Thursday, October 2, 2008
ranga on first generation Entrepreneurs
C K Ranganathan,(Ranga) Chairman and Managing Director, CavinKare
Ranganathan set up Cavin Kare in 1983. Under his leadership, Cavin Kare has grown from being a marketer of a single product – shampoo - to one offering consumers a range of hair care, skin care, and personal care products as well as packaging solutions, with a sales turnover of about Rs 3.50 billion. Smart marketing and clear product positioning have been the firm’s sources of strength, and these attributes have been instrumental in driving its growth. . The firm currently markets over 15 products in the hair care, skin care, and personal care segments.
Ranga said that the first generation entrepreneur requires belief, passion, the will to succeed and the hunger to grow. He began with a description of his struggles during the early days of Cavin Kare, which started operations as a manufacturer and marketer of shampoos. He was particularly handicapped as he had chosen to part ways with an established family business, had little experience in the manufacture of shampoos, limited amount of money, and only a moderate education. His strong will to succeed, however, helped him overcome these handicaps.
Ranga realised early that the firm could differentiate its products from those of its competitors only if it challenged existing norms and established new rules of the game, thereby creating a competitive advantage for itself. He identified product design and development, and marketing as keys to success in the FMCG business and therefore decided to outsource manufacturing, a strategy that continues till date. To ensure quality supplies, a strict quality assurance programme was instituted. Suppliers are rewarded by being paid ahead of due dates.
An interesting aspect of its product offerings is that its products span both ends of the price spectrum, ranging from the very low priced 50 paisa shampoo sachet to products priced higher than erstwhile market leaders. CavinKare has now integrated backwards, setting up associate firms that manage its advertising, media buying, product packaging, and R&D activities. It has also commenced marketing of pickles in sachets.
Summing up, he said that his success was driven by his belief that he was the master of his own fate. He exhorted students to seek out opportunities to create wealth and go ahead fearlessly. He called stretching beyond existing resources the hallmark of an entrepreneur and hoped that the efforts of the EVC Club and the WCED will help foster a spirit of entrepreneurship among students.
4 A's of rural marketing
Adaptability
Availability
Affordability
Acceptability
- Commitment from the top management: This must be total and management must realize that it is long haul and an investment into the future, otherwise RM will not give long term results. He sites HLL and ITC examples.
- Getting a dedicated task force: Rajan says that RM requires a dedicated mindset which many urban oriented MBA's don't possess. He suggest hiring of the RM team from students from RM institutes like IIRM or students with fire in their belly about RM from second level institutes, those who have taken RM as an elective course. He also advocates treating and paying such employees well and giving them an indication of their career graphs in the company. He reverts to an old saying - You pay peanuts, you get monkeys.
- Setting Clear Objectives: It is important to clearly define, in the early stages, the goals for the RM initiative and whether the initiative is a tactical effort to achieve increased sales in specific areas during specific time or build strong equity for the brand in Rural India.
- Understanding the Mindset of Consumers: Understanding of the mindset of the rural customer is important for the rural specialist to come up with a customized plan of action. The Rural market is heterogeneous with traditions and cultures that vary from state to state, even region to region in some cases. Most companies equate their findings from studies based on urban India to the rural segment and initiate a strategy based on this. Rajan says that his experience shows that the attitudes, fears, expectations, aspirations, comprehensions of rural customers to products and brands are different from urban customers. Advantages of such research are manifold because they give valuable ideas for new product development to suit the market - (a case in point a refrigerator with a twelve hour battery backup to take care of the power outages in rural areas), or new methods of physically reaching out to rural folks, along with insights into the right communications strategy and delivery (media) strategy
- Ensuring availability: In most cases, distribution is one of the biggest nightmares; the task of reaching products to 600,000 plus villages is a challenge. TVC's have raised the aspirations of the rural customer and makes him demand the product from the local shopkeeper, who then buys the required quantity from the nearest feeder, markets that he visits regularly for his supplies. Hence feeder markets such as towns and villages having populations of 10,000 to 15,000 initially must be provided for to start the first steps towards RM
- Evolving a Comprehensive strategy: A comprehensive strategy involving multimedia (including mass media, where necessary) has better results as compared to those one-off projects with limited goals.
