Should Horlicks Extend to New Categories?

Vaibhav Bansal - 056/02

Horlicks is one of the most popular brands in the Indian society and is a market leader in white beverages segment leading by a big margin from other players. It generates around 85 percent of the revenue for GSK Consumer. The company marketing strategy of positioning Horlicks as a drink which is amalgamation of health and taste has worked wonders and has transformed the brand image as an enjoyable, fun and healthy drink from the traditional health drink recommended by doctors. The core values of the strong brand equity of Horlicks lies in nutrition and health. Due to such a long presence in Indian market, Horlicks has also won the trust of the Indian consumers. This along with well though marketing strategy and strong advertising has positioned the brand as a premium health drink with great taste. Hence the valuation of brand has exceeded 1000 crores The companys decision to diversify into other categories using brand extension is a logical move looking at the tough competition faced by them. Also the diversification should be easy as long as the image of healthy brand is in the focus of the brand extension strategy. However the extension should be properly planned and shouldnt be done in haste as this can lead to tarnishing of brand image and also there is no sense of urgency to do so. The brand should only extend into the healthy product segment like milk biscuits etc and not into the products like instant noodles as it will be a clear divergence from the core values of the brand and will create a customer disconnect leading to diminishing brand image. This argument can be bolstered by the fact that Horlicks was able to capture the market by launching Junior Horlicks and Horlicks for pregnant women which had the same core values as the original Horlicks and met with decent success. The success can also attributed to the fact that the move was gradual and was well thought out. Also the company shouldnt extend into segments where the customers are not looking for their core values of health and nutrition like carbonated drinks or sauces. Horlicks should be first extended into healthy drinks segment like ice tea or juices or packed flavoured milk. After this the brand should extend into other FMCG segments like biscuits where the trend of healthy biscuits is gaining momentum. This move will help the company to enter into other FMCG products as well at some later point of time. The long term goal of the company should be to make Horlicks as an umbrella brand for all the healthy edible products in the market. For that proper market strategy should be planned and not rushed into as it can tarnish the image of old Horlicks as well. The company can also follow of strategy of creating multiple power brands by pulling the Horlicks brand out once the decent market share is achieved in the healthy products which do not come under healthy product category. In this way the company will be able to leverage the brand image of Horlicks to create other power brands in different product category but still keeping the core value of health and nutrition intact.

But GSK needs to cross several roadblocks in order to do that. The company has a poor distribution network catering to only 800,000 thousand outlets in India. In order to make theor product available for consumption for the masses GSK needs to have a better market penetration and a wider distribution network. This can lead to increase in price of the product which needs to be taken care of as the FMCG market is highly competitive. Also the recent failure of Horlicks Asha and chilled drink can act as a learning experience for the company. Concluding, I support the extension of Horlicks into other categories as long as the core value of health and nutrition is intact. Any product which does not support their core value shouldnt be extended into. Also the increase in health consciousness of the people should be an advantage for the company but poor distribution network if not improved can be detrimental for the company as well. Hence GSK needs to upgrade the level of distribution network for better market penetration and stronger brand equity of the Horlicks brand.