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Asian Journal of Management Cases
http://ajc.sagepub.com/content/8/1/41
The online version of this article can be found at:
DOI: 10.1177/097282011000800105
Asian Journal of Management Cases
R. Srinivasan
CavinKare Private Limited (B) : Vision and Strategy
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AVINKARE PRIVATE LIMITED (B):
V
ISION AND STRATEGY
R. Srinivasan
Case B on CavinKare describes the incredible vision the organization has set for
itself. This case is set at a time when the company had achieved signifi cant progress
towards its incredible vision, but needed a quantum jump in performance to sustain
its growth. The case describes the FMCG industry and the fi rm’s capabilities, and
evolves strategic challenges facing the company, including sustaining high growth,
expanding the product focus to men’s range of products and investment in the
services business.
Keywords:
CavinKare, FMCG industry, RBV, capabilities
At the beginning of the fi scal year 2007–08, Ramesh Viswanathan, Vice President (VP),
Marketing, at CavinKare Private Limited (CavinKare) returned to his offi ce after a long
meeting of the top management team (called the core team). As the meeting came to
a close, the team was woken up to the company’s dream of achieving
`52 billion by
the year 2012. At the current turnover of around
`5 billion, the company needed to
expand vigorously in the next fi ve years to be able to achieve this vision.
During the meeting, three major concerns had been raised. Ramesh had been
entrusted with the preparation of the Vision 2012 document, which was largely expected
to provide direction to the organization as to how they planned to achieve their
incredible vision. As a distant second by a wide margin in market share in most of
their categories, it was imperative that the company took a harder look at its existing
product portfolio. They needed to clearly refocus their efforts on specifi c categories
and brands among their existing product-brand portfolio.
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AGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DC
DOI:
10.1177/097282011000800105
This case was prepared by R. Srinivasan, Associate Professor of Corporate Strategy & Policy,
Indian Institute of Management, Bangalore, to serve as a basis for class discussion rather than
to illustrate either effective or ineffective handling of an administrative situation. The author
would like to thank C.K. Ranganathan and the senior management of CavinKare for their
support in documenting this case.
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42 R. S
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Second, there were questions raised about the company’s capabilities to address
the men’s segment. The company’s personal care division was largely focused on
meeting the needs of women consumers, and there was a discussion about whether
at all the company understood men as a segment. With the men’s grooming products
market expected to grow signifi cantly in the next few years, this was another area of
concern in his mind.
Third on their list was the expansion plan of their salon business—Trends in Vogue.
He had largely believed that the salon business would provide the company with the
much needed accelerator for growth in the coming years, and he needed to review
personally the expansion plans—both in the number of outlets and revenue growth
forecasts.
As his driver walked up to his offi ce to indicate his readiness to go, Ramesh picked
up his bag and workbook in hand, switched off the lights and walked out. He was
reminded that he had a long day ahead the next day, with crucial meetings scheduled
with his Chairman and Managing Director, C.K. Ranganathan (CKR).
T
HE BEGINNINGS OF THE ENTERPRISE1
C.K. Ranganathan (CKR, aged 46 years on August 2007) was born in a South Indian
coastal town, Cuddalore, to educator–parents. He was believed to be consistently
weak in studies, and therefore, his father believed that his future lay in agriculture/
farming.
His father quit his teaching job to set up a pharmaceutical repacking business. His
business was based on the philosophy that ‘whatever a rich man enjoys, a poor man
should also enjoy’. The pharmaceutical repacking business provided opportunities to
offer expensive medical products (for infectious diseases like typhoid and malaria)
to the poor, who could not afford to invest in large packs, but only small single-use
packs (from the usual 100-g packs to 5-g packs). The small single-use packs would
not be different in terms of unit prices; however, they provided daily and weekly
wagers with access to pharmaceutical products, which they would have never bought
in large packs. These products were in great demand and there was no need for any
advertisement or special sales/marketing efforts apart from effi cient distribution.
In the year 1976, the company entered the hair care business by packing shampoos
in small sachets. The fi rst technology used for sachet making was primitive, but
1
For a detailed account of the origins and entrepreneurial evolutions of the organization, refer to the
article ‘CavinKare Private Limited (A): The Entrepreneurial Innovation’.
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adequate. The demand for small packs was growing and there was no special need
for any marketing. The shampoo product was branded Velvette and was distributed
directly to the retail outlets. Other products that were packed in sachets included
honey and coconut hair oil. When CKR’s father died of a heart attack at the age of 48,
his brothers were still in college. He and his brothers refocused the company by exiting
the pharmaceuticals repacking business and began advertising the shampoo product.