- Involve the Region: RM is a highly regional subject, with a company's regional teams being specialists in their respective regions. Involving them from the word go to ensure ownership of the campaign by the region, and also getting their insights and inputs in the development implementation of the campaign is essential
- Developing full proof plan implementation: Conducting a pilot in one taluk in one district of a state to gain insights from it, before a national roll out of a rural campaign is not realistic. To get meaningful results, both in terms of impact and sales, the pilot must cover at least as few districts' of the state, if not the whole state. The implementation plan must be as comprehensive as possible to ensure that all the elements to be checked out are included in the plan. Implementation of any rural campaign requires meticulous ground level planning and a thorough briefing and training of the field level people before execution. Sufficient time must be given to the agency to check out all the elements, before getting into the field
- Provide adequate budget: A decent budget could be spelt out by a rural specialist, depending on the task and the region. If the budget is limited, it should not be spread thin by trying to look at too many markets. If a company feels that it has a bright future in rural markets or would like to target the rural markets, then it is better to invest today so that the early mover advantage is gained to reap rich rewards in the future. But miracles should not be expected overnight, neither should hope be lost
- Evaluating the Results: The three areas that should be studied to understand that impact of a Rural campaign, according to Rajan are: Brand awareness, Brand Conversion, Increase in sales
Shampoos
Shampoos: Putting money where the lather is
Aarati Krishnan
AT A time when most FMCG (fast moving consumer goods) categories are inching along, personal products are being seen as the harbinger of prosperity. And hair care products is the fastest-growing category within personal products.
Between 1994 and 1998, the market size of products such as skincare and toothbrushes doubled in value. But the size of the shampoo market expanded two-and-a-half times over the same period. Not surprisingly, shampoos is a high priority area for major players such as Hindustan Lever. The current size of the shampoo market, according to ORG-MARG, is Rs 850 crore -- equivalent to 30,000 tonnes in volume terms.
Unlike other FMCG categories such as soaps and detergents, which boast of a penetration level of more than 90 per cent, shampoos remain a low penetration category. Industry sources estimate that the urban market penetration of shampoos is a modest 36 per cent. Shampoo usage in the rural markets is even more infrequent, with a penetration level of 12 per cent. Thus, even for the largest player in this industry, there is considerable scope for volume expansion by converting non-users.
Few players, HLL dominates
For a market with high potential, the shampoo market in India is dominated by just a few players. From scores of brands five years ago, the shampoo market has now been whittled down to a handful. Hindustan Lever (HLL), with a 65 per cent volume share (68 per cent share by value), dominates the market with brands such as Sunsilk, Clinic Plus and Clinic All Clear. Cavin Kare Limited, an unlisted company from Chennai, with brands such as Chik and Nyle follows with a 19.8 per cent volume share.
Procter & Gamble (P&G) is the only other large player in this category with brands such as Pantene Pro-V and Head & Shoulders. P&G discontinued its shampoo manufacturing operations in India in 2000. Most of its brands are today directly imported from other Asian countries such as Thailand, Taiwan and Vietnam.
New entrants are probably discouraged by the formidable task of establishing a distribution network from scratch. HLL's long established ties with retailers and its extensive distribution reach probably acts as an entry barrier for new entrants.
Cavin Kare Limited, which has managed to garner a significant share of the shampoo market despite this handicap, has focussed on scaled-down versions of its brands and herbal shampoos -- two segments where the market leader did not have a presence. Cavin Kare's shampoo business has grown faster than the overall market, at 20 per cent in 1998, 4 per cent in 1999 and 34 per cent over the past four quarters.
A blip in growth rates
Despite its undisputed potential, the rapid expansion of the shampoo market was interrupted in 1999. Overall growth rates in the market slowed to 1.7 per cent in 1999, from 16 per cent the previous year. Between January and November 2000, however, the market appears to have recovered some, and the shampoo category has grown by around 10 per cent.
The reasons for the slowdown? ``Lack of innovation'', says Mr D. Shivakumar, General Manager Marketing, Personal Products, Hindustan Lever. The company has identified three major barriers to shampoo use in India -- the perception that shampoos contain harsh chemicals that could damage hair, high price and the view that the shampoo is more of a glamour product rather than a hygiene product.
``We like to see it this way. Though we have a 69 per cent share of the shampoo market, we have just 10 per cent of the hair wash occasions in the country. We will work at getting consumers to switch over from alternatives, such as natural products and soaps, to shampoos'', says Mr Shivakumar.
His counterpart in Cavin Kare attributes the slowdown in growth rates to the contraction of agricultural incomes. ``The rural markets have slowed down due to the two consecutive disastrous monsoons'', says Mr Nandakumar, President, Marketing and Sales, Cavin Care. This does seem a plausible explanation. Roughly a fourth of the shampoo market is in rural India. But the rural market is the key driver for sachets, which make up 70 per cent of the total shampoo sales. HLL has higher stakes in the rural market with an 80 per cent share.
