67% market share but still insecure
GlaxoSmithKline Consumer Healthcare—or GSK India as it is popularly known —is going about its business like a company on steroids. In January this year, it launched Glaxo Nutrition ActiGrow, a high-protein baby food. In February, it introduced Horlicks Nutribars, a snack for healthconscious people. In April, Chill Dood, a flavoured milk drink in tetra packs. And last month? Junior Horlicks toddler biscuits. This is just a sampling of the avalanche of products that GSK has launched this year alone. Many more are in the pipeline.
As a result, GSK may come off as a new MNC in India, floundering in an unfamiliar market and throwing up a non-stop array of products with the hope that something sticks. The reality is that GSK has never been as strategically strong and financially healthy as it is today thanks to the unusual plan of action charted out by its current MD of two years, Zubair Ahmed.
When Ahmed took over from his predecessor Nick Massey, GSK was—and is—a leviathan in the now Rs 2,200-crore malted food drinks (MFD) market, enjoying steady growth and 66.5 per cent of the market share via its brands Horlicks, Boost, Maltova and Viva.
Most managers would thank their lucky stars and maintain status quo. Not so with Ahmed. He reacted as if he had stumbled into a corporate nightmare which required urgent remedies. This meant shaking up a company that, theoretically, didn’t need shaking up. “If Zubair wanted to, he could have just cruised along with the existing growth. But he’s driven and is actually forcing this quiet company to look outwards,” says a source from a top talent recruitment firm. “He’s bringing in new people from outside to infuse a new perspective in its already welloiled system,” he adds.
There is a keen instinctive logic to Ahmed’s apparent madness. GSK India—not to be confused with its pharmaceutical sibling GSK Pharma— is the undisputed king of malted food drinks in India, but that overwhelming strength can also quickly become its Achilles heel. “It’s hugely dependent on Horlicks and Boost and needs to successfully grow in other segments (like biscuits, OTC medicines, etc) that it is already present in,” says Anand Shah, Research Analyst, Angel Broking. While the firm’s lead over its competitors is impressive, sharks continue to circle the waters.
Between January and May this year, Heinz’s Complan, with a 14.1 per cent value share, snatched two percentage points away from Horlicks (49.5%), Boost (12.7%) and Cadbury’s Bournvita (16.1%). The battle for a slice of malted drinks market is heated—and can get ugly. Last year, GSK launched an advertisement which claimed that children who consumed Horlicks grew faster, thanks to the 23 vital nutrients in the drink, and moreover, it had a markedly lower price than its competitors.
Heinz India was infuriated and filed a case in the Bombay High Court, which was dismissed. In retaliation, Heinz responded with its own ad that trumpeted Complan’s nutrition and growth claims, which GSK promptly took to the Delhi High Court. Ultimately, both the ads have been withdrawn, but the matter is still pending, and the dust over the battle for MFDs in India is far from settled.
Ahmed’s real interest, however, is to grow the company in other areas where it either has a presence, or where it intends to create a whole new market. “Merely getting a double-digit growth in the health and wellness space, which is taking off in a big way in India, is not enough,” says Ahmed. “I could have actually chosen to continue doing the same things and still kept people happy.
But I am stating my agenda to grow in sync with the market growth potential and opportunity,” he adds. His agenda: doubling turnover in the next four years from its current base of Rs 1,543 crore for the year ended December 2008. Ahmed says that this is possible if the company continues to grow at its current growth rate of 19 per cent. Shah of Angel Broking says that the company’s growth figures are impressive despite having a large base in malted drinks.
GSK has other businesses where it is less of a leviathan, but is eager to become one. In the Rs 400-crore antacids market, its Eno (29%) barely outstrips the competition (Digene 28%, Gelusil 21%). In the Rs 550-crore market to relieve fevers, pain and colds, its Crocin (18.4%) brand is also just a few basis points ahead of its competitors. These are areas that GSK must boost market share in order to add to its top line growth.
However, it is in the “Rubs and Balms” category that GSK has suffered a comprehensive drubbing over past decades. Its Iodex ointment once ruled the category with over 70 per cent market share, but has gradually slipped to an abysmal 16.5 per cent today, while Indian stalwarts like Zandu and Amrutanjan have together seized over 60 per cent of market. Ahmed clearly has some work to do if he wants to regain a slice of this lucrative segment.
Ahmed’s current strategy is not much of a surprise when you consider his 30-year tenure in the FMCG space— and his expertise in launching and growing brands. He is viewed as a hugely successful head for Gillette India when he moved here in 1995 to take charge of its acquired company, Wilkinson Sword. This firm eventually got merged into Indian Shaving Products and was subsequently restructured as Gillette India.
He not only grew the firm’s shaving blade category into a dominant position, but also introduced many innovations for the price-sensitive men’s grooming category: “He has a very strong sense of what will work and he has the ability to cut across lines and build relationships,” observes Jayant Kumar Singh, Managing Director, Henkel India. “He is also quick to spot strengths in people and then empowers them to take decisions,” he adds. Singh worked with Ahmed at Gillette for a year in 2005, then joined GSK a little ahead of Ahmed in July 2006 and recently quit this year for his present assignment.
Ahmed’s tinkering at GSK seems to have paid off. The firm posted its fifth consecutive quarter of double digit volume growth, a 48 per cent increase in after-tax profits (to Rs 84 crore) and its launches of Horlicks for Women as well as Nutribars have been bona fide successes. More significantly, Horlicks volumes were up 21 per cent, Boost grew 8 per cent and its small portfolio of biscuits surged 27 per cent during a bleak economic period.
Still, for all of Ahmed’s—and GSK’s—successes, the hounds of competition continue to nip at its heels. Bournvita launched Li’l Champs in February this year to take on Junior Horlicks. Similarly, Heinz India is attempting to broadbase its Complan portfolio to offer muesli for breakfast, even as it tries to grow its presence in the biscuits category, much like GSK.
So, while GSK carries on posting big numbers, it is quite likely that Ahmed will continue to whip himself and his company into a frenzy of product launches and brand expansion. For Ahmed, it seems like success begets paranoia. However, considering the fate of GSK’s Iodex today, that’s probably not a bad thing.
