What does Coca-Cola's interest in Horlicks tell us about the brand and its ambition?

A few months ago, British pharmaceutical giant GlaxoSmithKline (GSK) put its malted milk drink brand Horlicks under strategic review. The news had global consumer food giants such as Nestle, HUL and Danone vying for GSK’s consumer nutrition business. Now, Coca-Cola too has joined the $4-billion-plus pursuit by throwing its hat in the ring.

Both Horlicks and Boost are sold by GlaxoSmithKline Consumer Healthcare in India and according to media reports, the strategic review will include an assessment of GSK’s 72.5% shareholding in the company.

Coca-Cola is trying to diversify from its core of aerated drinks to other products like juices and flavoured water to make a space for itself in the health market.

BestMediaInfo.com tries to find out what could be the possible reasons behind Coca-Cola’s interest in Horlicks and if the deal comes through, what will it mean for both the brands.

For a brand, that is, at its heart a cola brand, to venture into the ‘health’ space might look like a departure from its mainstay. But in a world that is becoming increasingly health conscious, this might be a very strategic move.

Santosh Desai

“On the face of it, this might look like it is a little out of Coke’s arena. But if you look at it from the lens of a long-term game plan and look at where the world is going, ‘health’ is possibly going to become a very important sector in which one needs some presence and this becomes a way to get a quick entry in that space,” said Santosh Desai, MD and CEO, Futurebrands India.

Desai observes that Coca-Cola is a brand that is not growing rapidly and is in a category that is not in a growth phase at all and therefore this diversification is probably what they need right now.

Sharda Agarwal, Co-founder, Sepalika, too agrees that with the increasing popularity of healthy choices and habits, this move by Coca-Cola might be a part of its plan to venture deeper into the health space.

“Basically, they are trying to balance their beverage portfolio. From a bunch of drinks that are purely indulgence-based, they are now trying to go deeper into the health space. They probably want to ensure that they cover the entire spectrum of drinks from pure indulgence to pure health. They started with carbonated beverages, then they moved into fruit drinks, then into fortified water and tea and coffee and now with this move they might be eyeing the other end of the spectrum. As a global beverage player, you want to ensure that you have a wide enough portfolio that is in conjunction with changing consumer trends. Globally, there is a huge trend towards eating and drinking healthy and so one has to ensure that one has a product in their portfolio that meets that consumer trend,” said Agarwal.

Speaking about the impact this acquisition (if it goes through) will have on Horlicks, MG Parameswaran, Founder, Brand-Building.com, said, “They are trying to widen their portfolio beyond aerated drinks and this seems to be a logical addition to that. Though the distribution channel for a malted milk drink is somewhat different compared to that of soft drinks, I think that if they can take Horlicks to the ready-to-drink beverages space then it might open up a whole new avenue for Horlicks. It will be good for Horlicks because they will get some fresh thinking and fresh energy behind the brand and they will be able to look at new ways of growing the brand franchise.”

Desai also believes that if the deal clicks it will be a change of pace for Horlicks.

“Coke has equity to gain from this move but going forward I cannot imagine that Coke would be interested in Horlicks as it stands today. If there is any reason to be interested in the brand then it must have to do with what they can do with the brand and where they can take it. From a brand which is used to stable and slow growth, Horlicks would perhaps get used in a way that is quite different from what it is today,” said Desai.

As far as GSK is concerned, Agarwal feels, this move will help them focus more on serious healthcare. But Coca-Cola might have a conundrum when it comes to associating Horlicks with their brand.

“Horlicks has been nurtured by a healthcare company. So, whether it is in formulation of the product or the promotion and marketing of the brand, it has all come from GSK’s core value of healthcare. Now, the core of Coca-Cola lies in indulgence and good times. Their current positioning is open happiness; the brand is all about connecting people and having a good time. If they acquire Horlicks, it is a brand whose core is health. When you have a brand whose core is health, the entire organisation will have to build itself around health. For Coca-Cola, their entire business, whether it is branding, pricing, product design, communication, R&D, brand culture, all of it comes from indulgence. But now, they are moving into healthcare and so they will have to re-engineer or re-invent the entire organisation. That will be a challenge for them,” elaborated Agarwal.

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