Scaled down versions
Therefore, the strategies of the major players have revolved around attacking these barriers to usage. The players obviously believe that the key obstacle to recruiting new users lies in the high price of shampoos as a product. Unlike other FMCG categories, where marketers are experimenting with low unit packs, as a concept, the low unit shampoo packs have been around for over a decade. Therefore, marketers have been working at scaling down prices further.
Cavin Kare made the first such attempt last year. It introduced a smaller 50 paise sachet of Chik, when most other sachets retailed at Rs 2. The effort appears to have been an unqualified success, with the Chik brand expanding by 40 per cent after the launch. A new 50 ml bottle of Chik priced at Rs 6 (when most other brands were available in 100 ml bottles and above) has also helped expanded the brand.
HLL acknowledges that the Chik innovations have expanded the overall market, trimming HLL's volume shares by 2-3 percentage points. ``Cavin Kare has expanded the market itself. Though our volume shares are down, our brands have not lost volume. They continue to sustain their earlier growth rates,'' says Mr Shivakumar.
HLL has responded with its own 50 paise version of Lux shampoo. The company claims the recently launched 30 ml bubble pack for Clinic Plus (Rs 8), is an innovative and cost-effective alternative for sachet users. While sachets are difficult to store and re-use, the bubble pack allows the user to extract just the right quantity for a single wash.
The scaled down versions could help pep up volume growth rates for major players. But they have also had the effect of lowering the per ml cost of the major brands retailed through sachets. Till the time the players upgrade users to the larger pack sizes, the sachet revolution could restrict margin expansion for the players.
Functional benefits
Players have also tried other routes to expand the shampoo market. Fighting the perception that shampoos are essentially glamour products, marketers have tried to add a utility value to shampoos by offering functional benefits. Anti-dandruff shampoos represent this attempt. Clinic Plus, one of the first anti-dandruff brands, is the largest shampoo brand today, with a market share of 31 per cent.
Clinic All Clear, an anti-dandruff extension targeted at the youth has also managed to garner a 13 per cent share. Due to its low pricing (Rs 71 for a 160 ml bottle against Rs 68 for a 100 ml bottle of Head & Shoulders anti-dandruff shampoo), the brand also has a significant rural market share of 44 per cent.
HLL has also experimented with different versions of Sunsilk for dry, normal and oily hair. Procter & Gamble's Head & Shoulders Menthol and Pantene Lively Clean also offer functional benefits to users. Since these add-ons enable brands to command a price premium over the plain shampoos, this strategy could aid both volume and margin expansion.
Herbal opportunity
One of the key barriers to shampoo usage lies in the reluctance to use a synthetic product on hair. Worldwide, therefore, herbal shampoos or botanicals, are a fast growing category. Ayur from RDM Traders Private Limited and Nyle Herbal, a herbal shampoo launched by Cavin Kare, have been some of the early entrants in the Indian herbal shampoos market.
These products claim to use traditional Indian herbs such as shikakai, soap nuts and amla as ingredients and have been a success. Nyle Herbal is among the top five shampoo brands in the country and herbal shampoos today account for 10 per cent of the market size.
That industry leader, Hindustan Lever, does not as yet have a presence in this segment is noteworthy. ``We do not have immediate plans to enter this category. Today, brands are expensive assets, requiring continuous investment. Creating a new brand from scratch would be quite undesirable in these circumstances'', feels HLL's Mr Shivakumar. However, brands such as Sunsilk have been emphasising natural ingredients such as `fruitamins'.
However, high price could be a key barrier when it comes to herbal shampoos. The key challenge in manufacturing herbals lies in efficacy. Users typically require larger quantities or higher concentrations of herbal shampoos to replicate the results of synthetic shampoos. Bringing down prices can therefore be quite difficult in this case. This is probably why 90 per cent of the herbal shampoos still sells only in the urban markets.
Moving across category barriers
Meanwhile, the value-added shampoo segment is getting quite crowded, with a range of pharmaceutical and cosmetics companies launching specialised products. While Dabur has leveraged Vatika's brand equity to launch Vatika Herbal shampoo, Godrej Soaps has leveraged its dominance of the hair colour market to launch Godrej Colourgloss shampoo, for users with coloured hair. This apart, several pharma companies (including Johnson & Johnson) have launched medicated anti-dandruff shampoos (which will probably carry higher credibility with buyers), while cosmetic companies such as Biotique and Lotus Herbals also have herbal shampoos on the shelves.
