Dialogue C K Ranganathan
C K Ranganathan
CMD, Cavinkare
19 Sep 2003
'“My dream for Cavinkare is to be a 5,000 crore company by 2012. We aim to be a global player and would not like to restrict ourselves to India alone.”'
From a small partnership firm in 1983 with an investment of Rs.15,000 to a 255 Crore Company, Cavinkare has grown steadily with C K Ranganathan at the helm. Gifted with intuitive business acumen and a talent for introducing profitable marketing strategies, which has been instrumental in increasing the market share of Cavinkare’s flagship brands, C K Ranganathan is now looking to tap the foods segment as well. In conversation with Abitha .G of exchange4media, C K Ranganathan talks about the growth of Cavinkare, his innovative marketing strategies and his dreams for Cavinkare.

Q. Why the name Cavinkare?

The name “Cavinkare” was created because we wanted our brand name to have a neutral appeal compared to the earlier name, “Beauty Cosmetics”. We also wanted to move beyond cosmetics. “Cavin” means beauty in Tamil and “care” in the brand name is spelt as Kare, The name is special to me since it has my initials C and K representing my father’s name, Chinni Krishnan.

Q. Could you take us through Cavinkare’s growth over the years?

I started a small partnership firm way back in 1983 with an initial capital investment of Rs.15, 000. In 1990 we streamlined the outfit to make it more professional and made the company a Private Limited concern. We then named it as “Beauty Cosmetics” which was then changed to Cavinkare in 1998.

Initially with a meager capital it was very difficult to move forward. It took me about three years to get a bank loan. Growth started happening eventually albeit slowly. In 1990, we were a 40 lakh company per annum. Today we are a 255 crore company. We maintain an annual compounded growth rate of 40%.

There were various high points during Cavinkare’s growth. 1990 was a high point when we hired professionals in different areas. Another high point was when we expanded the network beyond South. This happened between 1991 and 1995. 1998 was a significant year since we launched Fairever Fairness Cream and Indica Hair Dye that took the company to new heights.

Q. What are the most important ingredients, which spurred Cavinkare’s success?

We have a very clear understanding of our consumer needs. A consumer does not directly put forth his requirements and hence to obtain a clear image of what he wants we analyze and understand the consumer’s mindset. Secondly we leverage and execute the understanding better. One other key effort we have taken up is in distribution and marketing. We definitely have an edge over our competitors since we have made our products available in every nook and corner of India including remote villages.

Another factor is Research and Development. We have about 36 people working in our full-fledged R&D center. We are also coming up with a new research center in Chennai itself, which is due to commence operations next year and is presently under construction. It is about 38,000 sq.ft and is located in Ekatuthangal. We will be making an investment of about 15 crores in 3 years time for the internal infrastructure facilities of the Research Centre. This Centre will focus on fundamental research, enabling us to exhaustively understand nature’s potential, analyze different natural ingredients and harness their potential without losing their efficacy. Apart from that we will also be working in synthetic areas and strengthen the composition of our flagship products. The R&D center has been primarily put up to stress our focus on research as a very vital tool and moreover we also want to attract good talent for the center. We don’t have a factory of our own so that leaves us with these key things, which are, to sum up, Research, Marketing and Distribution that have spurred our success.

Q. What are the important milestones in your career with Cavinkare?

When we launched shampoo as a commodity there were roughly about 200 competitors in the market and when we approached the retailer it was the retailer’s call in most of the markets. They wanted to have a strong say in the pricing and were not interested in stocking the products otherwise. So we undertook a consumer study to understand behaviour patterns. In one such study where I was present, I happened to see a consumer approach the counter requesting for a Velvette Sampoo Sachet. In those days Velvette was the pioneer in selling Shampoo in Sachets. Though the retailer gave the consumer a different sachet brand, the consumer still chose to buy it without much ado.

The retailer explained that Velvette was the first to introduce itself in sachets, and hence consumers generally ask for the brand but what they really want is a sachet shampoo and don’t notice the brand much. So we wanted to break out of this situation and create quality awareness about our shampoo brand Chik. That is when I hit upon the idea of giving away one sachet of Chik Shampoo free for 5 empty sachets of any shampoo brand initially and then after the move started picking up momentum we restricted the free shampoo exchange only for empty sachets of Chik. This idea worked out pretty well for us. Retailers too reaped benefits from the idea. Apart from their service charges we also gave them a Chik Sachet free for every 15 empty sachets they get from the consumer so they initially set the momentum by making an offer to school going kids to pick up empty sachets of shampoo brands in exchange for chocolates. Also we kept our prices higher than the rest of the shampoos in the market, this helped us maintain our profits and the retailer also believed he had a higher margin by stocking our products. After this move, in about six months time, we became available in several outlets in good quantities.

