Should Horlicks Extend to New Categories?

Submitted

by

M.D.S.S. Phani Bhushan - AP19110010110

Department of Computer Science and Engineering

SRM University-AP, Andhra Pradesh, India

November - 2022
INTRODUCTION:

The history of the Horlicks in India can be dated back to world war ii when the
soldiers used the product as a dietary supplement. Initially, the product had been used
in southern parts of India, but now the product has become one of the leading products
in the health drink segment. Horlicks held the highest market share around 50% in the
year 2017 and continued to be the market leader in the part. At first, it was only sold
as malt, but a significant alteration took place in the year 2003, it came out in new
flavors like vanilla, and chocolate to satisfy the needs of variety-seeking consumers.
It is well-known as a healthier drink and is admired by people of all ages. It contains
vitamins and iron required for children and is often said as having two spoons of
Horlicks is as nutritious as having 10 almonds per day.

Horlicks had the first-mover advantage in the market, it enjoyed a monopoly for a few
years in the market. But slowly competition had come and it became a threat to
Horlicks. Since then Horlicks launched campaigns and had done market research and
found that targeting families will help them to target audiences across the globe.

In the initial years, Horlicks positioned itself as a family drink, but as time passes
rather than targeting the entire family, it started rolling out products for each
individual be it women, children, and men. They also have products for pregnant
women. In the initial days, it positioned itself in the healthy drink market, but later it
added new products into its product portfolio namely biscuits, and noodles, and
entered into the food and beverages market. Horlicks has high brand equity and
managed to secure high brand awareness as well. Horlicks is well regarded as the
most trusted and healthy brand among Indians.

We must also be clear that category expansion is not always fruitful for companies,
there will also be certain disadvantages with expansion. The same is the case with
Horlicks. It had been reported that secondary products of the Horlicks contributed
only 6.5 percent of the sales. Horlicks believed that the extension of the product
category will help them to support the credibility of the brand, but they failed to do
that.

WHAT WAS WRONG WITH THE BRAND EXPANSION OF HORLICKS:

In the year 1992, Horlicks came up with a product biscuits naming them as a solid
form of nutrition. But it failed miserably in the market because Horlicks was
consumed with milk the consumers thought that the biscuits should also be consumed
with the milk because they have previous product knowledge. Also, consumers
believe that there is no cohesion between that product and the parent brand.

Horlicks was distributed by GSK Consumer Healthcare. GSK's distribution network is

its weak point. While HUL has almost 6.5 million of the 7.5 million outlets, Nestle
has 3 million and ITC has 2.5 million. In comparison, GSK has a limited distribution
network, with only 800,000 direct and indirect retail locations. When Horlicks began
to expand its product line and create varieties, such considerations had a vital part in
determining its performance. Low reachability or accessibility has a direct influence
on the bottom line, and Horlicks bore the brunt of it. Horlicks was concerned about
this, especially since it had only entered the markets of east and south India. North and
west were still mostly unexplored.

To target low-income people or rural area people, Horlicks came up with a product
called “Asha” at a lower price. But it failed to create its mark as people developed
cognitive dissonance, that the product may be of poor quality because of its lower
price. It contrasted the people who are ready to pay more price for quality products. In
2009 Horlicks launched Nutribar as a cereal bar snack, but it failed to succeed in the
market due to low association with the parent brand. Also, in the same year, it
launched another product named “Foodles” and marketed them as healthy noodles
containing vitamins. But the fact is they were made up of maida which is considered
as non-healthy. Even though they tried so hard to change the perception that they were
made of four grains using “Horlicks”, they failed to remove that perception among
consumers. It was in contrast to the original attributes of the Horlicks.

There are five product features that determine how attitudes toward new products and
services are formed. According to the relative advantage trait, faster adoption occurs
when consumers perceive that product to be better than the existing one. This is what
made Children's Horlicks so popular.

However, one Horlicks product, "Women's Horlicks," did well in the market. The
company conducted critical research and discovered that women were being ignored,
so they developed items specifically for women. Because of the ties to the parent
product, there was a significant increase in sales of that product. The key cause for the
other products' failure was a lack of linkages to the original product.

CONCLUSION:
According to this, brand extensions only operate when there is a string tie from the
parent product. Foodles was unhealthy, but the parent product is known to be healthy.
Line growth has been more effective for Horlicks than brand expansion. When it
attempted to develop additional products, several of them flopped badly due to poor
association with the parent brand and minimal resonance with Horlicks' core values.
We can observe from the Horlicks case that unsuccessful brand expansion harms the
company's brand image. However, retaining its essential values in new products will
undoubtedly aid Horlicks' brand expansion.

REFERENCES:
● https://economictimes.indiatimes.com/news/company/corporate-trends/gsk-con
sumer-will-pushing-horlicks-into-new-categories-destroy-the-brand/articlesho
w/7415215.cms
● https://www.businesstoday.in/magazine/case-study/story/case-study-horlicks-ap
peals-across-groups-47248-2014-04-30
● https://pdfcoffee.com/should-horlicks-extend-to-new-categories-3-pdf-free.htm
l
● scribd.com/document/371351979/Should-Horlicks-Extend-to-New-Categories