC markets pan India as an on-the-go nutrition offering. Horlicks biscuits portfolio grew by 30% last year. Close to the end of last decade, the company decided to zero on Rs.500 crore breakfast market for Horlicks brand extensions.
In 2010, Horlicks made one of its most anticipated foray in packaged noodles market with the launch of Foodles. True to the brands DNA, Foodles was positioned as the more nourishing noodles. The commercial showed a mother who tries her best to stop the son from consuming noodles which are unhealthy. With the ad, Horlicks also made it clear that existing noodles in the market are not as healthy. Not to forget, the unhealthy noodles in the bowl had striking resemblance to Maggi noodles.
Says Singh, In India, packaged noodles have been driven by the consumer need to have a quick and tasty snack. Foodles come in a healthy, multi-grain and therefore more premium format. Shifting to a healthier option does not happen instantly. Like existing players, we are not in this category to play into huge volumes but to carve a niche for our brand. I am not even looking at capturing an X per cent share in this market as it largely operates in the taste and convenience space. While North and West are two biggest regions in terms of noodles consumption, the big markets for Foodles are in South. This is evident in companys media plan as well. While there has been no follow-up to the launch commercial, a new commercial was launched in South markets early this month.
Brand expert and CEO, Harish Bijoor Consults, Harish Bijoor observes how talking about health only does not work in noodles category and Foodles is no exception. Noodles are usually bought by adults and consumed by children.
Apparently, there is a gap in the communication as it appeals to the rationality of parents and does not pay heed to the fun side of kids. By focusing on the latter, Maggi has managed to strike the right cord with kids.
Bijoor has a word of caution for brands contemplating their extensions. One should look at at enhancing brand depth and not just brand width. In the past, big brands have failed to create sustainable extensions. It was fine as long as Amul made milk, cheese and ghee. But coming up with products like shrikhand and ice creams did not work in its favour. In case of Horlicks, while noodles was a risk, biscuits made a lot more sense.
There is no use in entering a category (with brand extension) which is not closely related with the mother brand in the minds of consumers. Any brand should avoid taking that route. Says Krunal Mehta, VP - branding and corporate communication, Angel Broking, The packed noodles category is doing fairly well in India. Because of the lifestyles, especially in metros, the demand for this category is set to grow. The current packaged noodles market in India is estimated at around R1400 crore which is estimated to grow by leaps and bounds in next three to five years. Because of the anticipated demand, the category saw flurry of activities in terms of new player entering the category and couple of old players extending their existing brands to this category. The packed noodles market in India till now was dominated by Swiss giant Nestle with its brand Maggi. But recently the market saw new players like Horlicks Foodles, Hindustan Unilevers Knorr Soupy Noodles, ITCs Sunfeast Yippee etc eating into the market share of Nestle. Another reason for more and more big FMCG players eying on the space is, the consumers are more open to the packed noodles then they were before and they also are spoilt to choices.
He adds, Post the launch of Horlicks Foodles, the brand is doing much better than what they had expected. It is moving much faster in the value chain. Everything has worked in the favour of Horlicks Foodles starting from their punch line Noodles without the NO. Also, the positioning of the product is on the high nutritional value (healthy meal). I think Foodles has also been benefitted from the existing brand equity of Horlicks.
The next big extension materialised in November last year when GSKCH entered Indias breakfast market with Horlicks Oats. Quite similar to the overcrowded noodles category, a large number of established players were already present in oats including PepsiCo with Quaker Oats, Kelloggs with Heart to Heart Oats, Marico with Saffola Oats and Britannia with Healthy Start. Overall, the oats category had been a slow mover before 2010. Indian consumers may find it difficult to give up idlis and paranthas for breakfast but according to Singh, the shift towards cereal-based options is becoming more visible. According to GSK, the product has turned out to be an instant success.Within four months of the launch we had become Number 3 player in oats. While we will continue our efforts in capturing a larger pie of the Rs 250 crore oats market, theres a larger responsibility of expanding the category. Currently, 70% of Indias oats business comes from markets in South (Tamil Nadu, Andhra Pradesh, Karnataka and Kerela) and so theres a lot of scope in other markets as well. With proven scientific benefits, oats is a relevant offering for India where we witness a surge in the number of diabetes and obesity cases, says Singh.
Bijoor points out that oats are a niche segment. In the coming years, oats will see high adoption rates by men who are 40 years and above since we are a cholestrol rich country and young women who want to stay in shape, he adds. Agrees Kapoor, Oats as a category is way ahead of todays time. Also, it works in South because the penetration of organised retail is higher there. Below the line initiatives have helped in imparting the right product knowledge. Right after the launch, Horlicks roped in nutritionists to conduct awareness programmes on oats across retail stores in South markets.
Horlicks is also leaving no stone unturned in the corporate social responsibility sphere. Early this month, GSKCH kick-started Horlicks Ahaar Abhiyan, an initiative that aims to address the issue of malnutrition among young children. The initiative will help increase awareness of the issue among consumers and enable access to nutrition and thus, a better life to malnourished children in West Bengal. During the campaign period, with the sale of every large pack of Horlicks in West Bengal, the company will contribute Re 1 towards the initiative. To generate mass awareness about the initiative, GSKCH has roped in actor Vidya Balan.
Currently, Horlicks products are available across 1.2 million retail points and the company is working towards growing its sales and distribution network pan India.
Interestingly, Horlicks also entered the chocolate space with Nutribar but GSKCH has been facing supply chain issues. The company is sorting out the matter on a priority basis.
Horlicks extension story will continue in the breakfast space and it will not come as a surprise if the company comes up with another food product soon.
Says Singh, We are a science-driven company and live on by the principle of do more, feel better, live longer. We will never operate where we cannot add relevant science to the lives of our consumers.
Extensions do not mean that we will not focus on building the mother brand. Fortunately, our extensions have been sustainable and they are delivering.