Case Study Horlicks

Executive Summary: -

The case study is about the Horlicks Company. The researcher has explained how strategic
marketing techniques are used to identify growth opportunities in the market and how to
plan marketing strategies.

The researcher has used PORTER’s 5 Forces analysis to understand the external as well as
the internal factors that may affect the company. The researcher has also used the SWOT
analysis to understand the key strengths and weaknesses of the Horlicks Company and
emerging opportunities for the company. Researcher has used Porter’s Growth strategies
while proposing way forward for the Horlicks

Learning Outcome 03: Be able to use strategic marketing techniques

3.1 Use appropriate marketing techniques to ascertain growth opportunities in a market
3.2 Plan how to use marketing strategy options in a market
3.3 Create appropriate strategic marketing objectives for a market

Learning Outcome 04 : Be able to respond to changes in the marketing environment

4.1 Report on the impact of changes in the external environment on a marketing strategy
4.2 Conduct an internal analysis to identify current strengths and weaknesses in a marketing
strategy
4.3 Propose strategic marketing responses to key emerging themes in a marketing strategy
Introduction

In 1873, James Horlick, a pharmacist with his brother William established a company J&W
Horlicks in Chicago, USA to manufacture a “Malted Milk Drink”, which claimed to promote
sleep. In 1883 they got patent for this product. Horlicks was thus the first invented to
substitute milk baby food. In 1890 the product was imported the united kingdom and later a
factory was established in Slough, Berkshire, England.

Horlicks became popular during the world wars I&II. The drink became popular at home and
the battle front. In world war II, Horlicks tablets were sold as candy, used as an energy booster
by US, UK and other soldiers.

Coming to India, Horlicks bottles were imported and sold, This was during 1930’s. In the later
part of 1958, a plant was set up, and was named Hindustan Milk Food Manufacturers. After
this the company was acquired by Beecham which later became Smithkline Beecham and
finally Glaxo Smithkine Beecham consumer Health Care Ltd.

Facts – Horlicks India

 Horlicks was first invented to substitute milk as baby food

  The brand has been endorsed by Amitabh Banchan on Radio ( 1960-70). Moon Moon
Sen and her daughters Rahima and Riya (1980) and Vishwanathan Anand
 In India, over 2 Billion cups of Horlicks are drunk every year!
 Biggest market in India
 6th Most trusted brand in India ( A.C. Nielsen)
 About 50% market share in health drink market

Horlicks Market Share in India

As per Euromonitor, the market size for the Indian health food drinks (malt-based health drink
and supplemental health drink) is of the order of Rs 9,600 crore wherein brands (Horlicks and
Boost) dominate the category with about 49 percent share in trade volume terms.

This is a bit divergent from GSK Consumer Healthcare’s annual reports where the company
claims 64.4 and 56.3 percent share in Health Food Drinks category in volume and value terms.

However, looking at market share trends from company’s annual reports, one finds that share
has shrunk over the years. Weak market standing can also be implied by the GSK consumer
healthcare’s revenue trajectory which has remained stagnant for last four years.
Euromonitor’s findings suggest that market is getting increasingly fragmented as the
competition heats up.
Table: India Health Food Drink market share

Source: Euromonitor

https://www.moneycontrol.com/news/business/moneycontrol-research/horlicks-a-
potential-nutrient-fit-for-a-select-fmcg-giants-2641541.html

3.1 Use appropriate marketing techniques to ascertain growth opportunities in a market

Marketing Mix is a tool used by the organizations to formulate products or services for
customers. Marketing mix is done by using 4Ps of marketing which are, product, place, price,
promotion. The marketing mix helps an organization how to mix various elements of the 4Ps
in order to make a relevant product for the customer.

The main objective of marketing mix strategy is to make the right product at right price at the
right place with right promotion.
Horlicks Marketing Mix Strategies

Horlicks Marketing Mix strategies have evolved over a period of time in response to changing
marketing conditions

Product Mix and Positioning

 Horlicks went for revamp in 2003 from boarding nutritional drink, it was positioned
as “Pleasurable nourishment”, by launching it in Vanilla, chocolate and honey
variants
 New positioning strategy adopted via product packaging which now carry a logo
saying – “Now Proven – Taller, Stronger, Sharper”. Even since the re-positioning
Horlicks has grown

STP Strategy

Thus, Horlicks is offering products and its variants to all age groups considering their needs