The business grew slowly and steadily. CKR took charge of manufacturing after his
graduation in Chemistry, but due to differences in management styles, he walked out
of home and company with
`15,000 in his pocket.
When he left his family business, he had absolutely no plans or ideas. He was
clear that he did not want to be in the same business to avoid any confl ict with his
family. However, with no alternative in front of him, he decided to enter the shampoo
business—it was the only thing he knew and he was confi dent that he could do better.
Second, the market was fi lled with a lot of imitations and the consumers were not
very brand loyal. A typical consumer would walk into a retailer and ask for a ‘packetshampoo’
and left the brand choice to the retailer. Very few customers recognized
brands and still fewer were brand loyal. He saw a huge opportunity in this high-growth
business, and entered the market in 1983 with the Chik brand of shampoos—after his
father’s name—Chinni Krishnan.
CRK’s brothers, who were managing Velvette shampoo, outsourced their distribution
to Godrej Industries (one of India’s leading national marketing/distributing
companies). He, on the other hand, decided to do the distribution himself. Even
though outsourcing distribution would have largely enhanced scope, he preferred to
have control and ownership of the product concept within his team. He also decided
against a multi-product/multi-brand distributor, where he realized the organizational
motivation would be restricted to the commissions earned from the brand, rather than
the ownership and commitment in an in-house distribution system. He also realized
that distribution outsourcing would make him just a manufacturer and therefore, he
would have no opportunity to interact with his channel partners/end consumers for
valuable product–market feedback. This need for feedback and the decision not to
outsource distribution was considered as the foundation of the company’s ability to
innovate.
One of the fi rst innovations the company created was a jasmine-fragrance shampoo.
This differentiation was consistent with the traditional South Indian habit of women
anointing their hair with fresh jasmine fl owers. This differentiation was a big selling
point at the retail end and the company also marketed this differentiation through
their commercials.
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C
AVINKARE PRIVATE LIMITED (CAVINKARE) TODAY
The company had crossed the annual turnover of
`5,000 million in the year 2006–07
(see Exhibit 1 for normalized summary of fi nancial statements.) The company’s
all-India network of 1,300 stockists catered to over 2.5 million retail outlets. It had
also registered its footprints in neighbouring international markets like Sri Lanka,
Bangladesh, Nepal, Indonesia and Malaysia.
The company was organized into three strategic business units (SBUs)—personal
care, foods and international business. The divisions operated on diversifi ed product
portfolios pertaining to hair care (shampoos, hair wash powders, hair oils, hair dyes);
skin care (fairness creams, moisturizing lotions, face washes, cold creams, face toners,
deodorants, talcum powders); home care (toilet cleaners, dish wash bars); and foods
(pickles, masalas, ready to cook, candy, dates). See Exhibit 2 for a list of CavinKare
brands and their positioning. A dedicated R&D centre, equipped with the state-ofthe-
art equipment and technologies, supported the divisions. The company had also
diversifi ed into services through its retail beauty salons under a wholly owned subsidiary,
Trends in Vogue Pvt. Ltd. Exhibit 2 provides details about CavinKare’s personal
care, foods and international brands (and positioning).
T
HE INDIAN FMCG INDUSTRY
The Indian Fast Moving Consumer Goods (FMCG) industry could be broadly classifi ed
into three major segments—personal care, household care and food and beverages.
The various sub-segments, their market sizes and growth rates are provided in the
Exhibit 3 (Economic Times Intelligence Group 2006). The FMCG sector was worth
`
650 billion in 2006–07 and was growing at a rate of 6 per cent annually. The industry
was expected to grow to
`1,500 billion by 2015 with the growth rate climbing up to
10 per cent. While the growth rates in bigger segments like soaps, fabric wash and edible
oil were lower, the industry potential was considered substantial in these segments
because the unbranded and unorganized sector accounted for a large proportion.
The sector was subjected to rising input costs, which signifi cantly impacted the
margins of all the competitors. The prices of crude palm oil and palmolein (primary
inputs for soap and hair oil manufacturers) rose from around $370 per tonne in
January 2006 to around $450 per tonne in November 2006, and signifi cantly affected
the operating margins of several soap and oil manufacturers. Similarly, the prices of
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milk, sugar and wheat affected players in the foods and beverages segments. Among
the FMCG sectors, CavinKare focused on the personal products, home care and
culinary products markets.
Personal Products
The personal products segment included fragrances, hair care, make-up, oral hygiene,
personal hygiene and skincare. The personal products market was dominated by the
personal hygiene market (53.70 per cent of the total value), followed by oral hygiene
(26.80 per cent of the total value), hair care (11.70 per cent of the value), skincare
(4.70 per cent of the value) and make-up/fragrances (3.20 per cent of the value)
(Datamonitor 2005).
