Hectomalt

Nourishment for the entire family

As a product with great heritage faces decline, its management is confronted with the challenge of resurrecting the brand.

The inspiration for the Hectomalt case comes from HorlicksThe Horlicks Legacy

Horlicks traces its origins to 1873 when two brothers, William and James Horlicks founded J & W Horlicks in Chicago to manufacture a patented malted milk drink as an artificial infant food.

During 1909 – 10 it was a famous provision for North and South Pole expeditions.

WW1 and 2 saw the increased use of the brand as a nutritional drink at homes as well as the frontlines.

The brand was acquired by the Beecham Group in 1969 which is today known as GlaxoSmithKline.

Horlicks is hugely popular in the UK, India, Malaysia and Singapore. As one of the ‘Most Trusted Drinks Brand’, it has captured more than 50% of the Indian Health Food Drink Market.

As consumer needs changed at the turn of the century, in markets like Singapore, Horlicks was faced with the challenge to re-invent and reposition.

Horlicks has undergone several avatars over the last century & more. Initially introduced as an Infant Food is now a substitute of hot beverages among Adults

The Horlicks Legacy

1873 1909-10 1914 1935 1948 2005

Originated as an artificial infant food

Provision for North & South Poleexpeditions

Nutritional drink for soldiers during World War I

Nutrition food for athletes at London Olympics

Horlicks Junior for growing up children in India

Energy booster for soldiers in World War II

2010

Horlicks Cappuccino in the UK

Hectomalt

Background

Hectomalt is unique among beverages. ­ It’s consumed by children as well as adults. According to ad claims

Hectomalt “relaxes and provides pleasurable nourishment”. It helps people “sleep better and feel better”, and it “makes kids taller, stronger and sharper”.

Is there a need to reframe Hectomalt?­ Hectomalt is placed in a category called ‘Health Food Drinks’ (HFD)

along with other products like Milo and Ovaltine. Usage habits, however, suggest that it expands beyond the boundaries of HFD. More than its competitors, Hectomalt competes with adjacent categories like tea, coffee and growing up milks.

Hectomalt in Joka ­ Joka is one of the more important markets for Hectomalt. The brand

is in decline in Joka and there is realization that it needs to quickly get competitive.

Case Questions

In preparation for a brain storming session on the brand’s strategy, Hectomalt’s brand manager is seeking answers to the following questions:­ What are the reasons for decline in Hectomalt's share?­ What are the opportunities for reviving Hectomalt?

Research data – Contents

Market trends - Hectomalt

Gain loss for Hectomalt

Hot beverage data

Growing Up Milks

Large erosion in Hectomalt’ share over the years

Y(-10) Y1 Y2

67.4

87.4 88.6

14.9

7.8 6.4

Sales Volume Share in Health Food Drinks

(12 years before Y2)

Milo

Hectomalt

Is Hectomalt relevant to

today’s consumers?

Where have the Hectomalt drinkers gone?

Price?

What’s plaguing Hectomalt?

Questions confronting Hectomalt

Promotion?Place?

Product?

Weighted Distribution: a measure of product availability

Jan Y1

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y1

Jan Y2

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y2

40

50

60

70

80

90

100

Provision

Minimarket

Super/Hypermaket

Share of trade for Health Food Drinks:

Super / Hypermarkets: 78%Minimarkets: 15%Provision: 7%

Hectomalt - Weighted Distribution

Share in handlers

Jan Y1

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y1

Jan Y2

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Provision

Joka (All channels)

Hectomalt’s Share in Handlers – (Value Share / Weighted Distribution)

Price

Jan Y0

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec Y

0

Jan Y1

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec Y

1

Jan Y2

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec Y

2

0

5000

10000

15000

20000

25000

30000

10.00

10.50

11.00

11.50

12.00

12.50

13.00

Vol

ume

(kg)

Pric

e ($

/kg)

Volume

Price

Trend in price and volume for Hectomalt

Hectomalt is price sensitive with estimated elasticity of -2.3

Series1

-5 -4 -3 -2 -1 0

-2.3

Hectomalt : Price Elasticity

Given its estimated price elasticity and its price at the end of Y2, a reduction in price would yield an increase in the brand’s profitability only if Hectomalt’s gross margin was greater than 30%. However Hectomalt’s gross margin was 25%.

13

15

12

5

7

2

-6

-9

-9

-16

-2

5

1

-4

-2

-2

-1

1

-4

7

Hectomalt and Milo Brand Image Profile

Brand Image Profile Hectomalt Milo

Popular

Healthy

Younger people

Sporty

Chocolaty

Energetic

Smooth

For the whole family

Affordable

Malty

Hectomalt and Milo: Demographic Profile

% Buyers Cups per buyerJul−Dec Y2

Milo

% Buyers Cups per buyer

Hectomalt

41

28

44

35

48

32

60

44

11

6

11

14

11

12

8

12

97

78

109

90

117

66

135

110

55

47

63

50

63

46

53

67

Demographic Analysis

Total

25-34 years old

35-44 years old

With Children

Without Children

Children

0-4 years old

Age of Grocery Buyers

45 years & above

5-14 years old

Age of Child

What else do Hectomalt buyers purchase?

