Corporate Front: Start-Up, CavinKare Works Up A Herbal Lather

While the company has captured a niche in the personal products market, expansion will need a change of strategy.

FACTFILE

Name: C.K. Ranganathan
Age: 38 years
Education: B.Sc. (Chemistry), Annamalai University, 1982
Business: Personal care products
Company: CavinKare
Work Exprience: Set up Chik India in 1983; Beauty Cosmetics, subsequently renamed CavinKare, in 1990; and Packaging India in 1990
Initial Investment: Rs 15,000
No. of Employees: 460
Track-Record: Turnover rose from Rs 5 crore in 1990-91 to Rs 85 crore in 1997-98
Work Style: Delegate, but keep your ear to the ground
Management Credo: Identify niches and focus on product differentiation
Hobbies: Chess; aquariums

He stood uncertainly under the scorching mid-morning sun, debating whether to call the whole thing off. Barely a year out of college, and all of 23, C.K. Ranganathan was trying to sell sachets of shampoo that he had developed in a small laboratory in Chennai.

On that sultry day in March, 1983, it seemed a workable idea. His father, Chinni Krishnan, had pioneered the concept of using sachets for personal care products: it was his Well Pharma that had launched the Velvette range of shampoos in 1980. This was a business the young rebel knew--and wanted to tackle on his own terms. But Ranganathan was aware that there were already hundreds of Velvette clones in the marketplace. Would his freshly-concocted Chik brand be commoditised in preparation for slaughter by the transnationals?

Perish the thought. Ranganathan's fully-owned start-up, CavinKare--which was earlier named Beauty Cosmetics--is a Rs 85-crore outfit today, with its own packaging arm, Packaging India. Despite a marketing reach limited to South India, the company has formidable brands in its kitty. Meera Kunkudukaaya Rasam, the flagship brand, has a 75 per cent share of the Rs 45-crore shikakai powder market. Its herbal shampoo, Nyle, launched in 1993, has mopped a 10.90 per cent share of the Rs 450-crore market, next only to Hindustan Lever Ltd's (HLL) Sunsilk Nutracare (15 per cent) and Clinic All Clear (11 per cent). Spinz, a dab-on perfume, accounts for 8 per cent of segment sales in volume terms. And Chik now commands a 5.60 per cent share of the market, though the brand belongs to Ranganathan's previous start-up, Chik India.

Ranganathan, now 38, and the Managing Director of CavinKare, smiles gently: "I was confident about our product superiority, and the only stumbling block was to get people to use it the first time." The end result is enviable. In a highly competitive personal care marketplace--packed with local brands at the lower end, and dominated by the likes of HLL, Procter & Gamble, and Godrej Soaps (Godrej) at the premium end--CavinKare has managed to create a customer pull for its products. And that too without the marketing and financial muscle of its well-heeled transnational and domestic rivals. Eight years after Beauty Cosmetics was born, CavinKare boasts of 6 mother brands and 65 Stock-Keeping Units (SKUs). How did Ranganathan do it? BT examines CavinKare's strategies.

AIM AT NICHE SEGMENTS. CavinKare zeroes in on niches only. In the process, it side-steps the biggies. For instance, the herbal powder segment had, till recently, 2 players: Wipro and Shaw Wallace. But both have moved out of the segment. And the threat is primarily from the cottage industry, which does not have the distribution reach or advertising budgets to match CavinKare. Agrees A.S. Srinivasan, 52, Adjunct Faculty at the Chennai-based Academy for Management Excellence (ACME): "The entry barriers are relative. While the bigger players have opted out of these segments, the small ones will remain small because they are commodity sellers." And the customer isn't complaining. Says Taran Chadha, 52, a CavinKare customer: "I find the company's Nyle cold cream to be less greasy than other similar products."