The Indian fragrance market was worth $41 million, with a CAGR of 9.7 per cent
for the period 1999–2003. Female fragrances constituted 74.3 per cent of the volume,
male fragrances 12.0 per cent of the market and unisex fragrances constituted
13.7 per cent of the total market (Datamonitor 2004).
The Indian hair care market generated total revenues of $325.4 million in 2005,
representing a CAGR of 10.2 per cent for the period 2001–05 (Datamonitor 2006a).
The conditioner market was the most lucrative in the year 2005, with total revenues
of $137.7 millions, equalling 42.3 per cent of the total market value, whereas the
shampoo market generated revenues of $110.8 million in 2005 representing 34.1 per
cent of the market. Hair colourants accounted for 19.80 per cent of the market; perms
and relaxers for 2.30 per cent and styling agents accounted for 1.50 per cent of the
total Indian hair care market in the year 2005.
The make-up market in India was made up of lip make-up (47.80 per cent of the
total value), nail make-up (26.90 per cent of the value), face make-up (14.20 per cent
of the total value) and eye make-up (11.20 per cent of the total value) in the year
2005. The total revenue of the make-up market was $74 million, growing at a CAGR of
6.1 per cent for the year 2001–05 (Datamonitor 2006b).
Personal hygiene market consisted of bath and shower products, deodorants and
soaps. The Indian personal hygiene market generated aggregate revenues of $1349.2
million in 2005 and grew at a CAGR of 5.3 per cent for the period 2001–05. The market
was dominated by the sales of soaps (84.40 per cent of the total value), followed by
bath and shower products (9.10 per cent of the value) and deodorants (6.60 per cent
of the total value) (Datamonitor 2006c).
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C
AVINKARE ORGANIZATION—CAPABILITIES AND COMPETENCIES
The CavinKare organization was headed by CKR, designated as the Chairman and
Managing Director (CMD). As the organization diversifi ed into multiple businesses, it
was managed as an SBU-based structure in 2005–06, which was subsequently modifi ed
to a functional structure in 2006–07, as the organization felt the need for increased
coordination among its businesses. It was envisaged that by the year 2007–08, the
organization would be reorganized again, providing CKR and his top management
team with the much-needed time to focus on strategic initiatives.
The following sections discuss CavinKare’s capabilities across various operational/
functional domains.
Research
For a company that advocated the intent of ‘creating competitive advantage through
innovation’, it was considered imperative to invest in long-term research and development.
CavinKare, unlike most FMCG companies, had made signifi cant investments
in basic research, as a backbone for their new product development. The investment
stemmed from the belief that strong R&D could make the company reach out globally
with both global products and technologies.
CavinKare invested signifi cantly in a dedicated research organization—CavinKare
Research Center (CRC) in Chennai. The CRC was actively involved in all the stages
of the product development process at CavinKare. The CRC scientists constantly
worked with their marketing and product development counterparts in meeting with
customers as well as retailers. Product testing was another area where the scientists
at CRC continuously interacted with their current and potential customers. Typically,
CRC along with the marketing department would evolve a brief about the new product
jointly. The brief would then be shared with the cross-functional team (CFT) formed
for that purpose. The scientists in the CFT would translate this ‘voice of the customer’
(VoC) into technical parameters referred to as the ‘voice of the scientist’ (VoS). The
R&D team would subsequently work on the VoS and develop alternate product samples.
These alternate product samples would be tested in dedicated parlours by the CRC,
before they went for home use testing. Subsequently, the marketing department
would make the choice among the alternate product samples that had been produced
and the chosen product samples would be subjected to blind tests and concept-in-use
tests, with the help of external market research fi rms. The CRC and the R&D team
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took the responsibility for evolving the brand’s reason-to-believe and the resultant
claim substantiation.
In the case of foods, CRC scientists faced different challenges. The idea of taste
was so subjective that in the ready-to-eat (RTE) category of foods, preferred tastes of
traditional foods varied across homes. Therefore, it was a great challenge to identify
and document the traditional knowledge of both products and processes, and develop
unique products. The primary challenge was to innovate on the processes of producing
traditional products. In doing so, the formulators would have to ensure that apart
from retaining the fl avour and taste of the food product, the scientists had to ensure
standardization, cost-effi cient processes, and processes that were scalable to largescale
manufacturing. Quite a few of these processes were developed by scientists
who would tap into traditional processes at homes—through their personal contacts
or otherwise, and document the recipes.