Coffee

Nescafe

Tea

Lipton

Milo

Ovaltine

Nestomalt

80

61.3

29.7

26.3

61.8

11.2

17.9 Jul−Dec Y2

Purchase Basket - %Buyers

What else do Hectomalt buyers purchase? Break-up of volume

27.4

48.6

24

Coffee HFD Tea

45.1

14.2

3.7

25.9

11.1

Other HFD

Hectomalt

Ovaltine

Nestomalt

Milo

Jul−Dec Y2

Purchase Basket – Break-up of volume

Gain Loss for Hectomalt

Gains Loss analysis of Hectomalt within Health Food Drinks

Market Contraction/Expansion

New / Lost Category Buyers

Switching Gain / Loss

(525)

(330)

(172)

344

245

136

Net Loss: - 302

- 181

- 36

Loss ($’000) Gains ($’000) Net

- 85

Hectomalt Gain Loss: Period Y1 – Period Y2

Brand Switching behaviour within Health Food Drinks

Hectomalt

154

91

109

100All Other Brands

NestomaltMilo

Ovaltine

Hectomalt Gain Loss: Period Y1 – Period Y2Brand Switching ($ ‘000)

Powdered Milk

Growing Up Milk

Tea

Coffee

Health Food Drink

(85)

(350)

(15)

(29)

(172)

65

110

14

31

136

Net

Hectomalt’s Gain Loss across categories

Interaction Index

63-20

270 -240

45-1

522

168-36

Hectomalt Gain Loss: Period Y1 – Period Y2

Interaction index provides a measure for the extent to which Hectomalt buyers interact with the categories. Norm is 100

Loss ($’000) Gains ($’000)

Hot Beverage analysis

Hot Beverages Shopping

80% of homes bought hot

beverage over the 6 months

Buying on average 450 cups

(2.5 cups/day)

Over 4.5 purchase occasions

100 cups per trip

Jul−Dec Y2 Hot Beverages(Tea, Coffee & HFD)

Age 25-35

Age 35-45

Age 45-55

Age 55-65

70

85

85

76

250

450

640

360

% Buyers Volume per Buyer: Cups

12

34

42

11

Distribution of volume

Beverage Consumers: Demographic profile

Hot beverage buying behaviour across age profile of the household grocery shopper Jul−Dec Y2

Tea

Coffee

HFD

25

60

60

% Buyers of HFD, Tea and Coffee

% Buyers

180

435

90

Cups per Buyers

a cup a day

2.4 cups per day

About half cup per day

25

75

20

% Loyalty

Hot Beverages - %Buyers, Consumption, Loyalty Jul−Dec Y2

111118 114

Lipton Nescafe Milo

Major brands in Hot Beverage Market

Y0 Y1 Y2

Sales Volume (Million cups)

170160 160

93 96101

Total Hot Beverage: 732 743 746 million cups

Hectomalt

108.6

7.3

Growing Up Milks

Growing Up Milks are powdered milks specially formulated for toddlers and young children with vitamins and minerals that aid their mental and physical development. Premium growing up milks also include ingredients such as AA, DHA, taurine and nucleotides, some of which exist as tissue in the human brain.

Growing Up Milk, Low Fat and Full Cream Milk market size (tons)Note: Population of children and infants is gradually declining in Joka

Growing Up Low Fat Full Cream

2707

839

1631

3050

921

1466

3458

988

1290

Y0 Y1 Y2

Powdered Milk CategoriesSales Volume: Tons

Health Food Drink and Growing Up Milk Market Size ($M)

Growing Up Milk Health Food Drink

50.5

34.9

60

36.2

72

37.8

Y0 Y1 Y2

Growing Up Milk, Health Food Drink Market Size - $M

Overlap analysis for young families

8.3 19.1 72.6

HectomaltRelative

Penetration 27.4%

Note:16.5% of young/mixed families buy Hectomalt and/or GUM :

Penetration = 16.5% (rebased to 100)Relative penetration =100%

GUMRelative

Penetration 91.7%

70% of Hectomalt Buyers purchase

GUM

21% of GUM buyers purchase

Hectomalt

Y2Base: young/mixed family(Families with one or more child aged below 10 years)

Y0 Y1 Y2

54.3 49.340.8

23.226.2

31.0

22.5 24.6 28.3

Upper Premium

Premium

Economy

Growing up milk market volume break-up across of price segments

Growing up Milk: Segment Volume Share (%)

2%

+23%

-6%

+30%

+27%+34%

59.3%(74% in terms of

Value Share)

39

55

18

35

% Disagree / Strongly Disagree

“Higher price means better quality” (% Disagree, % Agree)

Agree / Strongly Agree

Y2

Y1

To what extent do you agree with the following statement:“Higher price means better quality”

Growing Up Milk

Reasons for switching to Growing Up Milk

%

48

28

24

12

10

33

25

10

Ingredients

Contains advanced nutrients

Higher calcium content

Mental / Physical Development

Improves IQ

Good for brain

Weight gain

Aids growth

What were your reasons for switching to Growing Up Milk?

Re-inventing Hectomalt

What are the reasons for decline of Hectomalt?

Growth Opportunities for Hectomalt