KEY ISSUES IN THE HORLICKS CASE

Horlicks, a malt based drink, is a flagship product of GlaxoSmithKline Consumer Healthcare,

a UK based healthcare company. It was invented by James and William Horlick in 1873 (in

Chicago) as a substitute for baby food. The drink, started as a hot healthy drink for kids,

became a staple for intrepid explorers supporting brave expeditions to the polls. When war

broke out across Europe, it was sent to the frontline as a nutritious drink for soldiers. When

the Summer Olympics came to London, athletes drank it for its nutritional benefits. Horlicks

was introduced to India by the British during World War I as an energy drink.

Horlicks made some strategic errors over its journey of over 100 years.

1) It expanded to unrelated categories that were not in line with their core value of

providing nutritious drink: Horlicks may find it easy to stretch into variants like

Mother’s Horlicks, Junior Horlicks etc as they are mere variants of the same malt

based nutritious drink. However, extensions into categories like biscuits, noodles etc

might prove to be more difficult given its value proposition. While Horlicks as a

brand promises good health, FMCG products like biscuits and noodles are far from

diversifications into healthy food substitutes. They are made of refined flour. This

makes the mothers distrustful of this product. GSK overleveraged the mother brand

of Horlicks to promote its extended product line. However, these new products

drew heavily from Horlicks but gave back way too little. It also diluted the flagship

brand of Horlicks to some extent.

2) It went on an aggressive expansion plan to replicate the likes of HUL, ITC and

Nestle without having a proper distribution network: Horlicks had a strong

presence in the East and the South. It was serviced as a nutritional substitute in

both the regions. However, the company had very limited presence in the North and

the West. GSK was banking on its new product offerings to give it access to these

areas. However, the existing players like HUL, ITC and Nestle had a much

widespread distribution network as compared to GSK. Out of the 7.5 million outlets

in India, HUL covers 6.5 million, Nestle reaches 3 million and ITC’s FMCG arm

reaches 2.5 million. However, GSK’s retail coverage is about 800,000 and its product

like Foodles reaches barely 250,000 outlets.

3) Horlicks introduced its cheaper version for rural India customers, with slightly

different taste and close to half the original price: This created dissonance in the

mind of rural customers. They believed that the product was of inferior quality. As a

result, the product failed in the market. Horlicks should have developed a focused

strategy to cater to the needs of the customers from the bottom of the pyramid.

They should not have released it in the same distribution pipeline as the other

products by just reducing the cost.