 Junior Horlicks – a 150 crore brand has positioned a product exclusively for children
between the ages 2-5 years
 Horlicks lite - for the elderly who often have sure problem
 Nutribar – targeted towards Youth, with positioning “Health and Convenience”
 Women’s Horlics and Mother’s Horlicks – with specific composition for women
consumers
 Chill Dood – an instant milkshake in the dairy based market
 Horlicks Foodles – Horlicks eneterd 1000 crocr instant noodles market launching
Horlicks Foodles with nutrition and goodness of wheat

Price
 Horlicks as a brand name represents quality to the consumers. This is the reason
why the company has decided to follow value added pricing policy. The consumers
are guaranteed to get their money’s worth and as the nutritional capacity of the
 drink is much higher than those of other drinks, the consumers do not hesitate to
make it their final choice.
Packaging
 Horlicks visuals identity has undergone a complete makeover. The packaging of its
various segments products was designed according to the target customers
Place /Distribution

 Horlicks excels in its distribution network. It reaches the rural market in depth.
Horlicks is flourished in more than 25% of the rural market and moving on

Advertising and Promotion

 The brand strengthens its market position with the power of advertisement and
distribution network. Horlicks is involved in promoting events, organising shows
(Wizkids), Clinical trials, advertisement and involvement in social activities
 Horlick introduced vending Machines via Nutritional Food Services Division
established in July 2003 to extend the availability of nutritional brands such as
Horlicks and Boost. Vending machine was identified as one of the important sources
to make them conveniently available “out of home”. Vending machines have been
placed at institutions such as Corporates, Schools and Hospitals, at cities across the
country. These trendy machines offer frothy great tasting cup of Horlicks and Boost
in attractive cups on the go.

3.2 Plan how to use marketing strategy options in a market

Porters Growth strategies options:

Marketing strategic options can be explained by using the Porter’s generic strategies. Porter
has suggested four generic Growth strategies that could be adopted by the organizations in
order to survive and gain competitive advantage in the market.
1. Cost Leadership Strategy: -

It is based on the concept that the organization can produce and market a good quality
product in lower cost than what the other competitors are offering. The objective of this
strategy is to become low-cost producer, in order to become that the organization has to have
high level of productivity, easy production methods, etc.

In case of Horlicks, Horlicks used as nutritional product for kids to adult. It is a premium
product. Despite that it is priced very competitively. Horlicks follows value added pricing in its
marketing mix. As product gives health benefits to consumer so, consumer ready to gives
money for its value. Discount is given on Horlicks depend on place of the sale as bulk buying
and volume influence such decision. Horlicks 500gm jar cost is rs.230 whereas Boost costs
rs.255. in this industry Pediasure chocolate drink is most expensive product in this category.
Junior Horlicks is more expensive than standard Horlicks as it contain high nutrients required
for growth and development. Mother’s Horlicks is little expensive, as it create specific needs
of mother in every stage of her pregnancy

2. Focus Strategy:-

It is based on the concept of serving a particular target that others cannot compete. Usually
this means addressing a smaller market segment than others in the industry, but because of
minimal competition, profit margins can be very high.

Horlicks used STP strategy to ensure customer focus and offered products and its variants to
all age groups considering their needs
  Junior Horlicks – a 150 crore brand has positioned a product exclusively for children
between the ages 2-5 years
 Horlicks lite - for the elderly who often have sure problem
 Nutribar – targeted towards Youth, with positioning “Health and Convenience”
 Women’s Horlics and Mother’s Horlicks – with specific composition for women
consumers
 Chill Dood – an instant milkshake in the dairy based market
 Horlicks Foodles – Horlicks eneterd 1000 crocr instant noodles market launching
Horlicks Foodles with nutrition and goodness of wheat

3. Differentiation Strategy: -

The effect of the differentiation strategy can be on the brand image, special features,
technology, and superior service. This uniqueness can be translate into more profits than the
other competitors.

Horlicks went for revamp in 2003 from boarding nutritional drink, it was positioned as
“Pleasurable nourishment”, by launching it in Vanilla, chocolate and honey variants

New positioning strategy adopted via product packaging which now carry a logo saying –
“Now Proven – Taller, Stronger, Sharper”. Even since the re-positioning Horlicks has grown

Horlicks always have maintained their quality and have kept prices to ensure that customer
favours them value for money.

4. Competitive Advantage: -

The competitive advantage helps an organization to survive in the market and grow further
in the market. To have a competitive advantage in the market the organization must have
some unique features of their product that will attract more customers towards them which
will result into more profit for the organization.

