Horlicks 2

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Horlicks 2

  1. 1. Last week it emerged that GlaxoSmithKlines Horlicks, a brand that has always promoted itself on itsbedtime benefits, is to go one stage further and include technical evidence in its marketing to provethat it helps people sleep. GSK clearly sees its heritage as a "scientific nutrition company" as a vitalUSP in todays competitive drinks market. Moreover, it needed to do something with Horlicks becauseit has been losing sales. Turnover fell by 3.6% to L30.3m in the year ending July 12, 2003, accordingto IRI. To back its scientific stance, the brand is to get a packaging make-over from Williams MurrayHamm and a major advertising campaign through Grey Worldwide London and MediaComGlaxoSmithKline will give Horlicks a much needed pick-me-up with pharmaceutical evidence. Butbrands dont always benefit from using the tactic, says Daniel RogersLast week it emerged that Horlicks, a brand that has always promoted itself on its bedtime benef its,is to go one stage further and include technical evidence in its marketing to prove that it helps peoplesleep. (Marketing, August 14).But why should GlaxoSmithKline, which owns the 130-year-old drink, suddenly feel the need to bolstersuch claims with science?Ask GSK and it will say only that it is moving toward science-based marketing across the board.Indeed, in its corporate literature, SmithKline Beecham Drinks - the arm of GSK that markets theHorlicks, Lucozade and Ribena ranges - describes itself as a producer of health-orientated drinksrather than simply soft drinks, as is the case with Britvic or Coca-Cola, for example."Were essentially a pharmaceutical company and our aim is to make consumers more healthy," saysa company spokeswoman. "There is a strong emphasis on health claims across all our brands."Brand extensionsPerhaps we should not be surprised that Horlicks is now getting the same heavyweight sciencetreatment as its sister brands.GSK has developed a number of Ribena brand extensions specifically aimed at a healthier lifestyle,namely the lower sugar Ribena Light and the notorious RibenaToothkind, which positions itself asbenign to kids teeth with the endorsement of the British Dental Association.And Lucozade - once just a sweet, fizzy drink your mum gave you on your sick bed - has taken itsglucose positioning several functional stages further.The basic product has been renamed Lucozade Energy with a growing array of claims. In April it ran apromotion called Load it like Lara, which promoted its credentials as a drink that stimulatesalertness and built on its link with the all-action character Lara Croft from the Tomb Raider games.
  2. 2. Meanwhile, Lucozade Sport claims to keep athletes going 33% longer than water and is now evenbacked by the Lucozade Sport Science Academy which promotes best practice in athletic nutrition(Marketing, March 6).GSK clearly sees its heritage as a scientific nutrition company as a vital USP in todays competitivedrinks market. Moreover, it needed to do something with Horlicks because it has been losing sales.Turnover fell by 3.6% to L30.3m in the year ending July 12, 2003, according to IRI.GSK is not the first drinks company to emphasise the functional benefits of age-old formulae toreverse a sales decline.In January 2002, Tetley, facing flagging market share, pensioned off the Tetley Tea Folk ad cartooncharacters and invested L15m in a campaign focusing on a new Go on, live a lot proposition.Growing reputationIt ran into trouble when both the ASA and ITC upheld complaints in October 2002 from the FoodCommission challenging the claim that Tetley is rich in antioxidants that can keep your heart healthy.Although the positioning for the teabags had to be adapted following the watchdogs rulings, Tetleyhas pushed ahead with the overall strategy and is on the verge of launching nationally its first chilledfunctional soft drink, T of Life. The drink contains a blend of Tetley tea, spring water and fruit juice,with added ginseng, guarana, and B vitamins. It is aimed at the under-30 age group and taps intoteas growing reputation as a natural antioxidant."It doesnt take a market researcher to identify the consumer trend toward healthier products andgetting the right vitamins," says a senior advertising agency executive who has worked with Coca-Cola. "And whats happening on the ground is that well-established brands are being forced tocompete with a new breed of deliberately functional products."Red Bull, with its gives you wings energy claims and the inclusion of taurine, revolutionised the softdrinks market in the 90s.It has been followed with a vast array of designer beverages, most recently P&Js range of functionalsmoothies, MangaJos chilled green tea drinks and The Feel Good Drinks Companys mood-orientedsoft drinks portfolio.
