Beruflich Dokumente
Kultur Dokumente
ACRJ
This case was prepared by
Professor Anand Kumar
Jaiswal of the Indian Institute of Management, Ahmedabad and Professor Pingali
Venugopal of Xavier Labour
Relations Institute (XLRI),
Jamshedpur, as a basis for
classroom discussion rather
than to illustrate either effective or ineffective handling of
an administrative situation.
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is a literary word in Tamil language, symbolizing beauty and grace, while Kare
comes from the English word care.
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dHindustan
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SINGLE-SERVE SACHETS
Ranganathans father Chinni Krishnan had pioneered the
concept of sachets when he introduced Velvette shampooe
in sachets in 1976. Through Chik, Ranganathan popularized
the sachet concept. Ranganathan was often referred as the
moving force behind the sachet revolution in India.2 Sachets,
a form of low unit packs (LUPs), played an important role in
capturing the market initially for Velvette and later for Chik.f
Single serve sachets gave boost to shampoo consumption in
India and were especially suitable for rural markets. They
got high acceptance among rural and low income urban
consumers who could not afford the comfort of inventory.
Because of limited cash, these consumers preferred not to
stock up and thus block money for shampoo, a product
perceived to be less essential. Besides low cost, sachets
offered the convenience of buying the product only when it
was needed. Sachets also helped in minimizing the risk of
trial. Sometimes consumers did not want to be tied down to
a particular brand. Low price came in handy for consumers
to try out different brands.
In recent years shampoo sachets showed faster
growth than bottles. For instance, during 19972002, sachets
sales grew at a rate of 15% whereas shampoo bottles sales
grew at about 3% growth rate.6 The share of single serve
sachets as a proportion of total shampoo market had also
increased gradually over the years (Exhibit 8). In 2002, single
serve sachets accounted for approximately 64% of the total
shampoo consumption in terms of volume and 60% in terms
of value.7
eAfter
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REINVENTING PRICE-PERFORMANCE
RELATIONSHIPS
In the mid 1990s the company realized that other than
distribution access there were obstacles coming on the
way of large scale adoption of shampoo by consumers
especially from the rural areas. Shampoo as a product was
perceived to contain harsh chemicals. It was viewed more
as a glamour and lifestyle product than a necessity. Many
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gTraditionally
in the Indian market the consumers had to pay different prices per
unit volume based on whether they were buying sachets or bottles. For example, the
cost of sachets of Sunsilk Black is approximately Re. 0.25 per ml (an 8 ml sachet of a
good quality shampoo costs Rs.2). On the other hand, the cost of shampoo in a bottle
is approximately Re. 0.50 per ml (a 200 ml bottle costs about Rs.99). This is shown
in Exhibit 14. This price differential also has contributed to the popularity of single
serve sachet. By creating this price differential, companies such as Hindustan Lever
and P&G actually promote downgrading of consumers from bottles to sachets.
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FOUCS ON INNOVATION
Focus on innovation was the key element of CavinKares
business strategy of targeting low income markets. In
addition to channel innovation of using periodic markets
like haats and melas for distribution of Chik shampoo, pricing
Chik shampoo at 50 paise, introducing oral fragrances in
shampoo for the rst time, the company can be credited
with several other low income market innovations in other
product categories. It launched Spinz perfume in a small
pack called Dab-on which was typically for a one-week
usage. It also introduced a single use perfume Singlez.
Continuous and close engagement with customers
helped CavinKare in understanding the tastes and
preferences of Indian customers. Company representatives
traveled extensively and spent substantial time in rural and
far off areas. This gave them rst-hand experience of ground
realities and the heterogeneity of Indian markets. It enabled
the company in identifying consumer needs and gaps earlier
than the competitors.
CavinKare followed a four-fold strategy for promoting
the culture of innovation within the organization:
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 the case of problems, going back to the customer again
to rene products and re-launching improved ones.
The working culture in the organization was designed
to support innovation. To promote newer ideas and develop
an entrepreneurial spirit among employees, the company
had a special system in place. Any employee who came
up with a new idea would get a budget to pursue it and
to develop a commercially viable product. Even though
the success rate was 2030%, it helped the company in the
innovation of products and practices regularly.
