‘Our rural model is more sustainable in a downturn’

With GlaxoSmithKline Consumer Healthcare aiming to cross the £1-billion mark in revenue by 2016 in the South Asian region (India, Nepal, Sri Lanka and Bangladesh), Zubair Ahmed, Managing Director, believes the company is better placed compared with other FMCG companies in times of cautious consumer sentiment. The company says it will continue to focus on rural growth as well as launch of premium products. India, as a market for the company’s consumer healthcare business, is the second largest globally, even bigger than China. Edited excerpts:

How has economic slowdown impacted your business?

Our biggest business is in the health food drink segment and growth rates have slowed down in this category. So, we are under pressure, but not serious pressure. We are in the fast-moving consumer healthcare business, our products are science-based and more relevant for consumers. So, we don’t see downtrading, as is being witnessed in the FMCG category. While slowdown has affected us, as the category growth has slowed down, relatively, we are better off than a typical FMCG company.

Have you changed prices?

We have not dropped prices. Normally, we operate every year on a 6-7 per cent price hike on, say, the base Horlicks product. This year, we have only gone for a price hike of about 3.5 per cent and we are hoping for another hike. But I am a bit reluctant till the election outcome is known and buoyancy kicks in.

What is your strategy for tapping rural demand?

We started our rural journey two-and-a-half years ago and set a clear target that by 2016 we should be covering about 20,000 villages in the first phase. We are present in 12,000 villages, and the contribution from these villages is increasing in terms of our top line. If you look at both direct and indirect rural contribution to our business, it’s in the range of 24-26 per cent and growing.

Our approach to the rural programme has been different in terms of the model adopted.

A typical FMCG model entails getting products distributed in villages and using the most cost-effective media to spread awareness.

But our products are in the fast-moving consumer healthcare category, which is all about science. Therefore, we approach it differently. Our sales people go to rural medical practitioners and make them aware about our products, be it Eno to cure acidity or Horlicks to counter malnutrition.

A recommendation coming in from a local village doctor becomes far more credible. We also take our messaging to school children and women, where we don’t directly talk about our products but create awareness about malnutrition and nutritional needs. Our rural model is far more sustainable in a downturn.

What is the next phase of your rural growth strategy?

The next phase of growth will come from products based on specific consumer insights in rural regions.

In the first phase, we offer our products in sachets and made them available to consumers without changing the basic formulation. But in the mid- to long-term, we will be developing and launching consumer products for rural markets.

What about plans to launch a ready-to-drink Horlicks and other brand extensions?

We have taken two shots at launching ready-to-drink products. The first time, we had quality issues.

The second time, we launched these in cartons that worked well with mothers but the kids did not like it due to factors such as peer pressure.

We believe the ready-to-drink segment will work well in India, as it’s convenient. But, we need to make it more appealing for kids.

Our brand extension of oats has been very successful, especially in the South. Other innovations, such as Horlicks Kesar Badaam flavour have also been successful.

Your strong regions are South and East. How are you looking to grow in North and West?

We are relatively smaller in North and West partially because of historical reasons. But we are making strategic moves in these regions.

This is the browns market and we have our chocolate Horlicks and are also making consumers aware about how it increases the power of milk.

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