  3. 3. "In the first seven months of 2003 a great many products have appeared, from cholesterol-bustingproducts through to meal replacement solutions, an abundance of water-plus variants and a surge ofwellness products," says Laura Appel, editor of Zenith Internationals functional drinks newsletter.Functional growthAlthough functional drinks still only account for 3% of the beverage market, Zenith expects 70%growth in Europe by 2004. Could we be about to emulate Japan where functional drinks comprise 18%of all beverages sold?"Refreshment, relaxation or fun are no longer sufficient for todays sophisticated and demandingconsumer," explains the advertising executive. "Drinks marketing has moved on through need states- occasions to drink - toward more clearly defined health benefits. The market is now offering drinksthat claim to boost your immune system or improve the look of your skin."Horlicks could potentially fare well in this fightback. GSK certainly has the brand heritage and themarketing war chest to blow any functional upstarts out of the water.To back its scientific stance, the brand is to get a packaging make-over from Williams Murray Hammand a major advertising campaign through Grey Worldwide London and MediaCom.But history tells us that such functional relaunches are rarely plain sailing. RibenaToothkind was dealta huge blow in January 2001 when a High Court judge ruled that the company was wrong to claimthat it did not encourage tooth decay.Mr Justice Hunt said that when taken as a whole, the evidence did not justify the "absolute nature ofthe claim".The ruling followed a stand from the Advertising Standards Authority (ASA), which argued thatRibenaToothkinds positioning was misleading. This generated a damaging amount of negative PR forGSK, including various BBC news stories.Debatable valueHorlicks essential claim - relaxing sleep - seems somewhat less tangible, and probably lesscontentious, than avoiding heart disease or tooth decay, so the likelihood is that it will avoid abacklash. However, Peter Matthews, former chief executive of Cullens and now the entrepreneur
  4. 4. behind a range of high-performance drinks called Optio, believes that, as a rule, brands need to addgenuine value if they are to be accepted as functional."Where there is an added ingredient with a functional benefit - what is generally known as aneutraceutical - then thats great, but when its simply a repackaging issue, the value is debatable,"says Matthews.His answer, Optio, is an unashamedly functional creation - a blend of fruit smoothie and vitamin andmineral supplement in a single, daily shot."In many countries around the world liquid supplements are popular. With sales of vitamin tablets nowstalling, I think this market will take off and Optio is the first real player," he says.Peter Shaw is director of brand consultancy Corporate Edge. It has extensive experience with brandinghousehold names and recently created the identity and positioning for Optio.Shaw believes the rule is that if a brand is to adopt scientific positioning, then it needs to explain thisvery clearly to the consumer."You need to understand which side of the water youre on," says Shaw. "If you are a functionallycreated drink such as Optio you need the right retail positioning, whether thats in a health store or ina Tesco NutriCentre. If youre an established brand, the repositioning must be done in a subtle andincremental way, or you may even need a mark II version of the drink. Its when you fudge the issuethat you can become unstuck."SidebarBRANDS FACE LEGISLATION BATTLERules being proposed by the European Commission will trigger a shake-up of food marketing,including a ban on vague health claims and an end to endorsements by medical professionals.Under plans announced last month by the Health and Consumer Affairs Commissioner David Byrne,nutritional, functional and health-related claims must not be deceitful, raise doubts over foods that donot make similar claims or be unintelligible to the average consumer.And, in a move that has implications for GlaxoSmithKlines revamp of the Horlicks brand, all healthclaims based on scientific data must be submitted to the assessment of the European Food SafetyAuthority. For sister brand Ribena Tooth kind the perils are even clearer, with the Commissions
