PGDM MARKETING (2018-2020)

Adaptive Market Leadership Assignment

On
CavinKare

Section: C2DE

Submitted by:

Amit Gupta (201830014)

Course Instructor
Prof. Subodh Tagare
CavinKare case: Serving Low Income Consumers
CavinKare Private Limited was started by Mr. C.K. Ranganathan. The brand took 20 years to
reach the position it holds today in FMCG market. There are several products which consist of
Chik (Shampoo,Talc), Meera (Herbal powder, liquid hair wash, hair oil etc.), Nyle, Fairever,
Raaga, Karthika. The company was initially named as Chik India in 1983, which went on to
become Beauty Cosmetic Private Limited in 1990 and finally changed its name to CavinKare
Private Limited. The company saw a significant growth which can be seen from its turnover
value rising from Rs. 850 million to Rs. 2640 million in just 4 years. Since 1994 onwards, it has
been growing at a compounded annual growth rate o about 31%.

CavinKare made innovations in their ideas by interacting with people at very ground level to
seek what their target customers really wants. It was very important to fill the gap-the rural
customers. So C.K. Ranganathan, understood this and started to tap the rural area customers. He
started a small company with only Rs. 15000 in 1983, called Chik India. The company saw slow
and steady growth which led to turnover of Rs. 850 million in 1998-99. The company was later
named as CavinKare.

The company saw an opportunity where rest of the companies did not. In India majority of the
population lives in villages or belong to rural area. Most of the known brands were selling their
products to urban class people only. This created a mindset in the people’s mind that shampoo
belongs to only the rich who have enough disposable income. Due to this, the awareness of use
of shampoos was less in their targeted audience of lower middle class and rural population.
They advertised their products by using popular stars in advertisements in order to create
awareness among their targeted audience. Even after those efforts, they were still unable to make
big sales. So, after that they started interacting with people living in rural areas and found out
that most of them could not afford current price of the shampoo which was priced at Rs. 2 per
sachet. CavinKare then devised cost effective shampoo production keeping the quality intact.

They also started the scheme of giving 1 free Chik shampoo sachet in lieu of 5 Chik shampoo
sachets. Soon the customers started asking for Chik sachets only. The sales went up from
Rs. 35,000 to Rs. 12 lakh a month. They also introduced jasmine and rose fragrances, which
made their sales jump to Rs. 30 lakh per month.

The rural market accounted for about 74.27% of population of India and contributed almost 60%
to India’s gross domestic product. The rural markets significance for low priced products was
very evident. In the exhibit we can clearly see that the low income group households comprised
of maximum market share of approximately 80%.
They unlocked the challenge by following simple but very effective ways of penetrating the rural
market:

 Educating consumers
 Single serve sachets
 Innovation
 Outsourced manufacturing operations
 Price performance relationship
 Extending distribution reach

CavinKare followed a four-fold strategy for promoting the culture of innovation:-

 Constant engagement with customers to gain special insights.
 Screening customer insights for their potential and translating them into meaningful
products.
 Challenging all conventional ways while translating insights into products.
 In case of problems, going back to the customer again to refine products and re-launching
improved ones.

Actions that helped CavinKare to succeed:

1. The most important thing that helped CavinKare to succeed is to target the untapped market,
that is, rural market. Since 74.27% of the population was from rural areas, which were not
explored by any other brand of shampoo.

2. They introduced the concept of sachets instead of big bottles. Not every household had that
much income that they could buy a bottle of shampoo. For them, use of shampoo was
restricted only to special occasions and thus buying a bottle for the same did not sound
logical to them.

3. They created awareness amongst the people about hair wash products. Normally, rural area
people used regular soaps or natural products to wash their hair and body. Thus creating
awareness was important before making any changes in the product. They also gave free
sachets to people so as to promote their product.

4. Ground level interaction with the customers gave them insights and they continuously
adapted to these conditions with constant feedbacks through interaction. One such strategy
was reducing the price of the sachets from Rs. 2 to Rs. 0.50 paise per sachet. This was a
breakthrough point with increased customer sales from 5.61% in 1999 to 23% in 2003.
5. They focused more on distribution channel. CavinKare kept their products in periodic
markets such as Haats and Melas where rural consumers from over 12 villages came together
and shopped a lot. Thus working excellently on their distribution channel, they created even
more awareness and reached more people at the right time using right platform.

CavinKare faced a lot of issues, such as people perceived the products as containing harsh
chemicals used in the shampoo that made the product less preferred. Considering this perception
towards the product no one wanted to spend money on such things. The insight CavinKare got
by the reviews it gathered from the consumers, company worked backward, the R&D division
invested a lot of time and money to find the best way to reduce the per month investment of a
rural consumer without sacrificing on the quality or efficacy of the product. The new formulation
helped the brand in providing a 4ml sachet of chik shampoo priced at Rs. 0.50 paise.

The market of shampoo was characterized by the presence of multinational companies and local
players like Hindustan Unilever Limited, Procter & Gamble, Dabur, RDM Traders Private
Limited etc. As the market share of Chik grew, Hindustan Lever realized the potential of rural
market nd responded by launching Lux shampoo followed by Clinic Plus and Sunsilk in 2002.
Even after this, chik continued to grow impressively and became the second largest brand in
shampoo category in 2002.

Besides Chik, Nyle herbal shampoo and Meera hair wash were market leaders in respective
categories. Overall, serving a market with low income but enormous in terms of volume, which
the existing players failed to see, helped CavinKare to emerge as a dominant and respected
player in the Indian FMCG market.