horlicks story

Why Horlicks isn't taller, stronger, sharper anymore
From Unilever to Coca-Cola, F&B biggies are said to be eyeing the once-glorious brand, but they might be going after a dead end. The story of Horlicks is also one of how India changed. Part 1 of a two-part series.
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Soumya Gupta
19 Jul 2018
 MUHABIT UL HAQ
You know what’s a weird place to discuss Horlicks? The Hacker News portal of YCombinator — the incubator of Airbnb and Dropbox — better known for topics like ‘Qt for Python available at PyPi’.

Listen to PraneshP, a forum member who says he is from south India: “When my dad had a heart issue in 2003, his doctor strictly told him to stay away from Horlicks. But every well-wishing visitor would bring a pack of Horlicks, and we had some 25-30 packs lying around in the house.”

The rest of the thread contains barbs about Horlicks’s “insidious marketing”. One member calls Horlicks’s operations in India a “rabbit hole”.

That’s when the thread begins to make sense. Of course. What was Horlicks’s conquest of kitchens if not a classic hack?

British pharma company GlaxoSmithKline’s (GSK) Trojan Horse entered India around the Second World War, and for the next seven decades sat pretty on monthly grocery lists promising to make Indian children “taller, stronger, sharper”.

On March 27, the company said game over.

Paneer. Lots of paneer.
On that day, GSK said it would sell off Horlicks, its biggest money-spinner in India. Along with Mondelēz’s Bournvita, Nestlé’s Milo, and Heinz’s Complan, Horlicks is part of a legacy malted food drinks market that largely exists in India and South Asia.

Among the brand’s reported suitors: Unilever, Nestlé, and the Coca-Cola Company.

But why buy Horlicks? There is no good reason, if you ask Prachi Sanghavi, Mumbai-based nutritionist and director of MyDIETist, a nutrition app that helps build and track a diet regime.

“Parents still give Horlicks and all to their children, but nutritionists tell them to avoid it completely,” says Sanghavi. “We as parents need to understand that products like these are not high on protein. They are little more than marketing gimmicks. Good nutrition today means parents ensuring their children get fibre and protein.

“My clients today, I tell them to get their children into the habit of eating salads and soups. Non-vegetarian parents are giving more chicken and fish to their children, and even vegetarian parents are trying to give eggs to their children. I see a lot more paneer added to children’s diets.”

When you lose to paneer, you know your market really is dying. Malted food drinks indeed seems a hopeless business, because the notion of what is healthy has changed drastically. Carbohydrates (especially sugar) are a pariah in modern-day nutrition.

To understand the forlorn state of the business, there are few better places than Canteen Stores Department or CSD canteens. Small supermarkets set up to cater to employees of the armed forces and the police, these account for 7%-10% of the sales of major consumer-goods firms in India, from Marico to United Spirits. For GSK-CH, this channel has been a godsend. Most army kids (this writer is one), for instance, were raised on a steady diet of malted food drinks with their milk. One of the leading brands would be part of an army officer's monthly ration allowance along with dal, rice, and jam.

All that has changed now. Malted food drinks no longer occupy eye-level shelf space in many large CSD canteens in urban areas. For officers in peacetime cantonments, the monthly ration that included malted drinks was dropped, which affected sales of Horlicks.

The hit from all this is clear in the droopy performance of the stock of GSK Consumer Healthcare (GSK-CH), the listed firm in India whose sales are dominated by Horlicks and Boost, both malted drinks.Globally, Horlicks stopped being important for the GSK group a long time ago. In 2017, across markets (India being the largest), the brand made GBP500 million according to a statement released by GSK.

This is a drop in the bucket for GSK's total consumer healthcare business that had sales of GBP7.2 billion in 2016, and of GSK's total revenues of GBP27.8 billion in the same year.

In India, Horlicks’s share in the health food drinks market has stagnated and started sliding. As per GSK-CH’s annual reports, its volume share fell from 66.2% in FY14-15 to 64.6% in FY17-18 while value share has fallen from 58.3% in FY15-16 to 55.3% in FY17-18.