  5. 5. proposals banning any reference to, or endorsement by, doctors or health professionals. Tetley Tea,which carries the backing of the British Heart Foundation, would also be affected.The restriction has been conceived because of a concern within the Commission that customers mightmistakenly think that not consuming the endorsed product could lead to health problems. Morebroadly, the legislation would place much stricter control on the use of phrases such as low-fat andhigh in fibre, for so long the mantra of hundreds of food products on sale in UK supermarkets.There will also be greater prohibition on claims that refer to the energy-giving properties of food anddrink products, which could curtail the marketing strategies of scores of brand manufacturers.The proposals, which have already gained the backing of consumer groups across Europe, will have tobe agreed by European Union member governments.But it is clear that with such detailed proposals now being supported at the highest levels in Brussels,food manufacturers are facing an unprecedented battle to retain claims that for many years haveunderpinned the appeal of their products.Horlicks is hip. After 130 years of being the favourite of grannies everywhere, the malted-milk drink isnow claimed to be the late- night beverage of choice for Londons A-list.Like camomile tea, ginseng and Classic FM, Horlicks has a reputation for inducing slumber. So whenmedia reports have it turning up on menus at the Groucho Club and Clerkenwells trendy Zetter hotel,one has to wonder on to what sort of bandwagon all those groovy people are jumping.The story that Horlicks is being sipped by celebrities is partly the result of clever marketing. ButGlaxoSmithKline, which owns the brand, has done its research. Ian Ainsworth, Horlicks marketingdirector, says there are a million people in Britain aged 28 to 45 who find it hard to sleep. So GSK ismarketing the drink directly at younger consumers, and is happy to have the products placed intrendy settings.Sleep researchers agree that we are more tired than past generations. "Weve stopped living our lifeaccording to day and night," says Neil Stanley, chairman of the British Sleep Society. "Weve got a24/7 society and that has made people forget about the importance of sleep, which is a pity. A goodnights sleep is one of lifes great pleasures."It is not easy to get accurate figures on the prevalence of insomnia, but "logic demands that it isincreasing," says Professor Kevin Morgan from the Loughborough Sleep Research Centre. That is
  6. 6. partly due to the proliferation of anxieties that cause sleepless nights in the first place, such as jobinsecurity. It is also because our population is ageing, and insomnia tracks demographics like shadowsfollow the sun.Research shows that 5 per cent of people between the ages of 18 and 25 say they are dissatisfied withthe quality of their sleep. This rises to 30 per cent for those over 65, Morgan says. "As you get older,sleep gets shorter, lighter and more fragmented. That is a biochemical imperative."The number of sleeping pills prescribed by GPs has stayed at about the same for the past twodecades. But that might have more to do with developments in the treatment of sleep problems -doctors have come a long way from recommending we all pop a benzodiazepine before bed.Taking a pill is like saying "this problem is beyond my control," says Morgan. "Everything werelearning about insomnia is going in the opposite direction. Were moving towards a broad approach totreating insomnia that includes, but isnt dominated by, sleeping tablets."The focus is on "sleep hygiene" and establishing the right conditions for dropping off, which includemaking sure the bedroom is warm, dark and quiet. It also involves setting up a routine that preparesthe mind for sleep, which is where milky drinks come into the equation.As far as science is concerned, theres no magic ingredient in Horlicks that induces sleep. It is notvastly different from plain hot milk or herbal tea. Almost anything that might theoretically cause sleephas ended up in a bottle in the health food shop, and the evidence for most of these remedies rangesfrom slender to non- existent.One of the few treatments that have been shown to work is cognitive-behavioural therapy (CBT), aform of structured psychotherapy that aims to identify and change extreme thinking and unhelpfulbehaviour. In a recent scientific paper, Boston-based researcher Greg Jacobs said that counsellingshould replace pills as the standard treatment.What CBT does is teach you how to switch off. "We live in a society that does not know how to relax.We turn the TV off, brush our teeth, do a pee, get into bed and say sleep, come and take me," saysStanley. "Its not surprising that sleep isnt always that interested. Youve got to get the conditionsright for sleep to find youIt would have been ironically appropriate if the directors of Premier Foods were buying the rights tothe eponymous bed-time drink, Horlicks, in their proposed GBP1.2bn deal to acquire fellow foodsprocessor RHM. And thats because, in fixing the details of buying RHM, which owns brands such as
