1. Discuss the key issues in
the Horlicks Case
10/13/2014
Sumit Arora (FT153107)
Section B

2. Introduction
Horlicks,a maltedmilkdrink,isaflagshipproductof GlaxoSmithKline Consumer Healthcare (GSK) a
subsidiary of GlaxoSmithKline plc. of UK, a global science based healthcare company. It was first
invented to substitute milk as baby food. GSK Consumer Healthcare has a robust distribution and
marketingnetworkencompassingaround700 distributorswhichcoversover 8 lakh outlets. Horlicks
is the cash cow for GSK India which dominates at the bottom left quadrant on BCG matrix. Other
products produced and marketed by GSK include Maltova, Boost, Viva, that serves a different
marketaltogether.Healthdrinkportfolio continues to hold around 60% of market share (GSK Press
release,2014). Barriersto entrycreatedby GlaxoSmithKline Consumer Healthcare prevented other
strong players such as Dabur and Nesle from selling their products.
By effectively propelling variants at distinctive focuses in time, GSK has reinforced its core brand
values, addressed new customer needs and consequently brought such buyers into its fold. Zubair
Ahmed,IndiaMD GSK ConsumerHealthcare,came in 2007 who implemented innovative strategies
whichrevampedcompany’s conservative style of thinking. He made significant changes to Horlicks
productline,productportfolioandmarketingstrategies which went through initial resistance from
highermanagement.GSKhassince invested in consumer research and strategies to improve brand
awareness and brand image. Horlicks has been gradually introducing brand and line extensions to
keep itself relevant. Horlicks Lite, Biscuits and Cereal bars (Horlicks Nutribar) were introduced,
followed by Horlicks Foodles, Horlicks Oats.
"We were alreadyapart of the morningmenuwith milk. Now we are growing in our presence with
various extensions and adjacents," says Ahmed
Thisis notto say that Horlickshasbeendisregarding its core business. The malt-food drink has also
been pushed to aim diverse consumer sets - from Junior Horlicks, Horlicks Women to the most
recent premium variant Horlicks Gold, with considerable success.
Product Line Extension
When customer awareness of a brand is very high, it gets identified with the parent category, and
therefore gets difficult to diversify. So, diversifying Horlicks is not easy. But diversifying it into
categories in the immediate neighbourhood might be easier than diversifying it into distant ones.
Horlickshave beentryingtobuild Consumerbasedbrand equity so that knowledgeaboutthe brand
can be increased. Sales figures of different variants of Horlicks (Mother's Horlicks, Horlicks Lite,
Junior Horlicks, etc) have shown significant growth.
Brand Extension
Extensionsbeyondthat into new categories like biscuits, oats have always been difficult given the
brand's equity.Thus,Horlicksintensiontoextendintofoodsectorneedsmore careful interrogation.
Productslike HorlicksBiscuits,Horlicks Oats, NutriBar, Chill Dood were few products launched into
different category than malted beverage which fail to fetch as much acceptance as the Horlicks
flagship products.

3. How customers evaluate a brand extension
 Consumer’sattitude towardsthe brand
 Strengthof brand associations
 Brand Image
 Non-productrelatedattributeslike price,packaging,userimagery,usage imagery
 Perceivedqualityof motherbrand
 Brand loyalty
 Trust inbrand competence innew category
 Logical fitin newcategory
Beloware fewadvantages of brand extension
Lofus and Lofus in 1980 said ‘Cognitive psychologists believe memory is extremely durable, so that
once information becomes stored in memory its strength of association decays very slowly.’
Marketers leverage this to strategically increase brand awareness and brand recall by diversifying
intodifferent unrelated product categories. Each product has its own target segment, thus, selling
products across different target group will increase brand awareness and accessibility across the
population.
 Brand Awareness– Parent brand can be used while promoting the extended brand to help
increase awareness of the new product. eg. Name Horlicks has been kept with all the new
extensions by GSK so that customer can relate the health benefits of parent brand to the
new products.

4.  Brand Accessibility –The numberof time the customer is exposed to the brand greater will
be brand recall.Thus,if the brand has been diversified into different product categories, it
will be betteraccessible/visibletocustomers/future customers. This is not an alternative to
advertising; however, this considerably improves brand recall.
 Consumer Trust – The goodwill and image of the parent brand helps in pitching the
extended brand as a compelling value proposition. Customers that are happy about the
parent brand will be willing to try out extended products.
 Cost Benefits - The newproductwill getafree publicityascustomersmostlyknow aboutthe
brand. This help to significantly reduce the advertisement budget and branding cost.
 AttackingStrategy – Extensionwillprevent competitors to gain complete market share due
to presence of your products in different product segments.
Below are few disadvantages of Brand Extension
 Wasted Effort – Lots of R&D go waste once the brand don’t pick after being launched. Thus
the company should do a proper market research before venturing into new product
categories.
 Long term dilution of mother brand – Many experts believed that Horlicks foray into the
noodles segment might dilute its brand value as connecting noodles with healthy Horlicks
brand will bringindistrustaboutthe brandto consumers.Horlicksimmediatelyrealised that
and run a campaigns showing AD benefits of foodles like – 9 vitamins and the more
nourishing noodles
.
 Cannibalization–Newproductswithinthe same brandcanreduce the sale of parent brands
as customermight try out new variant instead of the parent product. If the customer is not
happy with the child product, it can also lead to customer switching away from the parent
brand.

5. Suggestionsfor improvingbrand awareness and salesin differentcategories
 Needtotarget northand east
 Target BOP category
 Enter alliedfoodandbeveragecategories
 Providingnutritionthroughsingleserve lowunitprice packs
 Accessingnewcustomersinrural andin emergingconsumerclassinurbanIndia
 ELM model – Since the receiverof the advertisementcanbe distractedbycompetitorsAD
and there ishighprobabilityof brandswitching.Thus peripheral route of advertisement
shouldbe usedtopromote Horlicks.
 Focuson hedonicbenefits of productto gainadvantage overcompetitors.
References
 http://www.business-standard.com/article/management/stretching-the-horlicks-core-
111111100016_1.html
 http://www.zenithresearch.org.in/images/stories/pdf/2011/Oct/EIJMMS/6.excel_vol-
1_issue-1.pdf
 http://articles.economictimes.indiatimes.com/2003-07-30/news/27566635_1_horlicks-nick-
massey-brand-equity/3
 http://en.wikipedia.org/wiki/GlaxoSmithKline
 http://www.mbaskool.com/business-articles/marketing/5195-should-horlicks-extend-to-
new-catagories.html