The focus of the CRC over the coming years would be to help the company establish
a foothold in the personal care and foods categories through innovative research on
new products and process innovations. As basic research would proceed on cosmetic
applications of products like sunscreen and anti-aging products, they would seek to
narrow the differences between cosmetic products and therapeutic products—now
popularly referred to as ‘cosmaceuticals’. Logical extensions of cosmaceuticals would
take the company towards dermatological products that could otherwise fall under
prescription drugs or over-the-counter (OTC) drugs.
Product Development
The company had grown over the years on the backing of a 25-year-old brand Chik
that was positioned on a ‘good product’ plank. An added advantage to the product
image was its affordable pricing that connected with the segment it targeted. As the
organization grew, it capitalized on newer opportunities that came along the way—for
instance, the herbal wave was met with the brand, Nyle, which used the traditional
herbs of India, and the need for an off-the-shelf
shikakai powder was met with the
Meera brand. For every gap that would be identifi ed in the market, the company
created a unique brand—one brand for each position–segment combination. However,
in the case of food products, a single mother-brand—Chinni—was preferred to signify
the common positioning.
A signifi cant activity in the company’s opportunity identifi cation process was the
intensity and extensiveness of customer interaction. After the secondary research
was done, signifi cant time and effort was invested by the marketing organization to
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understand customer behaviour. Every employee of the marketing organization had
to necessarily visit fi fteen consumers each month and spend close to 30 minutes
at each home, observing and discussing consuming habits. These interactions were
open-ended and at the end of these interactions, the employee fi lled up a form (see
Exhibit 4) that summarized his/her experience with the consumer. This included information
about the consumers, their buying behaviour, their usage patterns, expectations
(fulfi lled as well as unfulfi lled), and media habits and preferences. The employees
would also be expected to share their insights with the rest of the team through
systematic presentations and group interactions. These consumer interactions and
internal sharing sessions were the backbone of a systematic opportunity identifi cation
process.
The primary criterion for evaluating an opportunity was the competitive context
of that category, including the investments required, the margins that were available
and the positioning opportunities. The new product development process went
through six stages (gates), referred to by the abbreviation SIEMAL—started, interested,
excited, marketed, advertised and launched. Across the stages, the various parameters
evaluated included category size and compound annual growth rate (CAGR), estimated
profi tability, concept test results, estimated costs, blind product test results, clinical
trial results, marketing mix elements and fi nal launch plans. After the launch was
completed, each project was evaluated on various metrics through the next six months,
matching the expectations from the brand with actual performance. Monthly reviews
were carried out to ensure that either the product expectations were set right, midcourse
corrections on the marketing mix elements were carried out, or the product
was dropped from the portfolio.
The institutional business for their products included the salons that used their
brands and served as major sources of information on usage patterns of various categories
and products. The company’s forward integration into salons helped their
cause signifi cantly—with over twenty-fi ve Green Trends and Limelight brands of salons
spread across Chennai, Delhi and Bangalore, the company gained signifi cant insight
into both salon managers’ as well as consumers’ category and product preferences.
Trends in Vogue, a group company of CavinKare that owned and operated the salons
(without any franchises), intended to grow the network of salons to 100 by the next
two years.
The company was considered commercial savvy by both insiders and outsiders.
For a company of its size, it spent on an average 16.5–17.0 per cent of its sales on
advertising and a signifi cant amount on product research and consumer research.
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This focus on consumer research and promotion ensured that the company retained
its consumer centricity across divisions.
Operations—Sourcing, Logistics and Manufacturing
The CavinKare organization was largely marketing driven, with manufacturing
being considered a support function. The prevalent belief was that manufacturing
and logistics needed to respond to the changes in the market with superior backend
capabilities. For instance, when the marketing and sales departments needed a
quick response (say, packaging changes or pack size changes as promotion packs, for
example, 10 per cent free), manufacturing should be able to respond fast. Such speed
could be critical when such changes were mandated by the competitive context.
The primary drivers of this responsiveness were the periodic meetings of the cross
functional teams (CFTs). At the top level, these CFTs specifi ed what changes were
required and would be passed down to the operational level CFTs, who would defi ne
how to implement those changes. The constant interactions of the manufacturing
teams with the marketing and sales teams ensured that the manufacturing team was
in constant touch with the customer and channel/sector requirements.
At CavinKare, manufacturing was done through a combination of company-owned
production facilities and third-party units (TPUs). Taking advantage of the tax holidays
provided by the local government, CavinKare established its own manufacturing plant
at Haridwar in Uttarakhand state. As on June 2007, CavinKare sourced its production
from its own manufacturing facility at Uttarakhand (in North India) and seven TPUs
located in Puducherry (formerly known as Pondicherry, in South India). These facilities
provided the fi rm with an advantage in logistics of distributing throughout the country
with its manufacturing distributed across North and South India.