  7. 7. Frank Coopers marmalade and Mr Kipling cakes, they seem to be making the said Horlicks ofPremiers arrangements to pay dividends. First, though, the trickier question: how is it that the nameof the worlds best-known malted-milk drink is almost as well-known as a synonym for you knowwhat, especially since former foreign secretary Jack Straw used it to describe the compilation of thegovernments infamous dossier on Iraqs weapons of mass destruction in 2003? The answer isnt clear,but at least it can take us on a sentimental tour of the UKs changing corporate landscape over thepast 100 years.This weeks column is as much about etymology as investment, but may be none the worse for that.Alternatively, some readers may think that, as usual, its a complete Horlicks, which is where my trainof thought began. The thing is, it would have been ironically appropriate if the directors of PremierFoods were buying the rights to the eponymous bed-time drink in their proposed GBP1.2bn deal toacquire fellow foods processor RHM. And thats because, in fixing the details of buying RHM, whichowns brands such as Frank Coopers marmalade and Mr Kipling cakes, they seem to be making thesaid Horlicks of Premiers arrangements to pay dividends.But more about Premiers dividends in a moment. First, though, the trickier question: how is it thatthe name of the worlds best- known malted-milk drink is almost as well-known as a synonym for youknow what, especially since former foreign secretary Jack Straw used it to describe the compilation ofthe governments infamous dossier on Iraqs weapons of mass destruction in 2003? The answer isntclear, but at least it can take us on a sentimental tour of the UKs changing corporate landscape overthe past 100 years.To do that, however, we have to stop being twee, and acknowledge that Horlicks is a euphemism forbollocks, because thats really the key word here. Quite why and how Horlicks got its slang meaning isnot clear. But it was certainly established by the early 1990s because that was when GlaxoSmithKline,the brands owner since 1969, commissioned a TV advertisement for the product featuring a harassedhousewife, who cursed "Horlicks".And we should not be too surprised by the connection. Clearly, the two words sound alike. Indeed, inits time, Horlicks has had many meanings. For example, in India, its biggest market, Horlicks is called- would you believe - "the great family nourisher". Not just that but, in 2005, Glaxos Indian armclaimed that children who regularly drank Horlicks became bigger and brighter. That, in itself, youmight think, justifies Horlicks alternative meaning.Even before then, the product had long been a study in hyperbole. Back in 1931, its marketeersconjured up the notion of "night starvation" to re-invent Horlicks as a bed-time drink. Before that, it
  8. 8. was a source of nutrition in the trenches in World War I and for polar expeditions. And, before the turnof the last century, it was patented as a food for infants.Soon after that, Frank Hornby, a Liverpool clerk whose name lives on in the eponymous models-making company whose shares are listed on the London stock market, secured the patent on a newtoy called Mechanics Made Easy, or Meccano, as the worlds little boys grew to know it. This thenwent on to provide an even richer vein of etymology along the same lines as Horlicks.Exactly how Meccano and bollocks came together, as it were, is uncertain. However, legend has it thatan early version of the toy came in two versions: the box standard and the box de luxe. From thebox standard, we get the phrase bog standard. Simultaneously, in a wonderful piece of spoonerism,the box de luxe transformed itself into the dogs bollocks, which it almost certainly was.Whether that will be an apt description of new-look Premier Foods remains to be seen. True, its dealto merge with RHM looks better business than its previous deal - the GBP460m acquisition ofCampbell Soups UK and Irish operations. Yet it looks better still for RHMs shareholders. Premiersbosses think that they can deliver GBP85m a year in cost savings from the bigger group. And anyback- of-the-envelope net-present-value calculation will value those savings at well over GBP500m.That amount ostensibly justifies the GBP280m take-out premium that Premier proposes to pay to RHMshareholders. But RHMs shareholders will also own 41 per cent of the enlarged group, so they willhave a future claim on the synergies, too - a bit like being paid twice for the same thing.Meanwhile, Premiers directors have to sort out the Horlicks surrounding the timing of Premiersdividends. Having been foolish enough to make just one payout in 2006, they will be paying four -almost certainly more than 20p-worth - in 2007. Meanwhile, former RHM shareholders will get threepayments next year.Maybe this sounds more dogs dinner than dogs bollocks, but a last word on the subject, which allinvestors and business chiefs should heed. Note that there is also dogs bollocks syndrome, which isexpressed in the question: why do dogs lick their private parts? Answer: because they can. But itsreally a generic joke. For example, why do business chiefs do takeover deals? Answer: because theycan.So the worry is that Premiers bosses may be victims of the syndrome. They made four acquisitionsfor GBP730m, which accounted for over half Premiers stock-market value, in the two years since thecompanys shares were listed. Now, the RHM deal represents a step change, bringing the total spentto almost GBP2bn. Sure, the nature of the low-growth food-processing industry makes mergers a way
