Report On CavinKare Private Limited

Report on CavinKare Private Limited: Serving Low
Income Consumers
Submitted to
Prof. Subodh Tagare
For the subject

Adaptive Market Leadership
By
Avantika Mishra
201600206
Section AB
Institute of Management Technology, Nagpur

2017-18
Introduction
Cavin Kare was started by C. K. Ranganathan in 1983. He had a family business of small scale
pharma-packaging and cosmetics manufacturing in Cuddalore, Tamil Nadu. It emerged as a
strong player in the FMCG industry, in the personal care segment.
CavinKare was able to identify a potential in the rural markets for their consumer products. With
a population of over 620 million, accounting for 74.27% of the population of India, the rural
markets contributed to 60% of India’s GDP. Penetration for consumer goods like toothpaste, hair
wash and dish wash products was significantly lower than that in urban areas.
CavinKare at Inception
 Started with the launch of Chic Shampoo in 1983 targeted at the lower middle class and
semi-rural populations with monthly income of Rs. 1500-3000.
 Differentiation – superior quality and long-lasting fragrance; affordable price
 Effective advertising that appealed to the target audience
i. Radio for mass media advertising;
ii. Using popular movie dialogues and movie stars from South India – Amla,
Khusboo, Manorama for endorsing the brand;
iii. Wall paintings and ‘video on wheels’ i.e., distribution of free samples at the
screening of popular movies;
iv. Scheme that gave consumers a free sachet in return of four empty ones;
v. Door to door sampling.
 Educating the target audience on how to use shampoo to encourage them to use it rather
than ordinary soap.
CavinKare during its Evolution
 CavinKare launched Chik shampoo at national level in 1993. However, it faced various
hurdles:
i. Difficulty in establishing a nation-wide distribution channel for rural population;
ii. Lesser number of retail outlets; poor physical infrastructure;
iii. Poor logistics, shipment and delivery channels for products to reach retailers;
iv. Negative perception of shampoo having harsh chemicals – consumers used it only
at special occasions like weddings
v. Unaffordability by target audience in spite of availability of low unit packs;
vi. Aspiration value created by mass media advertisements and celebrity
endorsements did not convert into sales due to pricing
 Innovation to tap distribution channels in rural markets – periodic haats and melas,
periodic meeting of buyers and sellers. They attracted customers for 10-15 nearby
villages, about 4000 customers.
 Insight received by CavinKare – per person shampoo costs per month for a family
assumed to be using 4, Rs.2 sachets per month turned out to be Rs.8 but people were not
willing to spend more than Rs.2. New formulation was launched at Rs.0.50 per sachet.
 Presence of Competition –
i. Hindustan Lever’s Clinic Plus and Sunsilk appealed to urban middle class as it
appealed to self-esteem needs;
ii. P&G had Pantene and Head & Shoulders as protein and anti-dandruff shampoos
respectively;
iii. Dabur’s Vatika shampoo was in direct competition to CavinKare’s herbal
shampoo, Nyle.
Chic was the only shampoo that provided low-income customers value for money.
Reasons for Success of CavinKare
1. Sachets gained popularity as they were suitable for rural markets because consumers had
limited cash and did not block their money in inventory.
2. Sachets worked for Chic and then for Velvette because of the low risk involved, allowing
consumers to try other variants too.
3. New distribution channels were tapped effectively. CavinKare approached through
regular haats and melas which were periodic gatherings where different buyers and
sellers met in public. They attracted customers for 10-15 nearby villages, serving about
4000 customers.
4. Haats and Melas were successful because they were conducted after the harvest season
and people had cash in hand. Additionally, stalls selling ‘urban’ products like shampoos
were looked forward to by the population.
5. CavinKare understood customer pain point when it came to pricing. It created a new
formulation that was sold at Rs.0.50 per sachet, allowing the consumers to reduce their
monthly expenditure without having to compromise with quality. It increased the number
of consumers coming within its ambit as sales increased from 5.61% in 1999 to over 23%
in 2003.
6. Close engagement with customers and identifying their needs such as reducing their
household expenditure while still wanting to use ‘urban’ products, through extensive
travel to rural and far-off areas, allowed CavinKare to launch and re-launch products
according to customer needs.
7. Employees coming up with new ideas were given a budget to pursue it, allowed scope for
innovation.
8. Outsourcing manufacturing operations allowed reduction in overhead costs
significantly and gave higher flexibility on product mix and capital requirements.

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Report on CavinKare Private Limited: Serving Low

For the subject

Institute of Management Technology, Nagpur

CavinKare during its Evolution

Reasons for Success of CavinKare

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