In the foods business, the company used only contract manufacturing. Raw material
(agricultural produce like garlic, turmeric, mango, lime, tomatoes and red chillies) were
procured by the company, taking advantage of the superior economies of scale, and
seasonality of production of these commodities. These commodities were procured
from the major producing centres by experienced procurement staff.
The complexity of the manufacturing process in the case of food products made
it extremely diffi cult to earn high margins. For instance, pickle processing involved
an inevitable process of aging, where the product had to be stored in the processing
plant for long periods of time. There was no technology available to speed up this
aging process without affecting the quality and shelf-life of the pickle. Therefore,
the cycle time from procurement to sales was necessarily high. Added to this was
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the seasonality of production of agricultural commodities like mangoes that further
enhanced the cycle time.
Given that the margins in the food businesses were very low, it was imperative to
reduce procurement, storage, processing and logistics cost as much as possible. In
order to facilitate logistics, the company shifted their main contract manufacturer to a
location close to the source of raw materials. The pickles, for instance, were centrally
manufactured, but packed regionally to ensure consistent quality and cost reduction.
Regional packaging also ensured local variations in terms of packaging, seasoning and
garnishing. In four years of production (2006–07), the food processing business had
grown from 500 to 5,000 tonnes.
The operations in the company were integrated through SAP-based enterprise
resource planning software systems. The logistics were routed through four regional
distribution centres (RDCs) located at Chennai (south), Ghaziabad (north), Kolkata
(east) and Bhiwandi (west) that serviced the 29 depots across the country. The depots,
in turn, served the various distributors (the redistribution stockists, RS). The stock at
the RS was replenished weekly by a system of logistics that ensured effi cient routing
of trucks that ensured effi ciency, cost reduction and quick response. The logistics
system leveraged the requirements of both foods and personal care categories by
consolidating the orders and thereby reducing costs.
Sales and Marketing
The sales organization was organized with the sales head at the head offi ce supported
by fi ve regional managers. They managed the regular channel of sales—through the
carrying and forwarding agents (CFAs), redistribution stockists (RS), the RS salesmen
and the retailers. The RS salesmen were employed by the RS who were additionally
incentivized by the company for the target achievement. The returns (ROI) the company
promised to the RS could vary from 20 per cent for high turnover RS, to about
36 per cent for RS with lower turnovers.
The CavinKare strategy of recruiting RS was unique. The company focused on
recruiting average size, but fi nancially strong stockists who would give the company
and its products a signifi cant push in the market place. Most often than not, the company
chose RS for whom CavinKare products were the primary business, leading to
signifi cant commitment.
Weekly sales data at the RS stock were captured by the fi eld sales people every
Thursday and logged into the SAP system through an Internet-based interface. These
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sales data formed the basis for preparation of the manufacturing plan at the company
factory and the TPUs.
The ‘regular’ channel described earlier accounted for about 72 per cent of the business
of the company. Apart from the regular channel, the company distributed its
products through the superstockist channel (24 per cent of sales), the modern trade
channel (1 per cent of sales) and the hawker channel (2 per cent of sales).
The superstockist channel was focused on the rural markets with populations less
than 200,000. These superstockists were supported by the substockists who would
pick up the stock from superstockists and manage their sales through their salesmen
known as rural sales promoters (RSPs). These RSPs, who were on the rolls of the
superstockists, were responsible for ensuring that the company’s products reached
the rural markets faster, and at lowest costs.
The modern trade channel was focused on the emerging organized retail trade.
This channel was managed by a National Key Account Manager, with his own staff of
Area Managers and Territory Sales Offi cers. It was realized that this channel required
very different skill sets—in this channel the front-end staff had to generate demand,
and therefore, needed to possess strong marketing skills, apart from sales skills. This
channel, though small, was expected to grow signifi cantly at rates over 10–15 per
cent per annum.
The hawker channel on the other hand was focused on products that were much
lower priced—less than
`5. The products in this channel were not supported by a lot
of advertisements and the entire sales were on cash. This channel reached the lowest
end of the retail (small, multi-utility shops serving populations of less than 2,500
people), where brand consciousness was not very high. Success in this channel required
signifi cant demand generation exercises through brand building without signifi cant
advertisements. This channel was perceived to be very crucial as it contributed to
much higher demand generation through word-of-mouth and product availability at
markets that were hitherto not serviced by the company.
Intrapreneurship
Being an entrepreneurial organization, the company was characterized by fast pace of
work (the speed from idea to execution was very fast). This speed was facilitated largely
by the active involvement of the top management, including CKR himself. However,
as the organization grew and professionalized further, lesser and lesser involvement
of CKR was envisaged, and the organization would require building intrapreneurial
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capabilities across the ranks. Added to this was the rate of attrition in the company
that refl ected the trends in the sector/industry.