  9. 9. of life. But, even so, there are good deals and bad ones. Premiers bosses havent obviously made aHorlicks of it yet. That said, they have yet to prove that their acquisition strategy is the dogs bollocks.Bio - MrBearbulls column has appeared since the 1950s. Its aim is to help readers manage theirinvestment portfolios. Details of all the Bearbull portfolios can be found atwww.investorschronicle.co.uk/bearbull/ E-mail: bearbull@ft.comGlaxoSmithKlines best-selling product in India isnt a treatment for asthma or cancer. Its a maltedmilk drink called Horlicks. The brand is Indias top packaged beverage behind bottled water and sellsmore than twice as much as Pepsi. Glaxo, Britains biggest drugmaker, is seeking to replicate thatsuccess with other consumer products in emerging markets, including China, as it sheds over-the-counter medicine brands sold mostly in the US. Glaxos efforts to build on the Horlicks brand are partof a broader push into consumer products the company is making in places such as India, China, andLatin America. Emerging markets have become increasingly important to the British drugmakersstrategy as the European debt crisis puts downward pressure on pharmaceutical prices.Zubair Ahmeds true test as the India MD of GSK Consumer Healthcare came four years ago. Ahmedprevailed on its UK parent GlaxoSmithKline to think out of the box, something none of hispredecessors had dared to even try for decades. Making a conservative, British healthfood major allowits Indian subsidiary to get radical on a sacrosanct brand asset, Horlicks, was unthinkable. Ahmedpulled it off.Last August, as part of Ahmeds grand design, GSK extended Horlicks into unrelated terrain-instantnoodles-and launched HorlicksFoodles. The transition was not obvious. And it wasnt easy. BrandHorlicks stood for health and nutrition, noodles are everything but this. Inside and outside thecompany, the question was asked: is the company killing its golden goose? In 2010, Horlicksaccounted for 85% of the companys Rs 2,306 crore revenues."There was a knee-jerk reaction to the proposal, but Zubair made the management see reason in hisapparent madness," says a GSK insider."Once the concept of transitioning Horlicks into a megabrand due to its high equity became clear,there was tremendous support for this idea," says Ahmed. Foodles has already garnered a marketshare of around 6% in the South and East within six months of launch."What clinched it for us was the fact that we were addressing the same target group (that consumesHorlicks) and providing consumers with a range of healthier options under the Horlicks brand," addsAhmed. Foodles was just the start. In September 2010, GSK followed it up with a slew of launches in
  10. 10. the confectionery segment-premium biscuits, creams and cookies-under the umbrella brand. Thecompany, says sources, is now planning a foray into categories like breakfast and mid-day meals, alsounder Horlicks.GSKs adventure and great expectations are not limited to a hallowed brand like Horlicks. Other powerbrands in its portfolio-Eno, Crocin and Iodex-are in for similar experiments in India. The company haslined up innovations in these three products, primarily for the rural audience, says a company officialwho did not wish to be named.For GSK, the brand extensions mean more than just moving on from being a health-beverage makerto a company with FMCG aspirations. It signals a higher trajectory in its risk-taking ability.Traditionally, the company has been reluctant to scour spaces beyond health-milk beverages. Withreason. In the late-1990s, two of its new products - Aquafresh toothpaste and Ribena, a black currantdrink-bombed.With this new-found inclination to experiment, GSK is attempting to leave its conservative, middlingpast behind. A new, confident and aggressive GSK has emerged; one that is willing to try out newideas, even if it means taking a few failures in its stride. The company is "trying to optimiseunderleveraged brand assets," says Ahmed.Its looking to take on the biggest and the brightest in the FMCG space. Compared to them, it has asmaller distribution network and less experience in the new categories. "I cant see them (GSK)getting very large numbers in the newer categories," says the CEO of one of Indias largest consumergoods companies, requesting not to be named. "Some products will work for them, some will not."At the brand level, theres a fear that GSK will over-leverage the mother brand, Horlicks. Newproducts like noodles will draw heavily from it, but give back precious little. The refined flour (maida)in noodles makes mothers distrustful of the product, and this could end up diluting the flagship brand.Ahmed is unfazed. "Even before we extended Horlicks, we ensured its transition to a mega brandthrough a series of variants, such as Horlicks Women, Lite, Nutribar," he says. "What we are doing innew products is to also give the science behind Horlicks and not just another product."Foodles forms part of GSKs better for you sub-range, where taste is the primary driver, but healthplays a key role as a differentiator. "While Foodles borrows from the health equity of Horlicks, it buildsor adds back the taste equity to the mother brand," says Ahmed.
