Problem statement

Horlicks is a leading brand of glaxosmith kline in nutritional health drink

segment which has the highest market share with its motivational campaign
of epang opang jhapang or taller, stronger and sharper which has
attracted mom and children. The quality of the product is not consistent
rather improved time to time and also has a diversified product line. Brand
has a competitive advantage and brand image therefore being priced
premium has the highest market share .Despite its higher prices it has still
been able to sell more than its competitors. Other brands like nestle and
cadbury have also introduced nutritional health drink and in last couple of
years they have priced less than horlicks which is identified as threat to the
brand.
Problem
Competitive advantage created by Horlicks is being imitated by its
competitors and they now reduced their product price. What strategy should
Horlicks use to remain the leader in market and the pricing strategy?
Objective
To suggest a price revision basis change in price and its effect on sales for
last 5 years.
Data Collection
Source of Data: local super market.
Duration for collected Data: 5 years (2011-2015)
Data variables: Units sold annually and price of the product
Data has been collected from a leading sales store in the local market
Method of data Collection: Interrogation
Name of the Respondent: Mr Rajinder singh (manager at super market)
Primary data collection
Q1
A
Q2
A
Q3
A
Q4

Which are the leading brands of nutritional health drink?

Horlicks, complain, bournvita, boost
Which of the these brands sells the most ?
Horlicks
What is the effect on milk sales?
Previously milk was not taken by most of people but after horlicks came
to market people starting consuming milk.
How many units of horlicks 500gm bottle/packet is sold in a day?

A
Q5
A

Q5

28
Why is horlicks consumed more?
Horlicks is a brand which has targeted every age group people and
always improved, has priced a bit higher than its competitors but the
quality and taste has been maintained.
How has the per day sales increased or decreased in last 5 years ?
Units sold
Year
Daily
2011
12
2012
16
2013
18
2014
23
2015
30

Shopkeeper had emphasized that Horlicks price has been increasing in last 5
years @ 6% annually.
Computation of total sales
It is assumed that a local shop operates for 26 days in a month .sum total of
312 days are available to sell the product
Calculation of Regression
Dependent variable: quantity sold
Independent Variable: Price of the product

Year

Quant
ity
sold

2011
2012
2013
2014
2015

3744
4992
5616
7176
9360

Price of
horlicks
(product)
175
186
199
211
225

Calculation of Regression

SUMMARY OUTPUT

price of
bournvita(subs
titute)
182
192
200
207
215

price of
milk
(complimen
tary)
13
14
16
18
20

Regression Statistics
Multiple R
0.992965
415
R Square
0.985980
316
Adjusted R
0.943921
Square
265
Standard Error
512.9525
768
Observations
5
ANOVA
Df

SS

MS

Regression

Residual

61682
68
26312
0.3

Total

18504802
.85
263120.3
461
18767923
.2

Coefficie
nts
4424.585
691
968.1863
561

Standard
Error
15175.41
916

t Stat

676.1730
449
2936.226
29

609.8480
949

Intercept

Price of horlicks
(product)
price of
bournvita(substitu
te)
price of milk
(complimentary)

837.9964
172

3168.690
953

Y = a + b1x1 + b2x2 + b3x3

a is the intercept coeeficient
b1 is price of product coeeficient

Significa
nce F
23.442 0.15040
76
5

PLower
value
95%
0.8193 -197247
0.2915 92
6
1.1553 0.4541 59
92
9679.57
1.1087
6
0.9266
4

0.4671 96
8425.03
0.5242 3
43198.3

Upper
95%
18839
7.4

Lower
95.0%
19724
7
11615. 94
9679.5
7
7072.6 82
8425.0
3
37325. 81
43198.
3

x1 is price of product
b2 is the price of suppliment coeeficient
x2 is the price of suppliment
b3 is the price of compliment coeeficient
x3 is the price of compliment

Elasticity computation

Yea
r

Quanti
ty sold

chang
e in
quanti
ty

3744

Price
of
horlic
ks
175

201
1
201
2
201
3
201
4
201
5

chang
e in
price

Del
Q/Del P

4992

186

1248

11

5616

199

624

13

113.4545
455
48

7176

211

1560

12

130

8736

225

1560

14

111.4285
714

P/Q

0.04674
145
0.03725
962
0.03543
447
0.02940
357
0.02575
549

price
elasticity

4.227272
727
1.700854
701
3.822463
768
2.869897
959

Suggested Pricing Strategy

Price elasticity is elastic because small change in percentage change of price results in substantial
change in demand of horlicks. The competitors had high priced product before and suddenly in
last two years reduced the price in order to increase sales but still being the premium priced
product horlicks has high demand as it has a high quality product. Relative rise in price of the
product company has been able to sell much more in quantity. On basis of this observation GSK
can continue with its price and get the desired amount of sales as it doesnt depend on the change
in price but should maintain a margin with competitors price.