Human Resources
Across the organization, everyone held signifi cant pride on two parameters that distinguished
the company—innovation and the speed of execution. The company had promoted
a scheme, popularly known as breakthrough innovations (BTI), through which
they promoted innovative initiatives. The scheme looked like a suggestion scheme,
but went well beyond it—the breakthrough ideas received were discussed within the
respective teams and then the parameters for success were defi ned. Immediately, a
pilot site would be chosen, where the idea would be tested and the success parameters
defi ned would be monitored. If the pilot test succeeded, then the initiative would be
rolled out at a larger level. As the roll-out happened, it would be shared in a pool of
BTIs maintained on the company Intranet, with an intent of replicating it across all
applicable regions/divisions/markets. The testing and replication of successful BTIs
formed a signifi cant part of the regional managers’ key result areas (KRAs) and such
successful BTIs would be shared and discussed in all quarterly review meetings. The
evolution of the hawker channel of distribution was a result of a BTI.
The company employees also prided themselves on the openness of the culture
in the company. It was commonplace to see emails marked to the entire hierarchy
to ‘keep them in the loop’. With strong systems and processes and free fl ow of information,
the speed of execution was given the highest priority. Quite often, speed was
achieved through low cost, small scale testing that would be escalated or rejected after
measurement of the pilot test results. No idea/suggestion would be turned down or
accepted at the proposal level—there was an obsession with testing. This culture of
testing provided the organization with fast decision times, encouraging people to take
initiatives, take risks and learn from experience.
The company behaving as a challenger in the marketplace inculcated passion in
the workplace. They believed that the only way CavinKare could retain people was
to provide them with freedom, informal culture and opportunities for experimenting.
The company culture was also fi ercely performance driven—evaluations were based
on long-term impact on the organization, rather than short-term results, which also
promoted risk-taking and initiative. The performance management system in the
company tried to strike a balance between business results (BR) and organizational
capacity building (OCB). The proportions between BR and OCB in the KRAs would
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AVINKARE PRIVATE LIMITED (B) 53
vary across sales (typically 60 per cent BR) and service (typically 40 per cent on BR)
functions as well as across levels of management (more OCB at senior levels).
The company also spent signifi cant effort in learning programmes. Every employee
was mandated specifi c learning programmes that would fi t her role in the achievement
of the company objectives as specifi ed in the company’s balanced scorecard.
The performance management system included learning programmes as an essential
component of measurement at every level.
Opportunities and Challenges
Ramesh believed that their fl agship brands, Chik and Meera, were very strong, and
with frequent updating of their advertising and communication strategy, they had
sustained their brand strength. The primary challenge was to continue introducing
products that were signifi cantly winning (referred to SIGWIN)—signifi cantly better
than other brands on offer, in a blind test. In order to create more and more SIGWIN
products, the company continuously focused on features that an average customer
would be able to differentiate the product/brand on, referred to as strong ‘reason to
believe’. It was also imperative that the company undertook the requisite cultural and
organizational changes.
A signifi cant challenge (and opportunity) that loomed ahead was the growth in the
men’s grooming product category. The company was actively considering launching
a series of men’s brands (deodorants and perfumes) within the next few months. The
salons operated under Trends in Vogue helped the company leverage the confi dence
customers placed on the advice of the beauticians. The product development team
and the entire marketing organization, therefore, had to be in constant touch with the
beauticians, both within Trends in Vogue as well as other salons, to be able to create
successful brands/product categories. Men’s grooming products, apart from foods,
were expected to drive the company’s growth in the next few years.
As the company grappled with the dilemma of ‘whether to invest resources or
wait for results’, commonly discussed as ‘resources fi rst or results fi rst’ debate in the
beginning of fi scal 2007–08, three strategic imperatives emerged. First, the company
needed to strengthen its presence within the categories in which it existed. In a lot
of categories, they were distant seconds and the gap between the fi rst and the second
was not shrinking as fast as desired. The company realized the need to defend and
grow their market shares in these categories. In most categories, they were competing
with large products and brands from established multinationals with deep pockets.
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54 R. S
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Second, the company had to invest and nurture new product categories continuously.
These new product introductions required signifi cant investments and longterm
commitments of resources. Some of these new products required building new
capabilities (for example, sourcing of agricultural products for the foods business),
while leveraging existing capabilities as well.
The third strategic imperative that emerged was the need to build some ‘cash cows’
that would provide the company with consistent cash fl ows to fund their expansion and
achieve their vision of becoming a
`52 billion company by the year 2012. The vision
had emerged out of their dream in 1997, when they were at
`520 million and resolved
to multiply their revenues 100 times in the next 15 years—by the year 2012.
