CavinKare: Serving low income consumers

Group 4: Ambrish Awasthi Ayushi Agarwal Isha Nag Sidharth Ramachandran Varun Bajaj

Company overview
FMCG company with best new brand success ratio in the industry Set up with initial capital of Rs. 15000 and rose to Rs. 2640 Mn in 20 years Product line includes: Hair care (beauty and herbal shampoo) Talc and perfumes (deodorant) Beauty creams Actively promoted a culture of innovation within the organisation through 4fold strategy: Constant engagement with customers to gain special insights Screening customer insights for their potential and translating them into products

Unconventional product innovation based on insights

Refining and re-launching innovative products based on customer feedback

Untapped opportunity in rural markets

74.27% of Indian population 620 Mn
FMCG Category Penetration
(in percent)
Urban Percent Penetration 70 Rural Percent Penetration

Contributes 60% of Indias GDP

Market size of 70 Mn households for products priced below Rs. 1000 Huge opportunities as compared with penetration of FMCG categories in Urban areas Hair wash, Toothpaste & dishwash

66 55 40

32

36

38

20

16

12

12 1

Toothpaste Skin Care

Hair Wash

Talcum Powder

Dishwash

Ketchup

CavinKare had first mover advantage in terms of understanding the rural potential

Characteristics of the rural consumer

Income Distribution of Rural households
(in percent)
45001 215000 14% <16000 23% 22001-45000 32% 80 46 48 >215000 0.33%

Rural Occupation Distribution

(per '000 people)
762

5 16001-22000 31%

33

21

Occupation over 76% employed primarily in Agriculture Income more than 50% of households earn less than Rs. 22,000 per annum Culture Vast differences in culture even within the same state Geographical peculiarities in media exposure, making consumer recruitment highly specific Attitude Buying behavior: Do not want to block their money through purchase of high price SKUs; also do not want to be tied down to a brand Do not give much importance to cosmetic products they look for functionality

Value proposition to rural consumer

Rural Consumer: Occupation, Income, Culture, Attitude

Benefits

Availability

Cost

Product Features & Packaging

Distribution Channels

Pricing

Value

Providing value to the rural consumer through innovation Chik Shampoo

Product features and packaging

Innovation in features:
Appealing French fragrance added to shampoo for the first time Positioning of VFM (Value for money) as compared to positioning around health platforms by competitors

Innovation in packaging:
Single- serve sachets: provided convenience of buying product only when needed Sachet sales account for ~95% of market in units & 65% of market by tons Overcoming attitudinal issues of over spending on cosmetic products

Distribution
Rural markets spread across 600,000 villages with 82% of the rural population living in villages of 5000 people or less
Followed a novel approach by using haats & melas as the distribution channel
Haats Markets held weekly attracting villagers from neighborhood villages in the 12-15 km radius Higher incidence of purchase seen because of greater range of available products & perception of urban products being sold in haats 47,000 haats with average daily sales of Rs 0.2 million Melas Markets held along with amusement rides etc. normally after harvest as a kind of celebration Caters to a greater number of consumers because its larger than haat in size 25,000 melas with sales per mela approximated at Rs. 1.43 million

No. of Villages by population

(percent)

24.3 24.97

17.9

19.7

10.83

1.82 0.48

CavinKare s distribution network reached 0.75 million outlets as compared to HLL with a reach of 1 million outlets. Still a fraction of the 5.5 million outlets present in India

Promotion
Managing perceptions & educating consumers Live demonstration of shampoo usage & product benefit Wall paintings & video-on-wheels campaign Creating an aspirational value for shampoo through celebrity endorsements via mass media Promotion schemes Created a consumer pull with the Return four, get one free scheme

Door-to-door sampling & distribution of free samples

Distribution of free samples along with screening of movies to create brand awareness

Pricing
Aspirational need created by mass media advertising and BTL activations inhibited by unaffordable pricing
BEFORE CHANGE IN PRICING Cost per sachet Rs.2 No. of purchases per month 4*5 = 20 Total monthly cost Rs. 40

Achieved a reduced cost by altering product formulation using cost effective substitutes while maintaining quality Cost per sachet reduced to Rs. 0.50
AFTER CHANGE IN PRICING Cost per sachet Rs. 0.50 No. of purchases per month 4*5 = 20 Total monthly cost Rs. 10

Profits made on large volumes rather than large margins Cost per ml kept the same between sachet and bottle SKU so that people could upgrade easily

Key Learning
Rural markets can be highly profitable due to large volumes

To succeed in the rural market, companies must rely on innovation & new ideas
Buying behavior of rural buyers is very different from urban consumers gaining valuable consumer insight & then tailoring products Habit cultivation is often more important since rural consumers are not even open to try non essential items. Eg: Chik shampoo served as the recruitment brand for the entire shampoo industry Rural customers are highly price sensitive value proposition of the product should be well communicated Haats and melas form an innovative and effective way to reach rural markets as buying incidents increase during these events

WAY FORWARD
Expand distribution channel
In rural areas by using stockists & super stockists to reach out to villages with smaller population as well In urban areas build out a direct retail network to ensure presence of products on racks & displays inside outlets

Expand to different product categories following the innovation strategy of value product

NEW OPPORTUNITIES
Population X Incidence X Times X Amount
Analyzing opportunity of the toothpaste market using this Model
RURAL (earning less than Rs. 45000) 27.7 36.9 37.3 X X X 0.32 0.32 0.32 X X X 36 36 36 X X X 5 5 5 X X X 1595.52 2125.44 2148.48 5869.44 URBAN (earning less than Rs. 22,000) 5.3 7.1 X X 0.7 0.7 X X 36 36 X X 5 5 X X 667.8 894.6 1562.4 7431.84

Moderate growth rates combined with significant penetration makes Toothpaste a viable category As per the penetration vs. growth map, company operates in similar high growth areas like Deodorant, Skin Creams etc.

Thank you!