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COMPETITION
The market for shampoo was characterized by the presence
of multinational companies and local players.
Hindustan Lever Limited (HLL): Hindustan Lever
was a 51% Indian subsidiary of Unilever, an Anglo-Dutch
consumer goods company. Hindustan Lever was one of the
most dominant consumer products companies in India. It
was present in virtually every category of the fast moving
hMost
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CONCLUSION
Over the years Chik emerged as one of the most popular
and admired hair care brands in India. It won the
Advertising Agencies Association of Indias best brand
performance award in 2003. According to A C Nielsen, Chik
brand cornered revenue of Rs.1.11 million in 2004. It also
entered the list of top 100 consumer brands in India in the
same year.15
iHindustan
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ACKNOWLEDGEMENTS
The authors are thankful to Mr. C. K. Ranganathan,
Managing Director and Mr. K. S. Ramesh, former Chief
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REFERENCES
1. Economic Times, 2004. When speeds the lever, giants will fall.
December 1.
2. Economic Times, 2004. Show-stopper: Sacheting down the rural
ramp. October 18.
3. C. K. Prahalad and Allen Hammond, 2002. Serving the worlds
poor protably. Harvard Business Review, 80(9): 4857.
4. Praxis, 2003. The making of Chik. Business Line Publication.
July 2003: 2227.
5. Business Standard, 2002. Strategist. Chik-mate. June 3: 4.
6. Economic Times, 2002. Brand Equity, Sachet up the ramp, March
13.
7. C. K. Prahalad, 2005. The Fortune at the Bottom of the Pyramid:
Eradicating Poverty through Prots, Wharton School Publishing:
1819.
8. Venugopal, Pingali, 2002. Accessing rural markets, unpublished
paper, XLRI Jamshedpur: 143.
9. Business Week Marketing Whitebook, 2003. Haats, Mandies and
Melas: 91.
10. ICRA, 2001. Industry Watch Series. The Indian FMCG sector:
144.
11. CavinKare web site. http://cavinkare.com/practices.asp.
Accessed on January 1, 2005.
12. Presentation by HLL executives, 2004. Morgan Stanley Asia
Pacic Summit, Singapore, November 4. http://www.hll.com/
HLL/findinformation/Presentations/MorganStanleyAsia
PacicSummit.pdf. Accessed on January 20, 2005.
13. Hindustan Lever Limited Chairman, Mr. M. S. Bangas brieng
to analysts on 15 February 2001. http://www.hll.com/HLL/
ndinformation/speech_excerpts.html. Accessed on November
1, 2004.
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Exhibit 1
CavinKare: Milestones
1983 Set out as Chik India, a rm that marketed Chik Shampoo
1990 Set up Beauty Cosmetics Private Limited with the aim of producing world class
products
1991 Saw the launch of Meera, a herbal hair wash powder
1991 Floated Packaging India Private Limited for supplying packaging laminates
1993 Nyle Herbal Shampoo was launched for consumers beyond the South
1997 Introduced Spinz perfumes to the masses
1997 Crossed a turnover of Rs.500 million
1998 Deodorants were added to the Spinz Range
1998 BCL renamed as CavinKare Private Limited to revamp its corporate image
1998 Saw the launch of Fairever, a revolutionary Fairness Cream with saffron
1998 Witnessed the launch of Indica Hair Dye with herbal extracts
1999 Enters Talcum Powder segment in the South
2000 Set up a division for exclusively focusing on its export initiatives
2000 Made its presence online with SAP 4.0B
2000 Changed corporate logo to reect true personality of the company
2000 Forayed into the Soaps category
2000 Marked an entry into the Cold Cream category
2001 Created an In-house media buying outt, CavinKare Advertising Private Limited
2002 CavinKare reached Rs.2430 million
2002 Trends In Vogue Private Limited started
2003 Acquired leading pickle brand Ruchi
Source: Provided by the company.
