GSK Consumer: looking beyond Horlicks, again
GSK Consumer Healthcare Ltd, the maker of Horlicks, is making another attempt to diversify. The company is set to launch Horlicks Protein+, a protein supplement aimed at working men, reports Mint. The category has potential. It is estimated to have a market worth Rs700 crore and is said to be growing faster than the overall health food drinks segment where GSK’s Horlicks has a dominant presence.
What’s more, the product is expected be priced competitively. Motilal Oswal Securities Ltd’s interaction with GSK management indicated that the product is expected to be priced lower than market leader Danone’s Protinex.
The development comes on the heels of a management change and quarterly results commentary where GSK stressed growth-reviving measures such as expansion in product portfolio and market reach. “There is clear focus by new management to increase penetration and execution capabilities,” Edelweiss Securities Ltd said in a note.
The product launches and the commentary do provide confidence to investors who otherwise are tired of listless sales in recent quarters (see chart). After underperforming the broader markets for three years, the stock also began gaining positive momentum from the beginning of the current fiscal year.
But benefits from the recent developments may be a long-drawn process. The proteins segment has well entrenched participants with dominating market shares. Gaining a foothold in the segment can be a time-consuming exercise as GSK will have to build the business. This can drive up the expenses in the initial phase.
The most important bit is gaining consumer acceptance. Despite being able to catch its consumers at an early age, Horlicks, as with the case with several other firms, has been unable to hold on to them beyond 12-13 years with other products.
“While companies like Mondelez (Cadbury’s) have been successful (in the chocolates and confectionary business) in upgrading their image from a kids-only to an all-ages brand, GSK Consumer (Horlicks and Boost), Heinz (Complan) and even Mondelez (Bournvita) have been less successful in doing so,” Motilal Oswal said in a note in the context of changing advertising norms and constraints.
GSK will have to transcend perception barriers to gain durable success. Its earlier attempts were met with limited success in other segments such as oats, noodles and biscuits, though product extensions such as Women’s Horlicks did well.
Of course, the mother brand Horlicks will help gain consumer attention. But achieving lasting success with notable market share will be crucial in the long run. That will give GSK the pricing power and yield earnings benefits for investors, who otherwise are likely to see elevated expenses in the near term.