Group C10: CavinKare Private Limited (B)

1. What are the key marketing strategies followed by CavinKare till now and what are its key
strength areas?
Ans.
CavinKare has adopted unique marketing strategies in several of its products to gain substantial
market share in the respective categories. Some of the key marketing strategies include:
i. Marketing and Communications: CavinKare emphasized on the importance of brands and
had invested resources in advertising and branding. It was effective in using regional media. For
example, it extensively used radio for advertising its shampoo brand Chik, while using famous
movie dialogues supporting Chik and roping in famous movie stars to endorse the products.
Even through the national media, CavinKare was able to connect well with the consumers. The
did unique and effective ad campaigns for their brands like Fairever which helped them gain
leading positions in the market.
ii. Value through Affordable Products: CavinKare identified the gaps in the Indian market and
the existing products and came up with superior quality products which were priced affordably to
the consumers. It successfully used this strategy to make products like Chik shampoo and Spinz
perfume brands that delivered value through superior quality and at affordable prices.
iii. Cost Advantage: Like mentioned above, CavinKare was able to sell quality products at an
affordable cost due to its reduced cost structure. It had implemented the strategy of outsourcing
its manufacturing effectively. This helped save overheads due to manufacturing considerably,
and also enable CavinKare to become a nimble and agile organization by giving it high level of
flexibility in its product mix and reduced capital requirements. This allowed it to lay primary
focus on marketing and distribution, and on R&D to come up with superior products.
iv. Packing Innovations: Understanding that the rural customers would not prefer to spend a lot
of their income in stocking up items like shampoo in large quantities which had lower utility
according to them, CavinKare introduced sachets, a form of low unit packs (LUPs). Sachets
gained high acceptance among rural as well as low-income urban consumers who could not
afford to stock high quantities. Small sachets also reduced the risk of trials for consumers. This
packing strategy was also employed for its perfume brand. Through this it was able to change the
perception of consumers that perfumes should be used on special occasions to a “once a day”
usage perception. Single-use packs helped drive up perfume consumption.
v. Distribution Access: CavinKare gained access to the rural markets in an innovative way by
tapping into periodic markets such as haats and melas. It was observed that the per capita spend
in these periodic markets were sometimes higher than even urban areas. CavinKare successfully
increased its rural penetration by focusing on these periodic markets. Compared to the products
of its competitors, CavinKares products were not only had high availability but also had high
affordability allowing it to have a strong distribution network that could move its products to
every corner of India.
The key areas of strength for CavinKare are as follows:
i. Identifying Consumer Needs: It identifies gaps that were overlooked by established players.
Examples are the introduction of Chick Shampoo after observing the gap in the rural market, a
superior quality shampoo at affordable price as opposed to the existing brands at the time which
were priced high. Another example is when it identified the gap in the urban shampoo market
where consumers refrained from regular used of shampoo due to the fear of harsh chemicals in
shampoo. This allowed it to introduce Nyle, a range of shampoos containing pure herbal extracts
and natural ingredients such as shikakai, amala, and reetha. This concept was well received by
the consumers. Nyle gained the leading market share in the herbal shampoo market.
ii. Gaining Consumer Insights: CavinKare was continuously engaged with customers which
helped it gain important insights from the market. The instances of this strength being visible are
the introduction of the fairness cream brand Fairever and the herbal hair oil product Meera.
CavinKare learned that many Indians drank saffron milk for fair skin for themselves and for the
unborn kids in cases of pregnant women. Using this insight CavinKare’s R&D developed a
saffron-milk formulation to be used externally. The combination gained immediate acceptance
among consumers. Similar was the case of unique packaging for Meera herbal hair oil where the
insights were drawn on consumer perception that the existing herbal oil really didn’t work the
way they claimed to. They came up with a unique packaging which allowed the consumers to see
the contents of herbs continuously leach into the hair oil.
iii. Strong Distribution Network: CavinKare had a strong distribution network all over India in
the urban as well as rural markets. Its distribution system had reached 0.75 million outlets of the
5.5 million retail outlets in India, only behind HUL which covered about a million outlets.
iv. Experience of Successful Execution of Price Based Strategy: They had demonstrated this
strength on multiple occasions where they provided superior quality products at affordable
prices. This strength had helped them build the Chik shampoo brand which was the highest
revenue earner for them in 2003 (1 billion).
v. Superior Product Development Capabilities (R&D): CavinKare had remarkable product
development capabilities. They had invested extensively in the research and development
processes. These competencies had allowed them to provide value at affordable prices by giving
them a cost advantage. All they needed was generation of volume in sales in order to scale up.

