The Hindu Business Line : On a health trip

The health food drinks industry has been facing testing times with stagnant markets. Market leader GlaxoSmithKline is looking to put the spring back in its brands and the market.

YOU couldn't get an elbow in, leave along an arm and a leg. It was a media conference at a hotel in Chennai to celebrate 25 years of brand Boost. The venue was overflowing with scribes, cameramen and their paraphernalia, television correspondents, company officials, not to mention sundry hotel staff lurking on the periphery. Surely, a quarter century of a health food drink couldn't possibly evoke such passion in hard-boiled hacks. But, all had come to see that demi-god of cricket, Sachin Tendulkar, who was to preside over the event. In tow was the new secret of Boost's energy, the exciting batsman, Virender Sehwag.

Boost's growth as a brand is pretty much in line with the flowering of Sachin as a batsman, and from a shy kid who way back in 1989 first boyishly intoned "Boost is the secret of my energy" to a man who can face fiery pace bowlers and hostile questions hurled at him with equal aplomb. It was Kapil Dev who was first roped in by the brand to endorse Boost in 1986, followed by Sachin in 1989 - among the earliest brands that the master-blaster endorsed - to Sehwag now, who will give a double boost to the brand along with Sachin.

In the time Sachin was taking apart bowling attacks around the world, Boost has grown steadily as a brand in the `brown segment' of the health food drinks (HFD) industry to rival market leader Bournvita's leadership. While its `sister' brand, white beverage Horlicks, dominates the HFD market, with a more than 55 per cent share, it will take more than the savage strokes of the Sachin-Sehwag duo to kick-start a declining market for HFDs.

The approximately Rs 1,300 crore, 80,000 tonnes-a-year market for HFDs, according to ORG-Marg figures has been recording a decline of around 6-7 per cent in the past few months. Figures indicate that the category declined in 2001 by 6.4 per cent over 2000 and ORG's figures also show in that in the first nine months (cumulative Sept 2002), the category has further declined by 10 per cent over the same period last year. In this scenario, the Rs 967 crore GlaxoSmithKline Consumer Healthcare Ltd (GSK), the company that owns the Boost and Horlicks brands, has seen sales plunge by 9.4 per cent in the first nine months of this calendar year. It's a reality that Simon Scarff, GSK's Chairman recognises. "The whole FMCG arena has been impacted. The market may have gone down but our share's gone up; we're doing better in the beverage sector than others. And, as market leader, our responsibility is to get in and try and get some growth back," he says. With a close to 75 per cent market share in the HFD market, with brands like Viva and Maltova that GSK acquired in early 2000, in a sense, GSK is the market and whatever initiatives it takes will grow the market for HFDs.

A Cadbury spokesman, while agreeing that the HFD market's decline can be attributed to overall sluggishness in the FMCG industry, says that the market will continue to face strong resistance from other categories like tea, coffee, fresh and canned juices and even breakfast cereals. "The market growth will depend on the ability of the major players to drive category penetration amongst the milk consuming masses in the North and the West as well as their ability to drive penetration amongst the lower SECs, which is currently low," he explains. Elaborates Scarff: "The way forward is to keep it relevant to modern life; there's a slightly old-fashioned image that malted drinks have in the market and it's our job to change that. If you see Coke, which is being drunk for so long, it's managed to make the transition."

That also explains the flurry of relaunches that this industry has had in order to pump up the excitement around HFDs - GSK relaunched Horlicks in new packaging early this year and Boost, already in a new avatar, is seeing a new communication strategy in place. Says the Cadbury spokesman, "For us the focus is clearly to constantly innovate and energise our brands (Bournvita) so that they remain an integral part of the consumers' consideration set." This also involves category penetration by increasing the number of households consuming HFDs. GSK also evolved variants of Horlicks like Mother's and Junior Horlicks and Horlicks Plus for convalescents and also extended the franchise to biscuits.

To increase market penetration to the next level of consumers is indeed a major concern for the HFD players, as energy drinks are generally perceived as luxury items and expendable in a purchase basket. Says Scarff, "Yes, indeed, it's a huge market. There are a lot of people who aspire to use our brands, but can't afford them. As economic growth goes down the pyramid, I'm sure there will be more people who can do so. What we need to focus our minds on is make sure people who use our brands continuously do so and not lapse, perhaps from boredom."

However, there may be another subtle structural shift in the market which could, perhaps, explain the stagnating HFD market. As Nikhil Vora, Research Analyst tracking the FMCG and Retail sectors with Alchemy Share & Stock brokers, Mumbai, points out, HFDs thrived as a category in the '70s and '80s in milk deficient regions as a milk substitute. With better availability of milk, consumers, he says, are looking more at the taste platform that brown beverages offer, than white beverages. That explains the growing market share of Cadbury's Bournvita and the growth of Nestle's Milo and Boost. Heinz also pitches in with its Complan brand. Vora says that with this shift from white to brown beverages, Horlicks as a brand may have actually degrown a bit for the first time! The current ratio between white and brown beverages is 65:35 but that could undergo a change in the months to come.

Viva's cool, Maltova's mum

In early 2000, GSK took over the two Jagatjit Industries' brands, Viva and Maltova, both strong in regional pockets, for a sum of Rs 86.25 crore. While both brands have seen a re-launch it's taken some time in coming. Scarff admits as much, that the acquisition of both these brands has not been in line with the company's expectations. In fact, both brands dropped market share precipitously since the takeover - from a combined market share of seven per cent, share has dropped to under three per cent. Says he: "We had certain problems to sort out with the ingredients. Much to our surprise, when we analysed the product, what was claimed on the label was not seen in the product, so a certain amount of reformulation had to be done. We've relaunched both Viva and Maltova and we expect them to grow. Because we own them all (including Horlicks and Boost), when one is down, we probably pick it up on the other so it's not so disastrous from the business point of view as it would have been if somebody else had owned them." So, now that the re-launch has finally happened and a new communication strategy in place, GSK expects these brands to come into their own by the next year. Essentially, the two brands will act as flanking brands and, as they are strong in their own regional pockets, are not expected to cannibalise GSK's two chief brands. In the current scenario for HFDs, GSK will be glad to have these two brands pulling their weight in its portfolio.

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