Cavinkare’s gambit: Will it work?

Padmaja Shastri

* Flashback to 1998: Chennai-based Cavinkare Limited launched Fairever skincare cream which cocked a snook at the dominant Hindustan Lever Ltd’s (HLL) Fair & Lovely which had a noose-tightening 97 per cent share of the market.

* Cut to 2001: Fairever has creamed off a cool 14 per cent share of the roughly Rs 650 crore fairness cream market.

It’s a story that we have begun to hear with increasing alacrity, in the last few years. Of an industry giant being given a run for it’s money by a relatively smaller player. So, what’s new? Answer: Possibly unlike the other instances, the Rs 203-crore Cavinkare, flush with the success in challenging HLL, has embarked on an audacious gameplan to now, take on biggies across a wide range of product segments. This will bring bring it in direct competition with a slew of strong competitors. Consider:

* The company has already entered the toilet soap market with the launch of Meera herbal soap. It is looking at a range of other soap categories as well as detergents. That pits it against Nirma, Procter & Gamble (P&G) and HLL.

* It has also baked plans to get into the foods category. That’s food for thought for Britannia Industries to chew on.

* That’s not all. It is looking at new categories to enter in the household products and fabric care area where there are well established players like P&G.

* Again, in the hair care segment, through the small packaging sachet route, it picked up sizeable market for it’s Chik brand: roughly 15 per cent of the Rs 840 crore shampoo market in just two years. This has clearly ruffled the feathers of both HLL and P&G.

Clearly, it will be pitted against a formidable battalion of companies ranging from HLL, P&G, Britannia and Nirma. Does Cavinkare have what it takes to take flank itself from them? Says Mr Parmit Chaddha, chief executive of Chennai-based consultants Paradigm Management Know how, “It’s their attitude of ‘so what if HLL is the market leader, there must be a chink in its armour. The company sees opportunity in something that others construe as a threat.”

But marketing chutzpah by itself has not always guaranteed corporates, success. So, will the company be able to make a difference or will it get mowed down by the legion of corporate majors and fall by the wayside? Cavinkare recognises that to take the challenge and succeed, the traditional strategies may not work. That is why, it has chosen to turn marketing wisdom on it’s head and go the non-conventional route.

Combine organic product growth with acquisitions Smaller companies wanting to make a mark in the market normally tries to go with a slew of product introductions. But Cavinkare has sought to be different. It has decided that apart from an organic growth, when it has an opportunity to even acquire brands, it will not loose the opportunity. On the one hand, a number of new products are in the pipeline in the existing categories like skin, hair and personal care. It has also tried innovations in the pricing and packaging areas. New variants relevant to modern times and at different price points are also being looked into. For instance, its single-use perfume Spinz Singlez priced at Rs 1.50 per sachet, launched this May, is expected to drive usage and volumes by expanding the Rs 66 crore category. Currently, it is estimated that only one per cent of the population use perfumes. Chik’s shampoo sachets priced at 50 paise has already done that. Within a year of its launch, the shampoo penetration in the country grew from 17.90 per cent to 19.4 per cent. But for it’s entry into detergents, it is even mulling the acquisition route.
Indeed, this would be it’s second attempt. Cavinkare did consider acquiring ‘Det, a well-known brand from Swastik Chemicals stable. But the deal did not materialise. Says Mr. B Nandakumar, president, Cavinkare,” We are still open to acquisitions and are actively scouting for brands across various categories. However, there has to be a fit between the brand and our strengths.”

Continuous brand renovation
When companies are on growth mode, they normally would like to consolidate their operations and brand image at every level. But Cavinkare has done it differently. In a continuous exercise of re-inventing itself, it has chosen to be in a constant change mode.
For example, it went through two name and identity changes in the last 18 years: from Chik India to Beauty Cosmetics in 1990 and finally to Cavinkare in 1998. This also indicated its changing business interests: from a single-product entity to a broader FMCG company.
In late 1999, it also shed its traditional ‘herbal’ company image by redesigning its logo in line with its plans to diversify into other segments. Though over 40 per cent of its turnover still continues to come from the herbal products, the company does not want to limit itself to the herbal platform.

Brand extensions is not the only route to growth
One of the successful strategies that companies like HLL and P&G have employed is continuous implementation of brand extensions. However, Cavinkare has consciously stayed away from this temptation to extend its successful brands unless there’s a strong connection between the products. It would rather create and develop new brands. Says C K Ranganathan, managing director, Cavinkare, “Brand extensions don’t allow you to have different price points and quality.” Though the company is not confirming it, its latest brand is ‘Greenie’, a gents beauty parlour in Chennai. This will also be first foray at vertical integration into a service area.

Twin strategy of premium pricing and price cuts
Traditionally, when smaller layers have challenged larger players, they have like Nirma in the past, gone the route of taking product price cuts. Most small companies either place themselves in a niche limiting their potential or underprice their products, but Cavinkare did neither. In fact, the company priced some of its products at a premium over the competition. Fairever and Indica are priced six per cent higher than Fair & Lovely and Godrej Dye respectively, while Spinz Deo costs 11 per cent higher than HLL’s Rexona spray. What gives it the gumption to do that? “ We strive to offer the consumers the ‘best value at that price point “ says Mr Nandakumar.

Will it work?
Big gambits always have inherently high risks attached. It has had its share of brands that did not work in the marketplace. For example, Kanya, an anti-lice powder and Minerva, a mineral water brand. Kanya failed because consumers needed time to adjust to the product and the company needs to do considerable attitude shaping and product development activities. Minerva possibly did not take off due to supply chain issues.

It has also had failure’s at some of the other product too. Chik toilet soap and Chik Kali Mehendi did not cut mustard with the consumers. They were withdrawn and have gone back to the lab for refinement and so has the premium product, Nyle Wonder.

Riding high on the success of Fairever, Chik and Nyle, in mid-1999 the company had declared plans to unveil one new product every month. In the 24 months since, it has launched only five new products and product extensions: Chik 50 paise, Nyle Wonder, Meera Soap, Chik soap and Singlez. Except Chik 50 paise and Singlez whose performance remains to be seen, none of the others made it. Other launches planned by end-2000 in categories like face wash, face mask, bleach and a slew of haircare products are still in the product research stage.

Says Mr.Nandakumar, “ The general slowdown in the FMCG business contributed to a few new product launches being held back.” Also, some of the new products after test marketing had to be further fine-tuned in the lab. Further, Spinz lost its market leadership because consumers did not appreciate the new formulation. They have now reverted to the old formulation, while planning to roll out a whole new range of deodrants this year.

Moving ahead
Today, the company spends around four per cent of its turnover on R&D and close to 25 per cent on advertising and marketing, while constantly upgrading its offerings based on consumer feedback. It has employee forums like ‘cross functional teams’ which discuss and
plan new product developments while sharing learnings and insights from its successes and failures. The company also records its brand histories on compact disks for the benefit of new employees.

However, whether its target of reaching a turnover of Rs 5,000 crore by 2012 and becoming a global corporation will materialise or not will depend on the company’s ability to keep up the current momentum and manage itself against formidable rivals.