GSK tests cheaper Horlicks avatar for rural India consumers

GSK tests cheaper Horlicks avatar for rural India consumers

Chennai: When R. Ramakrishnan returned to India after a stint with GlaxoSmithKline Consumer Healthcare (GSKCH) in Indonesia, his new role required him to sometimes get to work unshaven, in an untucked, half-sleeved shirt and casual shoes.

The marketing manager has been overseeing GSKCH’s gamble in rural Andhra Pradesh with a variant of its flagship Horlicks drink. This variant, named Asha from Horlicks, tastes slightly different and is priced at Rs85 for a 500g pack, or close to half the price of the original.

The product’s potential is acknowledged by the company’s key competitor.

“If Asha does succeed, it will be a game changer," says Sanjay Purohit, executive director, marketing, for Cadbury India Ltd, which sells Bournvita, the main rival to Horlicks, India’s No. 1 milk food drink with a nationwide presence in about 780,000 outlets.

The GSKCH product gets 30-35% of its sales from rural areas, but to sustain its 21% jump to Rs1,542 crore in 2008 sales—a rate that would ensure doubling of sales in four years—it is imperative to enter smaller markets and multiply store count to 1.4 million.

Over 18 months, Ramakrishnan’s team worked to create a product that would be an alternative to consumers of local cereal mixes of uncertain quality such as ragi or finger millet malt and satoo—a porridge mix of oats, barley and millet.

“Understanding the rural consumers starts from the way you dress," says Ramakrishnan, who spent several weeks in rural Andhra Pradesh to understand consumer habits. “And while it would have been difficult to reach out to consumers in their homes, talking to women via microfinance groups helped break the initial barrier."

Hyderabad-based SKS Microfinance, the largest microfinance institution (MFI) in India, distributed about 75,000 Asha from Horlicks samples for an undisclosed fee via 16 of its branches across Andhra Pradesh. Consumer goods companies have of late been approaching MFIs, established primarily to lend small sums to poor women, as a rural distribution avenue because of their reach. “One of the biggest fears is a backlash or cannibalization, in which case the variant could become a low-priced alternative to the parent brand," says Ashish Potdar, a brand adviser at Market-Gate Consulting. “One way to avoid this is to have differentiated communication."

GlaxoSmithKline (GSK) has used street plays and cinema screenings to get villagers to taste the product. The firm, which also sells health drinks Boost and Maltova, participated in about 60 village fairs across Andhra Pradesh to generate awareness about the brand. Horlicks has a 53% share of the Rs2,000 crore milk food beverage market in India, with Cadbury’s Bournvita coming second with 16%, according to research group Nielsen Co. Horlicks dominates the south while Bournvita’s strongholds are in the north and west.

Purohit says that instead of targeting rural users for Bournvita in say Uttar Pradesh or Maharashtra, Cadbury aims to grow frequency and penetration in urban markets via launches such as last year’s Rs20 Bournvita pack. He perceives the rural market for milk food drinks as small and not worth spending big money on it yet. The concept may not work as well in the north as in the south, according to an analyst.

“Horlicks is a top brand and if you are offering it for a cheaper price, it is a brilliant proposition," says Anand Shah, an Angel Broking analyst. “Finding success in the rural south shouldn’t be a problem since the brand is entrenched in this region, but going pan-India will be difficult."

For GSK, the idea is to get rural consumers to buy Horlicks on special occasions, say four times a year, and to buy Asha at least six to eight times a year. “It is a bit like using shaving blades; the high-end razor that you may use for the special marriage day but on a day-to-day basis you will use a cheaper blade," says Shubhajit Sen, executive director of marketing for GSKCH.

Sen’s razor analogy isn’t surprising, considering the company’s managing director of more than two years, Zubair Ahmed, was the former head of Gillette India Ltd, now a part of consumer goods company Procter and Gamble India Ltd.

Ahmed has been credited with charting a high-growth path for the firm with a slew of launches, including this year’s introductions—snack bar Horlicks Nutribar and ready-to-drink flavoured milk Chill Dood. About two weeks ago, Asha from Horlicks was extended beyond Andhra Pradesh to Karnataka. If the experiments in the two states yield positive results, including proving that it doesn’t eat into the parent brand’s sales, it will be rolled out nationwide in about six months to a year.