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EXHIBIT 2
Exhibit 2
CavinKares Turnover from 19992003 (in Rs. million)
18
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EXHIBIT 3
Exhibit 3
Composition of Rural Markets: Households (in millions)
19
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Exhibit 4
Number of Households (in millions) by Annual Income (199596)
Annual Income
(in Rupees) at 199495 prices
Classication
Number of Households
Urban
Rural
Total
<16,000
Destitutes
5.3
27.7
33.0
16,00122,000
Aspirants
7.1
36.9
44.0
22,00145,000
Climbers
16.8
37.3
54.1
45,001215,000
Consumers
16.6
15.9
32.5
>215,000
The rich
0.8
0.4
1.2
46.6
118.2
164.8
Exhibit 5
Rural and Urban Penetration of Consumer Products
(in percent, 2002)
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Exhibit 6
Per Capita Consumption of Some FMCG Categories (in Rs., 2004)
Source: Presentation by S. P. Mustafa, Vice President, Treasury, M&A & Investor Relations at the Morgan Stanley Asia
Pacic Summit 2004, November 4, 2004 in Singapore. http://www.hll.com/HLL/ndinformation/Presentations/
MorganStanleyAsiaPacicSummit.pdf.
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Exhibit 7
Penetration vs Growth Rate of Some Consumer Products (in 2002)
Penetration %
Toilet
90
Tea
Laundry - NSD
70
50
Toothpast
Shampoo
Dish Wash
30
Ice-Creams
Skin Creams
Staple
Colour Cosmetics
Deodorant
Tomato
10
15
Growth %
Source: http://www.hll.com/Hll_Flash/nance/hindustan_nal.ppt.
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Exhibit 8
Sachet as a Percentage of Total Shampoo Category
Source: Prahalad, C. K., The Fortune at the Bottom of the Pyramid, 2005.
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Exhibit 9
Distribution of Villages in India
Village Class
No. of Villages
Percentage
Population
(in millions)
Percentage
103952
17.9
10.532
1.69
201499
141143
24.3
48.462
7.78
500999
144998
24.97
104.357
16.76
10001999
114395
19.70
160.294
25.74
20004999
62915
10.83
185.573
29.8
50009999
10597
1.82
69.839
11.21
2779
0.48
43.757
7.03
Total
580779
100
622.812
100
Exhibit 10
Haats (Village Fairs) and Melas in Rural India
Haats
Total number of Haats
Average sale per day
Number of sales outlets/Haats
Number of visitors per Haat
Average sale per outlet
Village covered by a Haat
47000
Rs.0.225 million
300+
4500+
Rs 900
20-50
Melas
Total number of Melas
Average sale per Mela
Number of sales outlets/Mela
25000
Rs.1.43 million
850
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Exhibit 11
Rural Market Share of Shampoo Brands, All India (in Volumes)
Brand
Nov. 2002
Dec. 2003
Jan. 2003
Feb. 2003
Mar. 2003
Apr. 2003
Chik
39.02
39.38
41.19
39.93
39.68
39.11
Clinic Plus
27.89
27.33
26.69
29.12
29.83
31.44
9.56
8.81
8.14
8.06
7.84
8.41
Lux
Exhibit 12
Chik Shampoos Position in Rural Market (2002)
States
Uttar Pradesh
No. of Villages
Market Share
(Volume, in Percent)
Position
1,07,440
66.86
Madhya Pradesh
55,392
21.96
Bihar
45,113
31.82
Andhra Pradesh
28,123
39.01
Tamil Nadu
16,870
45.77
Orissa
55,352
18.42
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Exhibit 13
Chik Market Share (Volume in Percent)
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Exhibit 14
Retail Prices of Sachets and Bottles
Bottle
Shampoo Brand
Sachet
Quantity
(ml)
MRP(Rs)
Cost
per ml
Quantity
(ml)
MRP(Rs)
Cost
per ml
160
160
81.4
71.2
0.51
0.45
8
8
2.5
2
0.31
0.25
200
122
0.61
0.60
180
122
0.68
10
0.50
200
112
0.56
0.40
Sunsilk Fruitamins
200
95
0.48
0.25
Sunsilk Black
Chik
200
50
99
6
0.50
0.12
8
6
2
1
0.25
0.17
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