Customer feedback is vital. In fact, the company conducts regular customer surveys as part of its product development process. And Ranganathan travels once every 2 months to meet his distributors and retailers. The result: products that are unique to specific, localised markets. Meera was born out of the Andhra market's preference for a liquid shikakai hairwash over the traditional powder. It was an improvement over the coarse and smelly shikakai powder that customers were used to in the South. Similarly, Nyle was launched in North India to cash in on a trend triggered off by brands like Ayur, which lacked a marketing push. Notes N. Venkat, 37, President, CavinKare: "Ranganathan's gut-feel of the market is very good ideas come naturally to him."

INVEST IN FOCUSED BRAND-BUILDING. Of its turnover of Rs 85 crore, the company spent a staggering Rs 16 crore on media in 1997-98. Meera is handled by Ogilvy & Mather (O&M), and the other brands, by Rediffusion-dy&r and Fountainhead. Says Suguna Swamy, 52, Creative Director, O&M: "The challenge for us is to sharpen the product appeal and, at the same time, target possible conversions." So, CavinKare aims at the mid- and lower-income groups through TV ads and the vernacular press. It also uses local language programmes to narrow its reach to the target audience. In fact, CavinKare's advertising on radio established Chik as a brand.

Explains Ranganathan: "We don't have deep pockets. So, we have to be careful how we spend our money." Particularly as CavinKare doesn't under-cut its competitors. On the contrary, its products are priced marginally higher than the big players. For instance, CavinKare's Indica hair-dye sachet is priced at Rs 8 against Godrej's Rs 7. And HLL's Fair & Lovely sells for Rs 23 a tube, a rupee less than CavinKare's Fairever. Says Srinivasan of acme: "I think what CavinKare has been able to do is develop strong local consumer empathy. The small-town buyer identifies more with Chik than with a transnational brand."

MAXIMISE REACH & PRODUCT DEVELOPMENT. As CavinKare has a salesforce of only 255, it maximises market reach by roping in redistributors. It has 1,600 redistribution stockists servicing a network of 3.40 lakh retail outlets. Of these, 1.15 lakh are in the South alone, and 94,300 in Western India. Most of the retailers are in small cities, where CavinKare has focused on building its brand image. Says Ranganathan: "Having brands like ours gives tremendous confidence to retailers, since they have both product and price options."

Although CavinKare does not manufacture any product on its own--it has 6 dedicated suppliers--the company does invest in product R&D. CavinKare's R&D set-up employs 26 specialists in the fields of ayurveda and siddha medicine. And a high 4 per cent of the turnover is invested in sales. Explains Ranganathan: "Since differentiation is our strength, we must keep our product pipeline full." Agrees P. Easwaradas, 45, Vice-President, Amrutanjan: "For any fast-moving consumer goods marketer, it is critical to leverage portfolio to push profits."

GROW THROUGH PROFESSIONALS. Since the mid-1990s, Ranganathan has roped in professionals to run the show. Last year, the company went to B-schools for campus recruitment, promising fast career growth to compensate for thin pay-packets. Ranganathan's role is more of a strategist, tapping new opportunities and focusing on keeping the company's R&D engine humming. Says he: "The company is a lot more professional than it used to be. A lot of ideas now come from down the line."

Ironically, however, the very products that catapulted CavinKare to where it is today could restrict its reach in the future. Sure, the herbal bandwagon is a strong one to be on, but the market for this category will necessarily remain a fraction of synthetic products. Adds Sunil Duggal, 43, Vice-President (Sales & Marketing), Dabur: "CavinKare is one of the 2 companies doing well in the herbal market. But it competes in the lower end." Moreover, sales of CavinKare's Meera formulations may also taper off unless new consumers are brought into the fold. While CavinKare serves baby-boomers, it is unlikely that Generation X will want to use shikakai. To stay on its growth path, CavinKare will, thus, need to launch products that address a wider and younger platform. But that would put it in direct competition with the Big Boys of personal care. And that is where CavinKare's ability to clean up the competition will be put to the test.