GlaxoSmithKline: Fast-tracking innovation

To combat the slowdown, GlaxoSmithKline Consumer Healthcare upped the ante with speedy innovation in its product portfolio

During the acute slowdown in 2009, almost every major FMCG company in India reacted in the same manner. To avoid getting on the wrong side of price-sensitive consumers, most of them reduced the weight of their products (noodles, shampoo, hair oil, biscuits, etc) without increasing prices. Also, small sachets became popular. While GlaxoSmithKline Consumer Healthcare (GSKCH) had launched sachets for its health food drink Horlicks way before the slowdown, the company sensed an opportunity here and started pushing them aggressively 2012 onwards. Says Jayant Singh, executive vice president, marketing, GSKCH, "In the last two years, our sachet volumes have doubled. The common lesson for FMCG companies post 2009 was to understand that time had come to shift the focus from urban to rural markets." So far, the company claims to have sold 500 million Horlicks sachets in the country.

When it came to devising a strong rural strategy, GSKCH realised that going rural is not about filling the distribution gap, but more about demand generation. Says Singh, "The slowdown made us understand that serving rural markets by just dumping products at kiranas won't work. The only way to build markets in the hinterland is by seeking behavioural change in consumers." For instance, research pointed out that Eno, the antacid from the company's stable, was not perceived as a serious remedy for constipation by rural consumers. Another interesting insight was how 40 per cent of families (SEC C and D) in small towns served tea as a morning beverage for their children. Here, the company saw opportunity for pushing Horlicks. This resulted in a slew of well-designed activation programmes and promotional campaigns. For example, as part of its Horlicks 'Didi' initiative, the company has been working with women entrepreneurs to sell its products.

Next, the company realised that in order to drive consumer loyalty during slowdown it must fast track the pace of innovation. Between 2009 and 2014 GSKCH has launched more than 12 products including Foodles, Horlicks Gold, Sensodyne, Horlicks Oats, and Horlicks Nutribic, among others. This is over and above other brand relaunches that GSKCH does from time to time to stay relevant to its young consumer profile. For the company, the most rewarding innovation is Sensodyne which had attained a leadership position in the sensitivity segment within two years of launch. "Sensodyne's success in modern trade is testimony to the fact that consumers are willing to pay a premium for the product innovation even during a slowdown," adds Singh.

Ankur Bisen, senior vice-president, retail and consumer products, Technopak, is of the opinion that it makes sense for large FMCG companies to build new markets in rural India from scratch. He says, "Since these companies have been cash positive for a long time, it is viable for them to venture into uncharted territories, which are still under-penetrated like J&K, Odisha and other markets in the North East."

GSKCH continues to lead in the health drink segment, with 57.5 per cent (value share) and 65.1 per cent (volume share) till June, 2014. It has retained this share despite a fall in its profit percentage from 19 per cent (Q1) and 29 percent (Q2) in 2013 to 9 per cent each in Q1 and Q2 in 2014.