  11. 11. The thinking within GSK, says a company official, is that the Horlicks label, which new products rideon, will be phased out. Foodles, for instance, will shed the Horlicks prefix after a while. Eventually,GSKs strategy is to move beyond Horlicks, says ArnabMitra, analyst, IndiaInfoline. Its entry into widerfoods may pay off considering it is using the same umbrella brand - Horlicks - which carries thenutritional connotation, he adds.GSK is going full steam with its brand extension plans. A full-time team of ideation managers is inplace to generate new product ideas that can fit in with the companys power brands like Horlicks,Boost, Viva, Eno, Crocin and Iodex.This team, which has nine people across functions like marketing and design, has been picked fromvarious FMCG companies across industries. The company is cagey about sharing how the team works,except to say their only task is to understand consumer insights and ideate. Additionally, the companyhas 60 scientists.While this team is new, the ideation team has, in the past, developed ideas like Womens Horlicks.Ideas in the pipeline, though, are a closely-guarded secret.GSKs weak spot is distribution. Its retail coverage remains way below that of rivals HindustanUnilever Limited (HUL), ITC and Nestle. The company is banking on its new products to change that.HUL covers about 6.5 million outlets out of the 7.5 million outlets in India, according to an analyst,while Nestle reaches 3 million.ITCs FMCG arm reaches 2.5 million. By comparison, GSKs retail coverage (direct and indirect) isabout 800,000. And products like Foodles reach barely 250,000 outlets.Horlicks has traditionally been strong in the East and South, but categories like noodles, biscuits andtoothpaste require an equally strong retail network in the North and West, which is missing. GSKserviced the milk-deficient East and South well in the 1960s and 1970s, and built Horlicks as anutritional substitute.Over the years, the distribution network was beefed up there, while the North and West remainedunderserved. GSK is hoping new products such as noodles, cookies and nutribars will help Horlicksgain equity in these areas.ShubhajitSen, vice president (marketing), GSK, says to carry on a long-term growth trajectory, thecompany needs to extend to the North and West," says. "To an extent, we have been hampered byour product portfolio," he says. "But we believe that over the next three-five years, newer products
  12. 12. will play a significant role in our business strategy." In an aggressive go to market approach twoyears ago, GSK created a second layer of sub-distributors in smaller towns to supplement the existingchain of around 700 wholesalers and big distributors.Called project canvas, it led to GSK making inroads into towns it had no presence in before, likeAbhor and Moga in Punjab. The sub-distributors are smaller distributors appointed with the largedistributors help. The idea is to increase retail reach by at least 30%, says NavneetSaluja, salesdirector of GSK.GSK also has big plans for the rural market, which accounts for about 30% of overall sales. Thecompany is present in 30% of the rural market and hopes to extend this to 40% to 45% in a fewyears. "All the GSK brands, be it nutritionals (Horlicks) or OTC ones (Eno, Crocin, Iodex) are players incategories relevant for the rural market," says Ahmed.The company is conducting consumer insight studies for ideas on new product and delivery formats forthe rural audience. For instance, Eno, which is essentially an indigestion and acidity-relief Ayurvedicsolution, could be looked at to develop products for other gastrointestinal ailments. "Theres adiscussion on the possibility of launching fizzy Eno in a ready-to-drink format," says an official whorequested not to be named.Similarly, Crocin would be made available in other product formats that have a high degree offamiliarity among the rural audience, such as traditional home-made potions used in rural homes forcold relief. "At the first stage of this initiative, we are making our current brands and conceptsavailable in low-cash ring packs like sachets and dibbis," says Ahmed.For high-end customers, the company is trying out a mix of launches from the parents globalportfolio. Sports drink Lucozade and Sensodyne toothpaste are two recent launches, while smokecontrol brands, NiQuitin and Alli in the weight management category are in the pipeline.While GSKs entry into newer categories is logical, the challenge will be to grow big within them.Sustaining the initial momentum in terms of market share and national distribution has been a toughtest for GSK so far, say analysts. "Its not difficult to gain initial market share," says ArnabMitra ofIndiaInfoline."But to keep growing in competitive categories like the ones they have entered now and to cross 8-10% market share will be the challenge."