Cavin kare
C K Ranganathan, chairman and managing director of�CavinKare, has shown the world it is possible to beat the multinationals even in the most difficult market of fast moving consumer goods.
Ranganathan's journey, which started from a�small town�of Cuddalore in Tamil Nadu, has been an amazing one.�A business which he started with only�with Rs 15,000�is now worth Rs 500 crore (Rs 5 billion).
He learnt the first entrepreneurial lessons from his father, Chinni Krishnan, who�started a small-scale pharmaceutical packaging unit,�before moving on to manufacture pharmaceutical products and cosmetics.
In an interview with rediff.com,�the CavinKare chief speaks about his inspiring journey.
His father,�his inspiration
My father, Chinni Krishnan, an agriculturist, was also into pharmaceutical business. As I was poor in academics, he wanted me to either do agriculture or start a business.
My�siblings were good�in studies -- two of them became doctors and�another�a lawyer. I was the odd one out. While my siblings studied in English medium schools, I was put in a Tamil medium school. I used to suffer from an inferiority complex�because of�my poor academic record.
Studies did not interest me, but�rearing pets did. When I was in the fifth standard, I had a lot of pets --�more than 500 pigeons,�a�lot�of fish and a large variety of birds. I used to�earn my�pocket money out of�pet business at that time. Perhaps, the entrepreneurial spirit�in me showed its first streak.
The origin of the concept of sachets
My father died as I�entered college.�He had come out with the sachet concept a couple of years prior to his demise. He felt liquid can be packed in sachets as well. When talcum powder was sold only in tin containers, he was the one who sold it in 100 gm, 50 gm and 20 gm packs.
When Epsom salt�came in 100 gm packets,�my father�brought out salt sachets�of as low as 5 gm.
'Whatever I make, I want the coolies and the rickshawpullers to use. I want to make�my products affordable to them,' he used to say.�
Selling things in sachets�was his�motto as he said, 'this is going to be the product of the future.' But�my father�could not market the concept well. He�moved from one innovation to another but never thought of marketing strategies. He was a great innovator, but a poor marketer.
Joining the family business
After my father's death, my brothers took charge of the family business. In 1982,�when I joined them after my studies, they had�launched�Velvette Shampoo. Within�eight to�nine months, I left the�business because my ideas�clashed with theirs.
As I was in the manufacturing unit, I did not know anything about marketing or finance. But, my�inferiority complex notwithstanding, I�was somehow confident�of doing�business better.
Starting his own business with�Rs 15,000
I had left�my brothers saying that I did not want any stake in the�property or business. That was a defining moment for me. I had saved�Rs 15,000 from my salary and that was all I had. Yet I was confident of achieving success.�I�did not feel anything�about riding a bicycle after having got used to cars.
For a week, I�could not make up my mind as to what�business to do. I knew only two things; making shampoo and rearing pets. I didn't want to�venture into the shampoo business as it�would initate a fight with my brothers. However,�I decided to do the same�later as I�could only make shampoo.
I�rented a house-cum-office�for Rs 250 a month against an advance of Rs 1,000. I took another place for�the factory for a rent of Rs 300 a month and�against an advance of Rs 1,200. I bought a shampoo-packing machine for Rs 3,000.
How Chik Shampoo was born
I named�it Chik Shampoo after my father.�The product did not succeed immediately;�we learnt�many things�during the process. In the first month, we could sell 20,000 sachets and from�the second year, we started making profits.
I moved to Chennai in 1989 but our manufacturing unit continued to be�in Cuddalore.�It took me three years�to get�the first�loan because banks asked�for collateral. I did not have any. But�one particular bank gave me a loan of Rs 25,000�which we rotated and later�upgraded�to Rs 400,000, Rs 15 lakh (Rs 1.5 million), etc.
You know what the bank manager�wrote in our loan application? 'This person does not have any collateral to offer but there is something�interesting about this SSI unit. Unlike others, this company pays income tax!'
I must say�my business never looked back because I was very particular�about paying�income tax.
Strategies�that made Chik Shampoo No. 1 in South India
When�Chik entered the market,�Velvette Shampoo�was being marketed aggressively by Godrej. But a scheme of ours became extremely successful -- we exchanged five sachets of any shampoo for�a Chik Shampoo sachet, free.
Later, we altered the scheme�--�we started�giving one free Chik Shampoo sachet�in lieu of�five�Chik Shampoo sachets only. Soon, consumers started asking for Chik sachets only.�The sales went up from Rs 35,000�to Rs 12 lakh (Rs 1.2 million)�a month.