In order to address these concerns, a ‘Strategy Document 2010’ was also being
prepared that would outline the categories the company would be active in the year
2010, the resource requirements (including production infrastructure and manpower
capabilities) and the roadmap for reaching that vision. The document was intended
to facilitate the process of alignment of the various divisions in the company and provide
much-needed clarity to the entire organization.
R
EFERENCES
Economic Times Intelligence Group. 2006. ‘Quarterly Update: FMCG (Q2 FY07)’, November.
Available at http://www.etintelligence.com/etig/researchchannels/sectors/fmcgReport.
jsp?leftNavMenu=Sectors|FMCG.
Datamonitor. 2004. ‘India—Fragrances Market’, product id 0102-0703, May. Available at www.
datamonitor.com.
———. 2005. ‘India—Personal Products Market’, product id 0102-2124, October. Available at
www.datamonitor.com.
———. 2006a. ‘India—Haircare Market’, product id 0102-2242, September. Available at www.
datamonitor.com.
———. 2006b. ‘India—Make-up Market’, product id 0102-0700, December. Available at www.
datamonitor.com.
———. 2006c. ‘India—Personal Hygiene Market’, product id 0102-0707, September. Available at
www.datamonitor.com.
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Exhibit 1
Summary of Financial Statements
CAVINKARE PRIVATE LIMITED
PROVISIONAL BALANCE SHEET
As at 31 March 2008 As at 31 March 2007
SOURCES OF FUNDS
Shareholders’ funds
Share capital 0.98 0.98
Reserves and surplus 23.78 15.00
24.76 15.98
Loan funds
Secured loans 11.59 11.41
Unsecured loans
11.59 11.41
Deferred Tax Liability
–
TOTAL FUNDS 36.35 27.40
APPLICATION OF FUNDS
Fixed assets
Gross block 37.23 31.98
Less: Accumulated depreciation and amortization 8.64 6.55
Net block 28.60 25.43
Add: Capital work-in-progress including advances 0.58 1.95
29.18 27.38
Investments 7.98 2.36
Deferred Tax Asset 0.32 0.32
Current Assets, Loans and Advances
Inventories 8.50 6.72
Sundry debtors 2.61 2.93
Cash and bank balances 0.18 0.86
Other current assets 0.19 0.11
Loans and advances 8.44 3.79
19.92 14.40
Less: Current Liabilities and Provisions
Current liabilities 20.60 16.58
Provisions 0.45 0.49
21.05 17.07
Net Current Assets
–1.13 –2.67
TOTAL ASSETS 36.35 27.40
All numbers normalized to total assets as on 31 March 2007
(
Exhibit 1 continued)
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(
Exhibit 1 continued)
CAVINKARE PRIVATE LIMITED
PROVISIONAL PROFIT AND LOSS FOR THE YEAR ENDED
31 March
2008
31 March
2007
Income
Sales 112.39 100.00
Other income 0.35 0.48
112.74 100.48
Expenditure
Material costs and other expenses 99.72 93.61
Interest 1.65 1.49
Depreciation and amortization 2.59 2.46
103.96 97.56
Profi t/(Loss) before Taxation 8.78 2.93
Provision for taxation
Current tax 0.65
Fringe benefi t tax 0.22
Deferred tax charge/credit –0.37
0.49
Profi t/(Loss) after Taxation 8.78 2.43
Balance brought forward from previous year 0.71
Dividend
Proposed fi nal dividend on equity shares 0.09
Proposed dividend on preference shares 0.00
Corporate Dividend Tax
Equity 0.02
Preference 0.00
Balance carried forward 8.78 3.03
Earnings per share (
`)—Basic & diluted (nominal value of `10 (previous year: `10) each 0.98 0.27
All numbers are normalized with 2006–07 sales as 100.00
Source:
Company documents.