The kids aren’t all right
When the malted food drinks category was introduced in India, it was the land of poor milk production, way before it became the world’s largest supplier of the liquid. The effect was more pronounced in southern and eastern India where milk was even less available and Horlicks helped mothers mask the taste of the thing — sometimes diluted with water — to coax sniggering kids.

“As kids, we had several things available, including Maltova (also owned by GSK-CH),” says Amit Prasad, a mid-level executive at a large Indian bank. Prasad was raised in Patna in the 1980s. “Maltova was a fun drink, it was tasty, you could even eat it kachcha (raw, meaning in powder form, not mixed in milk). Horlicks was a daily affair because my mother believed it was the best thing for a growing boy who was studying hard. I would mix Horlicks with water. But Complan, that was the top thing. In powder form, it tasted bitter, so people thought it was obviously better for health than the others. We had Complan during important exams.”

It was a different country from the one where doctors, paediatricians, and nutritionists issue regular warnings to parents about a juvenile-obesity epidemic — India is home to the world’s biggest obese-kid population after China.

“Energy” and “growth”, the two strongest baits in malted food drinks’ advertisements, no longer guarantee jars flying off shelves. “A balanced diet that helps control weight”? Now that’s a good tag line.

"I think Horlicks is the base of the pyramid of the brown beverages and powders market," says Ambi Parameswaran, former CEO of advertising agency FCB Ulka that manages Horlicks's account. "But the market has become so large, there are many more choices. Since milk consumption has gone up, you have flavoured milk, you have lassi. And then you have competition from PediaSure (made by Abott Nutrition).”

PediaSure won a large chunk of the market despite being between 50%-100% times more expensive than Complan and Horlicks, because it wormed its way into an approval from doctors and nutritionists. "That's what Horlicks used to have some time ago, which Complan got after them," Parameswaran says. As per industry estimates, PediaSure and its variant for older consumers Ensure rake in about INR1,000 crore in sales.

“For all these [malted food drinks] brands, there is no real scientific backing to their claim that they help children at all,” says Sudhir Sane, director, department of paediatrics, at Thane’s Jupiter Hospital. “In reality, a child with a normal childhood — going to school, playing two to three hours a day — does not require any such supplements. We recommend them to children who have chronic diseases or are recovering from an acute illness.

“But [even] in those cases … we recommend one spoon in a cup of milk, while manufacturers generally require tablespoons of it,” Sane says, adding that it is high visibility via advertising that gets parents buying these supplements in the hope they’re doing all they can for their child.

Epang. Opang. Ad-slowdown pangs.
That’s exactly where Horlicks suffered its second blow. Known for carpet bombing homes with its television spots, the brand stopped getting its owner’s support.

After a long period of investment, GSK-CH’s advertisement and promotion expenses have been falling steadily. At the peak of the malted food drinks business, GSK differentiated its products by spending heavily on advertising and positioning them as indispensable supplements.

The ad push was critical because, according to nutritionists, there is nary a difference among the various rival brands. “Look at the list of ingredients. Malted sugar is the biggest component, and the quality and quantity of protein is not too high,” MyDIETist’s Sanghavi says.

Remember the ads? Complan’s “I’m a Complan boy” and Boost’s “Boost is the secret of my energy” were crucial lines to create brand recall and position them as the secret of success in school and sports. Parents bought into that message.

Reduced marketing support for Horlicks has benefited its bigger competitor Bournvita. Distributors of Horlicks we spoke to from disparate parts of India say it does between 70%-90% of Bournvita’s sales in their area.

“Kids only know and ask for Bournvita,” says a Horlicks distributor from semi-rural Rajasthan. “On television, Cadbury Bournvita ads are all that run, and so children understand only Bournvita when they think of this category,” he says, adding that others like Horlicks and Complan are sold as substitutes to the winning brand in his coverage area.

A similar story comes from a long-time Horlicks distributor in Bengaluru, who has never seen demand for malted food drinks wane.

So, back to the question: Why buy Horlicks?
In some ways, the decline is mirrored in other packaged-food brands that were staples of middle-class India in the 1980s and 1990s. Take Parle-G glucose biscuits and Britannia Marie, teatime staples for the longest time. Now, buyers can pick up everything from dry-fruit cookies to cream-filled biscuits.