2. Can CavinKare’s strength be mapped over to the key success factors in soap &detergent
industry?
Ans.
 Key Success Factors CavinKare’s Strengths
Understanding Consumers CavinKare excelled at identifying consumer
needs and market gaps. They were also strong
in drawing groundbreaking consumer insights
to come up with unique products to fill the
existing market gaps.
Offering Value CavinKare delivered superior quality products
with the help of its strong R&D capabilities.
They had experience of successful execution
of effective price strategy (Chik) to deliver
value for money to the price sensitive
customers in the highly competitive markets.
Distribution Network CavinKare had a strong distribution network
not only in the Urban but also in the Rural
India with their unique approach of targeting
periodic markets.
Brand Building CavinKare has had experience of building
strong brands. Fairever is the second leader in
the fairness cream segment behind HUL’s
Fair&Lovely. They have built brands like
Nyle, Chik, Meera, Spinz and more which
have had market shares on par with popular
brands from HUL, P&G and Godrej.

3. How similar or dissimilar soap & detergent product category is, in comparison to product
category in which CavinKare has substantial presence?
Ans.
The soap & detergent category is also an FMCG category and many competitors of CavinKare
had already been serving the market in this category. With the expertise CavinKare holds in the
outsourcing and product development which it has proven to be effective in its other product
categories, it can definitely leverage the same to build a strong brand in this category that is
positioned to serve any specific gaps in the category. Other key strengths like value offering
capability and strong distribution networks would prove to be helpful even for the soaps &
detergents category.
But, in contrast to other categories that CavinKare already has substantial presence in, the soap
& detergent market was already mostly penetrated, i.e., they were saturated, and the growth rates
were very low (Exhibit 3). Rural markets were somewhat less penetrated compared to the urban
markets but still there was not much left unpenetrated (Exhibit 4).
4. Should the company enter the soap & detergent factory, owing to the ongoing price war or
should it discard this plan?
Ans.
The MD and CEO of CavinKare had an ambitious target to reach an annual turnover of INR 52
billion by 2012. They should enter the soap and detergent category to achieve this target. The
reasons for the entry are discussed below.
The soaps and detergents category was estimated at INR 100 billion in 2003. Even if CavinKare
could get a small market share of this huge category, it can have a significant effect on its sales
turnover. Even the highest revenue for CavinKare comes from Chik which earns INR 1 billion in
sales (Exhibit 4 from case A). A mere 3% market share in the soaps & detergent market would
mean a revenue of INR 3 billion which is greater than the current sales turnover for CavinKare
from all of its products (INR 2.6 billion) (Exhibit 4 from case A).
The entry into the soaps and detergent markets was considered less investment intensive than
some other sectors since the fixed assets requirements was relatively low. However, companies
had to spend enormous resources on R&D, advertising, and sales and trade promotions. With
intense competition from large number of players it was a challenging task to gain a foothold in
the industry without enough product differentiation. But with the proven expertise of CavinKare
in R&D, effective outsourcing, and proven value creation from keen understanding of the needs
and gaps in the consumer markets driven from strong ability to draw key insights, it should be
able to come up with a well differentiated product in this category to gain a decent foothold.
By bringing products that give good value at affordable prices it could tap into the Bottom Of the
Pyramid (BOP) market which comprised of low-income urban and rural consumer who
constituted a mammoth size of the Indian population (700 M) to turn it into a profitable market.
CavinKare doesn’t have leading positions in many categories such as the fairness cream market
and perfume/talcum powder markets. With their current market strategies, they should look to
achieve growth and increase its market share. However, to meet their ambitious targets of
achieving INR 52 billion revenues by 2012, it is necessary to diversify into new businesses.
CavinKare has set up separate division for soaps and detergents. Entering this segment will be a
part of its strategy to enter the categories that were large. It had estimated an initial turnover of
INR 5 billion from this category in the next five years. Hence along with other diversification
options like entry into food products, and company owned salons, etc., entering the soaps and
detergent category will prove to be helpful for the company in term of the revenues. However, in
order to set a strong foothold in the category they need to differentiate their products effectively
which they have done before for other products. This should enable them to put up competitive
products positioned effectively fill the existing gaps in the market despite the ongoing price war
in the detergent market.