Another instance was in 1993, when all excise concessions for small-scale industries were withdrawn and we were suddenly placed on par with the multinationals. The advantage we had was gone overnight and we had to compete with them in the marketplace. Contrary to perception we fought the challenge head on and converted the setback into an opportunity. We directed all our efforts to bring out winning combinations of formulations, we strengthened our work force by hiring professionals and we advertised more often. Today we are reaping the benefits of the streamlining and consolidation we did way back then.

Q. Which are the different businesses under the Cavinkare wing?

Under Cavinkare we have our export division through which we export Fairever, Chik, Nyle and to some extent Meera to Singapore, Malaysia, Srilanka, Nepal and the Gulf countries. We are rolling out our products one by one as a typical launch in foreign countries, we work with the distributors very closely and we develop ads suitable to the local country. Apart from this, we have two packaging companies that function independently and also a Beauty Salon business, which we are currently expanding.

Q. What makes Cavinkare different?

Cavinkare is good at identifying unique products. We offer high value proposition and high aspiration value to our consumers. We are agile and quick to latch onto opportunities. This attitude has been the key to our success.

Q. What are your personal strengths that helped you propel Cavinkare forward?

Perseverance, the desire and curiousity to learn every new area that is useful for my business are some of my strengths. One other factor is my ability to recruit good talent, delegate work and give enough freedom to them, without compromising on their accountability.

Q. Could you give us a sample of your innovative market strategies?

I can describe two instances in this regard.

Penetration level of Chik Shampoo was not yet in an aggressive pace in 1999 so we went back to the consumer to understand the lag and to arrive at a solution that would drive the sales growth and help us gain a leadership status in the shampoo market. We discovered that soap was an alternative for the consumers besides a few natural products like herbal powders. The biggest barrier was soap usage. People did not see the need for using Shampoo. As part of the consumer study, we tried to impress upon the consumer that soap usage was bad for the hair and when a product exists specifically for hair it should be used. The consumers responded by stating that their fathers and grandfathers have used only soap and their hair continued to maintain good health. So the argument that Soap was harmful did not bear merit to them. However they did agree that Shampoo usage gave soft and silky hair. However their perceived value on hair wash was very less and they did not want to spend more out of their pockets to buy Shampoo. The study also revealed that though the aspiration to use shampoo was there, the need to spend more did not appeal. To arrive at a solution for this situation, we introduced the 50 Paise shampoo sachet, which easily satisfied a single wash. It was a calculated risk we took since our existing volumes of 1 rupee shampoo sachets was also in the market but when sales started picking up for the 50 paise shampoo, the 1 Rupee Shampoo also picked up pace once the consumer started making a habit of using Chik shampoo. Once the volumes were driven the company also gained a good margin.

Another situation where innovation was required was the economy value consumers saw between using shampoo sachets and shampoo bottles. 65-70% of the shampoo sold in India is through sachets. Only 30% is through bottles. Sachet sells more due to the phenomenal value it offers to the consumer. Let us assume 7ml of Shampoo in a Sachet is sold at Rs.2 and a 100 ml bottle of the same brand of Shampoo is sold at Rs.55. When a consumer buys 14 Sachets and stores them in a bottle, it would make 98 ml. The consumer would invest about Rs.28, which is roughly half the price as that of the bottle. Sachet thus offers high level of economy and also every use is measured. So to offer the consumer value for money we came up with the concept that bottles will be cheaper than the sachets. We had to be innovative and economize on the cost of bottle, packaging and other things and came out with a 50 ml bottle of Chik for Rs.6 with 2ml more in the bottle when costs are compared. This move resulted in a huge volume of sales and helped the growth of Chik from 5% market share to the current value of 21%. So this exercise revealed to us that the consumer would buy a product if he sees enough value for money.

Q. Is it not true that chemical foaming agents are used to make the herbal formulations foam better? Will it not tamper the “natural” quality of the product?

The consumer wants a blend of convenience and modernity. We did come up with a product that was very close to the natural form of ritha extract called “Meera Goongdukai Ras” but we were caught in between. People who used natural ritha did not find the aroma appealing and shampoo users did not find it as comfortable as the shampoo. So that product did not work. “Meera Goongudukai Ras” was then relaunched as “Meera Goongdukai Shampoo” which was a hit.

Q. Any plans to tap further segments?

Yes, we are planning to foray into the foods segment shortly. We will be concentrating on ethnic Indian foods. We will also be looking at other avenues for expansion with time.

Q. What about the skirmishes with HLL regarding the positioning battle between Fairever and Fair & Lovely?

No comments. They are our competition and we don’t want to convey our views through the media but that does not mean we don’t have our views.

Q. What is your dream as far as Cavinkare is concerned?

My dream for Cavinkare is to be a 5,000 crore company by 2012. We are looking at various avenues for further growth opportunities. We continue to scale professional heights day by day and this journey will be a continuous one. We are a socially responsible corporate concern who conducts our business in a straightforward manner. We aim to be a global player and would not like to restrict ourselves to India alone.

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