"There's just so much more choice in everything," Parameswaran says. 

That brings us back to the question of what any potential acquirer expects from the Horlicks brand.

One answer: boosting their respective packaged food portfolios. Hindustan Unilever needs a daily-consumption product to add to its stuttering food business, which largely comprises Knorr soup and Kissan jams and ketchup in India. Nestlé, after the Maggi fiasco, could do with a brand that has a hefty history of trust. Meanwhile, Coca-Cola is in the middle of a long-term strategic manoeuvre to reduce dependence on unhealthy carbonated drinks.

But is Horlicks the right choice to achieve any of these goals? It’s not the advertising crimp (or the rise of paneer) alone. Horlicks has been affected by a deep shift in distribution channels and the sudden assault of protein and plant-based products that have fundamentally changed the nutritional-supplements industry in India.

More on that in part 2 of the story.

Move over malted drinks. India has fallen in love with proteins.

Horlicks is on the block, Complan is said to be looking for a buyer as well. Meanwhile, a barrage of newfangled proteinaceous treats are eyeing the newly health-conscious Indian.

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Soumya Gupta

20 Jul 2018

Free Reads

The molecular structue of whey protein; MOLEKUUL/Science Photo Library RF/Getty Images

How do you tell when a food product has become desi enough?

When Patanjali wants you to eat it.

We are talking about the newfangled phenomenon of protein bars. Or their more sugar- and carb-infused alternative, energy bars.

Do you know how many protein-bar brands are available in India? At least half a dozen homegrown ones, including Delhi's Feel Mighty and MuscleBlaze and Bengaluru’s Hyp. Patanjali’s eponymous energy bar claims to offer higher protein for its price of INR30. For comparison, a single MuscleBlaze bar sells on Amazon for INR146.

The market leader is nutrition firm Naturell's RiteBite. The firm started launching most of its products only six years ago. Today, it controls 60% of India’s protein-bar market. Beyond that, there are nearly 15 major foreign brands of protein bars sold in India either online or through major supermarkets and stores dedicated to gym addicts.

That’s just bars — a relatively piddling 2% of the INR3,000 crore-INR4,000 crore protein supplements market. Protein powders are a whole other thing. Some 51 brands are listed under protein supplements on Amazon alone.

Such is the growing clout of protein that Danone SA, one of the world's largest dairy firms, abandoned milk altogether in India to concentrate on the nutrition business, mostly protein. It extended its biggest brand Protinex to kids, and even launched biscuits called Protinex Bytes.

Forget foreign specialists. Amul, India’s largest dairy, had launched a whey protein powder, Pro, in 2012. Amul's former managing director BM Vyas now runs his own protein-powder maker Nutrisattva. Listed dairy firm Parag Milk Foods launched Avvatar whey powder last year.

Where whey powder’s sway has grown, brown powders — Horlicks territory — have stagnated. In March, GlaxoSmithKline Consumer Healthcare (GSK-CH) decided to put Horlicks on the block, marking a watershed in the history of the storied brand that came to India around the Second World War.

Neither egg nor chicken
"It started with the sports-nutrition business, which is globally for the core consumer group of body builders and athletes," says Rohit Garodia, founder of Pecan Group and EAT Anytime, a brand of energy and protein bars.

"Until the late 1990s, only eggs and chicken were considered the primary sources of protein. Think of movie visuals of athletes eating raw eggs," Garodia says. "But in the US, the sports-nutrition business had already picked up. The biggest ingredient in all this was whey, a byproduct of cheese production."

All fitness enthusiasts, not just professional athletes, know about whey protein, the holy grail of protein supplements because it has almost all the sought-after amino acids for bodybuilders and athletes.

"Very soon, the players realised that there is a larger market in India. Then they began making protein supplements for ordinary people as well," Garodia says.

Among the protein supplements that ordinary folk would have heard of or used are Threptin diskettes, biscuits made by pharma firm Raptakos, Brett, & Co., and adult protein-powder supplements like Danone’s Protinex and Ensure made by Abbott Nutrition.

"Today, there is so much segmentation in the protein supplements market alone," Garodia says. The two axes on which the market is divided are product form — bars and powders — and consumer type.