  13. 13. Some of GSKs new launches are either showing signs of fatigue or require sustained investments,says a recent report by ManojMenon, FMCG analyst at brokerage firm Kotak Securities. Two recentfailures make this a tricky line to pursue. HorlicksAsha, launched two years ago for the bottom-of-the-pyramid (BoP) audience, has failed to make a mark and is being withdrawn. Similarly, Horlicks forayinto chilled/flavoured milk, a year ago, came a cropper and has been discontinued.While it is easy to develop products targeted at a BoP audience, the company needs to build a mindsetto serve them, say analysts. "You have to have a focused strategy and not tweak a product tohammer down the cost and release it in the same distribution pipeline as other products," says abrand analyst who has worked in senior marketing positions.HorlicksAsha caused dissonance in the mind of BoP consumers, admits an insider. "They saw it as astripped-down version of Horlicks, priced lower and that was not acceptable to them," he says. Ahmedagrees the companys BoP strategy needs a fresh look.Chilled milk, on the other hand, posed another big challenge for GSK. The category itself has notmanaged to take off in India. Players such as Nestle and Britannia, which experimented with it, havenot had much success either. AmulsKool too has not made much headway."Getting kids to drink milk has always been mission impossible, says Ahmed. "Where motherssupervision doesnt work, flavoured milk was actually meant to be had on the go, unsupervised," headds.Top-end products such as Sensodyne toothpaste, Lucozade and health supplements are yet to take offin a big way and will remain niche.The company has had its share of disappointments in the late-1990s too, when it launched a familytoothpaste, Aquafresh, and a black currant-based fruit drink called Ribena as its first diversification. Inboth cases, the choice of products turned out to be wrong. The family toothpaste segment was highlycompetitive, with entrenched players like HUL and Colgate. Ribena was ahead of its time, and a non-starter.Fighting to get a toe-hold in the toothpaste segment meant GSK diverting all its resources fromHorlicks. Aquafresh and Ribena were withdrawn in 2001.In 2000, GlaxoWellcome and SmithKline Beecham merged to form GlaxoSmithKline. In its new avatar,the Indian arm hurriedly pulled new products off the shelf and decided to focus on Horlicks. Havingburnt its fingers, GSK saw a long period of lull and no innovation. GSKs aversion to risk partly
  14. 14. emanated from the fact that for over two decades, it was run by the same conservative leadership.Nick Massey, who came on board as MD in 1995, did try to bring in some vibrancy, but that wasmainly limited to Horlicks.Four years ago, Ahmed moved to GSK from P&G Gillette India. He brought with him some fresh, out-of-the-box ideas -- and the element of risk -- into GSK. Under his watch, revenues have increased at acompounded annual growth rate (CAGR) of 17.5% and net profit at 24.2%; good enough to fetch anybusiness leader a plum global posting in reward.At GSKs headquarters in Gurgaon, a sense of optimism and raw energy fill the air. The sleepy, stodgylook of the early-2000s has given way to a vibrant facade -TV monitors are blaring everywhere, thereare open announcements of employee achievements, and the companys freshly packaged productsare strewn everywhere.With a striking performance and value creation, Ahmed has delivered so far. Yet, how he goes down inGSKs chronicles might well pivot from how his grand superbrand strategy plays out.Copyright Bennett, Coleman & Company Limited Feb 3, 2011Word count: 2083

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