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Exhibit 2
CavinKare Brands and International Business
A. CavinKare Brands and Positioning
Category Sub-category Brand Target Market Positioning
Personal
care
Hair care Chik shampoo Girls and women in rural and
semi-urban India
Softness and manageability of hair
Nyle herbal shampoo Women in the age group of
18–35 years
Herbal shampoo that nourishes
the hair
Meera Badam
shampoo
Rural and urban women in the
age group of 18–35 years
Strong and healthy hair using a
combination of fl owers and herbs
Meera hair wash
powder
Rural and urban women in the
age group of 18–35 years
Traditional method of taking an oil
bath once a week
Karthika hair wash
powder
Rural and urban women in the
age group of 18–35 years
Combination of herbs to provide
soft, lustrous and healthy hair
Meera herbal hair oil Rural and urban women in the
age group of 18–30 years
Herbs nourishing the oil, in a
packaging that makes the herbs
visible in the oil
Indica hair colourant Men in late-20s and mid-30s Forever young
Skin care Fairever Contemporary women of today Natural ingredients including
Kashmir-saffron and milk; triple
sun-screens
Spinz talc 18- to 26-year-old girl from
SEC A and B
Mild lasting fragrance that keeps
you fresh all day
Spinz deodorants 18- to 26-year-old girl from
SEC A and B
Mild lasting fragrance that keeps
you fresh all day
Nyle cold cream and
lotion
Women of all age groups and
SEC classes
Nourish the skin from deep
within, and reduce winter dryness,
leaving the skin smooth, fl exible
and glowing even in the harshest
winters
Home care Tex toilet cleaners Housewives of all age groups Extra thick and complete clean
(
Exhibit 2 continued)
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B. CavinKare International Business
Country Year of Entry Brands
Sri Lanka 1999 Chik shampoo, Fairever fairness cream, Nyle lotions
Bangladesh 2004 Fairever fairness cream and Chik shampoo (manufactured and marketed)
Nepal 1999 Fairever fairness cream, Nyle shampoo, Chik shampoo, and Indica hair
colourant
Middle East (GCC) 2005 Fairever fairness cream (Asian community) and the Nyle herbal hair oil (both
Asian and Arab communities)
Malaysia 2002 Fairever fairness cream targeting the strong Tamil population
USA 2006 Ruchi Pickles and Asafoedita targeting Indian expatriates
New countries Enter Myanmar, Yemen, Philippines, Africa in the next three years
Source:
Company documents.
Note:
SEC: Socio-economic classifi cation.
Category Sub-category Brand Target Market Positioning
Foods Pickles Ruchi Premium packs Highest levels of taste and
quality—with a South Indian
tradition
Chinni’s Healthy alternative to locally
packed pickles
Quality, nutrition, value-for-money
and convenience—pickle as a sidedish
with a meal
Masala Chinni’s Key ingredients sourced from
prime locations
Highest quality ingredients to
make the masalas and foods taste
fi nger-licking good
Vermicelli Chinni’s Affordable, convenient option Hygienic packaging and
competitive price
Ready to
cook
Ruchi gulab jamun
mix/ asafoedita
Affordable, convenient option Hygienic packaging and
competitive price
Dates and
candies
Health Plus Products that stand for health
and energy
Nutritious, tasty snacks that are
hygienically packed and can be
consumed whenever, wherever
(
Exhibit 2 continued)
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AVINKARE PRIVATE LIMITED (B) 59
Exhibit 3
FMCG Categories
Segment/Sub-segment
Market Size
(
` million)
Growth
Rate (%) Segment/Sub-segment
Market Size
(
` million)
Growth
Rate (%)
Personal care Food and beverages
Personal wash 45,000 1 Edible oil 120,000 5
Hair care 30,000 15 Bakery 80,000 2
Oral care 25,000 8 Tea 80,000 8
Skin care/cosmetics 13,000 15 Dairy products 55,000 5
Male grooming 2,000 20 Soft drinks 45,000 5
Feminine hygiene 2,000 20 Coffee 6,000 10
Culinary products 15,000 20
Household care
Mineral water 10,000 5
Fabric wash 50,000 4 Chocolates 10,000 6
Household cleaners 11,000 15 Health food and drinks 25,000 10
Dish wash 5,000 7 Branded wheat fl our 5,000 8
Source:
Economic Times Intelligence Group, 2006.
Exhibit 4
Consumer Contact Information
Details of the consumer contact
Who contacted: Date: Where:
Consumer name:
SEC: Sex: F
Occupation: Age:
Product: Current brand:
Address:
Key learnings about the consumer as a person:
Key learnings about how the consumer purchases the product/brand:
Key learnings about how the consumer uses the product/brand:
Key learnings on expectations from the product/brand; what problems currently solved by the product/
brand
Key learnings on ads that they remember/like/dislike
Key learnings on their media habits
Please tick one of the following
1. This consumer contact did not give me any new ideas. Merely confi rmed my earlier ideas/
thoughts.
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60 R. S
RINIVASAN
2. This consumer contact, though did not give any new ideas to me, made me think somewhat differently
about some ideas.
3. This consumer contact gave me some really new ideas.
Key reasons why you ticked the above:
Key product/communication ideas that you got from this interview:
Other products used/any other info:
Source:
Company documents.Downloaded from ajc.sagepub.com at K.R.E.T'S TRIDENT INSTITUTE on August 11, 2011
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