Horlicks has used their Marketing Mix strategies very tactfully to ensure that they stand out
in the competition as most favoured brand, which they have been.

3.3 Create appropriate strategic marketing objectives for a market

Strategic marketing objectives means a set of goals and objectives created by the organization
when they are marketing or promoting their products and services to attract the potential
customers which should be completed within given period of time. The marketing objectives
for any organization should include how to increase the product or service awareness in the
targeted customers, by making targeted audience aware of the features of the product and
services.
The strategic marketing objectives for Horlicks can be as follows: - For GSK or even new
buyer

1. To understand changing demands of the customers and develop new product or feature to
meet their demands which will result into increase in the profit and the market share of the
company.

2. To expand in to rural Indian markets, currently Horlicks is sold only in urban markets in
India

3. To keep the price range of the product in such a way that customers should not hesitate to
buy the product. Fair price range for the product can increase the profit and market share for
the company.

4,To increase the market share, the company needs to adapt new promoting techniques to
attract more customer base for their products

If Horlicks gets sold to HUL – All above strategic marketing objectives would need to be
redefined

4.1 Report on the impact of changes in the external environment on a marketing strategy

Porter’s Five Forces Model:-

Porter’s Five Forces Model is a tool which was created by Prof. Michel Porter from Harvard
Business School. It helps to identify and analyze the five competitive forces and also to
determine the strengths and weaknesses of an industry.

Porter’s Five Forces Model includes the following forces: -

1. Industry Competition: -

This force helps to understand the number of the competitors already competing in that
particular industry. It also helps to detect the how many numbers of similar products and
services they are offering. If the industry has a great chance of making profit but the barriers
to enter into that industry are very few then the rivalry will soon arrive.

 Horlicks has to face strong competition from the likes of Cadbury’s Bournvita, Milo,
Complan and Maltova. Intense competition affects market share and revenue.

2. Buyer’s Bargaining Power:-

This force shows that the buyers can demand for a better product as well as the lower price
for the product. Buyers have the strong bargaining power when there are many substitutes
for the same product and also when there are only few buyers exists. When there are many
sellers and only few buyers, the bargaining power of buyers to demand the lower price for
the product increases.
 Horlicks enjoys large market share and is also has number of variants addressing
needs of different consumer segments. Horlicks is seen as quality brand giving value
for money. However, there are number competitive similar and substitute product
categories entering in market, hence buyer’s bargaining power can be considered as
moderate

3. Supplier’s Bargaining Power: -

This force shows that when there are only few suppliers for the required material exists
then the demand of the suppliers’ increases. When the switching cost of the one supplier’s
product to another supplier’s is very high then also the bargaining power of the suppliers
remains high. Also, the quality of the raw material provided by the supplier can increase the
bargaining power. Also, when there are few substitutes to the raw material required then
the bargaining power of supplier increases

 Horlicks has perhaps the best supply and conveyance systems. It has in excess of 600
merchants and 5000+ sub-wholesaler. It is accessible in more than 1.5 million outlets

4. Threat of Substitutes: -

This force shows that when there are many substitute products are available in the market
then the threat of replacing the one’s product is very high. This force also shows that when
the buyers can find the similar product with better quality and attractive price they can
switch to that product or service for very little cost

 There is a threat of consumers moving from malted drinks products to other healthy
nutrition drinks like natural or packaged juices, processed milk etc.

5. Threat of New Entrants: -

Threat of new entry- This is the entry of new competitors and the threats they impose on
the market share of the organization. This involves the time and cost of the entry of the
competitor, the knowledge about their products, the economies of scale or the value for
volume of products sold, assessment of cost advantage and creating barriers to entry.

 There are other healthy nutrition drinks like natural or packaged juices, processed
milk etc. are entering in the market

Challenges – category expanding beyond nutrient drink

Over the period growth in health drink category has slowed down. From the double-digit
growth witnessed a few years back for both malt-based drinks and supplement nutrition
drinks, growth is now near high single digit. The market faces challenges in terms of growing
competition, varied consumer preferences, health food drink substitutes and distribution
reach. In order to cater to the latent demand, consumer, pharma, and ayurvedic companies
have upped the ante by providing premium variants of health drinks addressing protein
needs, specific age group requirements, heart and diabetic ailments.