When we introduced jasmine and rose fragrances, our sales went up to Rs 30 lakh (Rs 3 million)�per month and with actor Amala as�our model, our sales rose�to Rs 1 crore (Rs 10 million)�a month! Each idea of ours was rewarded by our customers.�There has been no looking back since then.
Our market share increased and in 1992, we became the numero uno in South India. It took nine years for me to overtake my brothers' business.
How Chik Shampoo conquered the rural market
Multinational companies sold products in big bottles and not in sachets and they�sold only from fancy stores. They�did not look at the small kirana stores, nor did they look at the rural market.
We went to the rural areas of South India where people hardly used�shampoo. We showed them how to use it. We did� live demonstration on�a young boy. We�asked those assembled to feel and smell his hair.
Next�we�planned�Chik Shampoo-sponsored shows of Rajniknath's films. We showed our advertisements in between,�followed by�live demonstrations.�We also distributed�free sachets among�the audience after these shows. This worked wonders in rural Tamil Nadu and Andhra Pradesh. After�every�show,�our shampoo sales went up�three to�four times.
Today, the Indian rural market is growing�at a�pace double than that of the urban market.
Launching Meera Herbal powder
We continued with Chik Shampoo for seven years before�venturing into anything else.
Meera Herbal powder was actually not our idea. Shaw Wallace already had a herbal product but it was marketed very poorly. We felt there was a�demand for�herbal products and�we made�a good product. I felt we should be the�leader if ours was a good product. And guess what? In the third month itself, we�topped the market. In�six months, we had 95 per cent market share,�while Shaw Wallace had only�4-5 per cent.
How Beauty Cosmetics became CavinKare
As we�planned to expand to new�products, we thought the name Beauty Cosmetics would be restrictive.�In 1998, we ran a contest among�our employees for a name and one of them suggested�CavinKare; with C and K spelt in capitals. CK, my father's initials. Cavin in�Tamil means beauty and grace.
Perfumes for the poor
We wanted to cater to those�who cannot afford (high priced) perfumes. Good perfumes�came at a huge price -- they were beyond the means of ordinary�people.�We decided to come out with a Rs 10 pack Spinz.�We were successful in that too.
Shampoo market share
In the last two to three years, our market share has come down though we are growing. It is mainly because of the anti-dandruff shampoos in the market. We do not have an anti-dandruff shampoo yet. From 0 per cent, the anti-dandruff shampoos have taken over 25 per cent of the market.�
Only 75 per cent of the market, therefore, constitutes�ordinary shampoos. We hold 20�per cent�of�the�market share.�
But we are the largest brand in rural Uttar Pradesh,�Andhra Pradesh, etc. and�we are�the number one in many other states as well.
On the decision to launch a fairness cream
We decided to launch Fairever in 1997 as we saw a huge�demand fairness cream.�We are the second largest player in the market in this.
Research�states that�when a product is good,�consumers do not�shift to a new brand.�Our team told me not to venture into the fairness cream market as the consumers were�quite satisfied with the existing products. But we went�to launch our product�containing saffron --�which is�traditionally used�to get a fair complexion. In�six months, our sales galloped.
This was followed by Indica hair dye.
Two and a half years ago, we launched Ruchi pickles in sachets and we�became number one there too. We sell close to 5,000 tonne of pickles per annum. We hope to double this in�two to�three years. Food is a huge market: we have understood that.
Our target is to be a Rs 1,500 crore (Rs 15 billion) company in another three years.
Reasons behind his success
Teamwork is the main reason for our success. We have good professionals who�work really hard. The second reason of our success is innovation. We have executed innovative ideas as well.
CavinKare Ability Award
This month, we�presented the 5th CavinKare Ability Foundation awards for physically disabled achievers.
I stayed as a tenant at Jayashree Ravindran's place�(the woman who started the Ability Foundation). Once, she said� she wanted�to start a magazine for the disabled. Though she did not ask for�sponsorship, I gave her a cheque of Rs 25,000. I also became one of the Foundation's founder members.
Once we came to know about�the disabled�who have�climbed the ladder�of�success, we -- Ability Foundation and CavinKare�-- decided to institute an award for�them.
I feel each of us has to give something back to the society. I have great admiration for those who fight against all odds and�attain success. When I started my career, I�only faced�shortage of funds but these people tide over graver difficulties.�We�must applaud their fighting spirit.
C K Ranganathan, chairman and managing director of�CavinKare.