"You have the core consumer, who is into sports nutrition. Then you have the fitness-conscious consumer who goes to the gym regularly, is better informed about nutrition. And then you have the bottom of the pyramid, the mass aspirational consumer who wants to be healthy and fit but is 'casual' about it."

Combine these blossoming choices with the growing disapproval for malted food drinks in India. Doctors (especially paediatricians) and nutritionists have increasingly been dissing sugar-rich supplements: think Bournvita, Horlicks, and Complan, given India is home to the world’s largest obese-children population after China. With a little help from fad diets focused on fewer carbs, and the growing realisation that Indians are largely protein-deficient, the focus of the nutrition market shifted squarely towards protein-rich supplements.

Data from the National Sample Survey Organisation (NSSO) shows how Indians' consumption of protein-rich milk, milk products, eggs, and meat has risen dramatically since the 1990s — when malted food drinks enjoyed their time in the sun. Latest NSSO data on household consumption is available from 2011-12. Shop at the chemist
Since the demand for protein supplements originated from a space relatively unfamiliar to India — sports nutrition — it created new channels of distribution too.

This turned out to be a critical inflexion point and, as we shall see, hastened the loss of sheen of the malted food drinks business.

Protein bars like RiteBite found their way to gyms, gym-focused nutrition stores in the big cities, and finally to chemists. Pharmaceutical firms, looking to premiumise their products and sell more to the core and health-conscious category of users, found their customers more at chemists as they became more scientifically informed about macronutrients. Protein-bar brands are also given prominent shelf space — usually the glass display at the counter — at pharmacies.

Distributors for Horlicks and Boost, both owned by GSK-CH, say channel competition is growing.

"In my area, demand is not the problem. There is strong demand for Horlicks. But the customer has much more choice now, there is modern trade, there are chemists. So the demand (sales) has not dropped, it has been divided," says a Horlicks distributor in Bengaluru who has been in the business for the last 30 years and covers 90-95 retailers.

"Paediatricians and doctors are a very important channel for brands like Horlicks," says a former executive of GSK-CH. "So naturally, pharmacies are a big channel for these brands."

"I don’t take samples personally, but I do know that medical representatives of these [malted food drinks] makers come to doctors and offer them samples and pitch the product," says Sudhir Sane, director of the department of paediatrics at Thane’s Jupiter Hospital.

Amit Prasad, a banking executive, grew up on Horlicks and the like in Patna in the 1980s and 1990s. Now, he is 36 years old and deals with a high-pressure corporate job in Mumbai. His doctor, worried about his constant fatigue and stress, suggested he try Protinex with milk daily. "I always used to have two glasses of milk, daily. But I started putting a spoonful of Protinex in it ever since the doctor told me to. And my life has changed. I am more alert. I always knew Horlicks was mostly sugar, but we were told it's good for us during exams. But this actually worked."

There is another challenge for several Horlicks retailers: The brand's biggest selling unit is the 500 g refill pack, according to the distributors ET Prime interviewed. Only in Maharashtra, where malted food drinks don't sell much, did a distributor report selling more of the 'snacky' INR10 sachets of Horlicks in his area outside Navi Mumbai. Sachets often work as introduction to a product in India. 

What's a malted drink to do?
Horlicks is on sale, and this churn means it could run the risk of turning irrelevant to a large number of consumers. So what's it supposed to do?

"I can only say, when the going gets tough, the tough get going," Navneet Saluja, area general manager, India subcontinent, and managing director, GSK-CH said in a rare company call with investors in May. "People are very much focused on business as usual, delivering what they can control." (The company didn’t respond to ET Prime's request for comment.)

Among the things the company can control is a renewed focus on nutrition, as consumers define it today. With this in view it has launched Horlicks Protein+, a high-protein variant aimed at adult consumers who were flocking to newly available protein powders and bars. Horlicks Growth+ also launched a campaign for young children that focused on protein and essential nutrients, endorsed by international paediatricians.

For what it's worth, GSK-CH India's latest annual report (FY17-18) mentions "protein" 13 times versus just five times in the report from a year earlier. The earliest available report, from FY2001-02, mentions protein only twice, as a matter of industrial disclosure of manufacturing capacity. Management discussion does not bring it up.