In recent times, Patanjali has entered this market as a discount player with its brand, Power
Vita, though pricing discount of about 10 percent doesn’t seem too disruptive in nature.
Further, Nestle has re-entered the market with its brand, Milo and Danone and Sri Sri have
launched new brands. Meanwhile, Abbott has worked with the medical fraternity to generate
favorable opinion for its protein rich supplement Pediasure.

There is new development at GSK, who is reforming their product strategies and plan to “drive
increased focus on over-the-counter (OTC) and oral health categories". This portfolio includes
Sensodyne toothpaste, Eno antacid, Panadol headache tablets, muscle gel Voltaren and
Nicotinell patches, among others. Hence, they are considering to sell Horlicks to interested
buyers. Understand HUL is likely to buy out Horlicks in coming future

4.2 Conduct an internal analysis to identify current strengths and weaknesses in a marketing
Strategy

Swot Analysis

SWOT stand for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis is done
by the organization in order to find their strength, weakness, opportunity and threats in the
market they are about to enter or are already in that market. SWOT analysis helps an
organization to plan their strategy while keeping in mind their strengths and weaknesses. It
helps an organization to focus on their goals and objectives. SWOT analysis helps an
organization to come up with alternative strategies to face their problem based on their
strengths and weaknesses.

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 Strengths
 Strong Distribution Network: Horlicks is driven by the strong distribution network
of GSK which helps it penetrate the market and reach out to urban as well as rural
consumers.
 Strong Market Share in countries present: Horlicks is the leading player in the
category in countries like UK and India wherein Horlicks enjoy over 45% of market
share. Such strong market share provides high revenue and cash flow for the
company.
 Multiple offering according to target group: Horlicks has different products for
different target groups. Horlicks has offerings for Kids, mothers and women. This
increases its customer base and also strategically helps Horlicks.
 Multiple variants: Horlicks offers multiple variants which also target different
segments. Its offerings vary geographically, for example, it has a special Badam
Kesar (Almond-Saffron) offering for the Indian market.
  GSK as a parent company: Horlicks comes from the armoury of GSK consumer
products. GSK supports the brand in its distribution and also provides strong
financial support.

Weaknesses
 Low global presence: Horlicks has the low presence worldwide being present in
only 13 countries. It is concentrated only on its present markets and loses out on
opportunities in other markets.
 Over dependent on some countries: Horlicks has a high presence in countries like
India and UK which contribute a major part of its revenue. This shows that Horlicks
is over dependent on these countries and any economic, political or social change in
these countries can affect Horlicks and its business.
Opportunity

 Global Expansion: Horlicks should look for expanding in countries in Europe and
America especially in countries where GSK products are highly penetrated. This can
help increase revenue and expand the customer base.
 Increase penetration in emerging Markets: The consumption pattern in emerging
economies is changing. With changing lifestyle and increased disposable incomes,
emerging economies bring opportunities for the company to expand in the future.
 Product line expansion: Horlicks has been able to garner trust from children and
their mothers. This can help Horlicks bring out new health-centric products. Horlicks
can take advantage of its image to bring out new products which can help increase
revenue.

Threats
 Intense competition: Horlicks has to face strong competition from the likes
of Cadbury’s Bournvita, Milo, Complan and Maltova. Intense competition affects
market share and revenue.
 Other Nutrition Drinks: There is a threat of consumers moving from malted drinks
products to other healthy nutrition drinks like natural or packaged juices, processed
milk etc.
 Cannibalization: Boost is one product that GSK offers in the same category
especially targeting kids who love chocolate flavor. Boost cannibalises the market of
Horlicks.

4.3 Propose strategic marketing responses to key emerging themes in a marketing strategy
Leveraging large customer base - Indian population is huge and it is on increase. Indian
economy is also flourishing with increased middle class having good purchasing power.
STP strategy - Horlicks have already adopted STP strategy and have introduced Horlicks
variants to address needs of each segment.
Brand Loyalty programmes - The new class of consumers, with increased health orientation
can be lured and build large loyal customer base.
Leveraging brand equity – “Value for money” and “Good Quality product from Reputed
company “
Attracting teen agers – with positioning stance - “Now Proven – Taller, Stronger, Sharper”
Market Penetration Strategy – with affordable prices and quality, they should come up with
attractive promotion offers.
Emotional Mind Games - People in India are quite emotional, if Horlicks gives emotional
touch to their advertisement it also helps to capture a market in India.
Changing hands of Horlicks Ownership from GSK to HUL – this can prove to be game
changer since HUL has already number of successful FMCG brands and Horlicks could carry
on legacy of the same