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CavinKare Private Limited (B) : Vision and Strategy

R. Srinivasan Asian Journal of Management Cases 2011 8: 41 DOI: 10.1177/097282011000800105 The online version of this article can be found at: http://ajc.sagepub.com/content/8/1/41

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ASIAN JOURNAL OF MANAGEMENT CASES, 7(2), 2010: 113134 ASIAN JOURNAL OF MANAGEMENT CASES, 8(1), 2011: 4160 SAGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DC DOI: 10.1177/097282011000800105

CAVINKARE PRIVATE LIMITED (B): VISION 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 signicant progress towards its incredible vision, but needed a quantum jump in performance to sustain its growth. The case describes the FMCG industry and the rms capabilities, and evolves strategic challenges facing the company, including sustaining high growth, expanding the product focus to mens range of products and investment in the services business. Keywords: CavinKare, FMCG industry, RBV, capabilities

At the beginning of the scal year 200708, Ramesh Viswanathan, Vice President (VP), Marketing, at CavinKare Private Limited (CavinKare) returned to his ofce 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 companys 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 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 specic categories and brands among their existing product-brand portfolio.
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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Second, there were questions raised about the companys capabilities to address the mens segment. The companys 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 mens grooming products market expected to grow signicantly 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 businessTrends 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 plansboth in the number of outlets and revenue growth forecasts. As his driver walked up to his ofce 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).

THE BEGINNINGS OF THE ENTERPRISE1

C.K. Ranganathan (CKR, aged 46 years on August 2007) was born in a South Indian coastal town, Cuddalore, to educatorparents. 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 efcient distribution. In the year 1976, the company entered the hair care business by packing shampoos in small sachets. The rst technology used for sachet making was primitive, but
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 CKRs 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 conict with his family. However, with no alternative in front of him, he decided to enter the shampoo businessit was the only thing he knew and he was condent that he could do better. Second, the market was 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 shampoosafter his fathers nameChinni Krishnan. CRKs brothers, who were managing Velvette shampoo, outsourced their distribution to Godrej Industries (one of Indias 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 productmarket feedback. This need for feedback and the decision not to outsource distribution was considered as the foundation of the companys ability to innovate. One of the 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 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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CAVINKARE PRIVATE LIMITED (CAVINKARE) TODAY

The company had crossed the annual turnover of `5,000 million in the year 200607 (see Exhibit 1 for normalized summary of nancial statements.) The companys 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 diversied 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 diversied into services through its retail beauty salons under a wholly owned subsidiary, Trends in Vogue Pvt. Ltd. Exhibit 2 provides details about CavinKares personal care, foods and international brands (and positioning).

THE INDIAN FMCG INDUSTRY

The Indian Fast Moving Consumer Goods (FMCG) industry could be broadly classied into three major segmentspersonal 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 200607 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 signicantly 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 signicantly 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 19992003. 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 200105 (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 200105 (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 200105. 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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CAVINKARE ORGANIZATIONCAPABILITIES AND COMPETENCIES

The CavinKare organization was headed by CKR, designated as the Chairman and Managing Director (CMD). As the organization diversied into multiple businesses, it was managed as an SBU-based structure in 200506, which was subsequently modied to a functional structure in 200607, as the organization felt the need for increased coordination among its businesses. It was envisaged that by the year 200708, 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 CavinKares 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 signicant 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 signicantly in a dedicated research organizationCavinKare 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 rms. The CRC and the R&D team
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took the responsibility for evolving the brands 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 avour and taste of the food product, the scientists had to ensure standardization, cost-efcient 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 homesthrough 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 productsnow 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 wayfor 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 identied in the market, the company created a unique brandone brand for each positionsegment combination. However, in the case of food products, a single mother-brandChinniwas preferred to signify the common positioning. A signicant activity in the companys opportunity identication process was the intensity and extensiveness of customer interaction. After the secondary research was done, signicant 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 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 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 (fullled as well as unfullled), 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 identication 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 SIEMALstarted, interested, excited, marketed, advertised and launched. Across the stages, the various parameters evaluated included category size and compound annual growth rate (CAGR), estimated protability, concept test results, estimated costs, blind product test results, clinical trial results, marketing mix elements and 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 companys forward integration into salons helped their cause signicantlywith over twenty-ve Green Trends and Limelight brands of salons spread across Chennai, Delhi and Bangalore, the company gained signicant 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 16.517.0 per cent of its sales on advertising and a signicant 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.

OperationsSourcing, 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 specied what changes were required and would be passed down to the operational level CFTs, who would dene 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 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 difcult 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 (200607), 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 efcient routing of trucks that ensured efciency, 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 ofce supported by ve regional managers. They managed the regular channel of salesthrough 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 nancially strong stockists who would give the company and its products a signicant push in the market place. Most often than not, the company chose RS for whom CavinKare products were the primary business, leading to signicant commitment. Weekly sales data at the RS stock were captured by the 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 companys 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 Ofcers. It was realized that this channel required very different skill setsin 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 signicantly at rates over 1015 per cent per annum. The hawker channel on the other hand was focused on products that were much lower pricedless 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 signicant demand generation exercises through brand building without signicant 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 reected the trends in the sector/industry.

Human Resources
Across the organization, everyone held signicant pride on two parameters that distinguished the companyinnovation 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 itthe breakthrough ideas received were discussed within the respective teams and then the parameters for success were dened. Immediately, a pilot site would be chosen, where the idea would be tested and the success parameters dened 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 signicant 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 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 levelthere 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 ercely performance drivenevaluations 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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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 signicant effort in learning programmes. Every employee was mandated specic learning programmes that would t her role in the achievement of the company objectives as specied in the companys 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 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 signicantly winning (referred to SIGWIN)signicantly 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 signicant challenge (and opportunity) that loomed ahead was the growth in the mens grooming product category. The company was actively considering launching a series of mens brands (deodorants and perfumes) within the next few months. The salons operated under Trends in Vogue helped the company leverage the condence 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. Mens grooming products, apart from foods, were expected to drive the companys 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 rst or results rst debate in the beginning of scal 200708, 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 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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Second, the company had to invest and nurture new product categories continuously. These new product introductions required signicant 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 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 yearsby 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.

REFERENCES
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. IndiaFragrances Market, product id 0102-0703, May. Available at www. datamonitor.com. . 2005. IndiaPersonal Products Market, product id 0102-2124, October. Available at www.datamonitor.com. . 2006a. IndiaHaircare Market, product id 0102-2242, September. Available at www. datamonitor.com. . 2006b. IndiaMake-up Market, product id 0102-0700, December. Available at www. datamonitor.com. . 2006c. IndiaPersonal Hygiene Market, product id 0102-0707, September. Available at www.datamonitor.com.

54 R. SRINIVASAN

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Exhibit 1 Summary of Financial Statements

CAVINKARE PRIVATE LIMITED As at 31 March 2008 As at 31 March 2007

PROVISIONAL BALANCE SHEET

SOURCES OF FUNDS Shareholders funds Share capital Reserves and surplus 0.98 23.78 24.76 11.59 11.59 36.35 11.41 0.98 15.00

15.98

Loan funds Secured loans Unsecured loans

Deferred Tax Liability TOTAL FUNDS APPLICATION OF FUNDS Fixed assets Gross block Less: Accumulated depreciation and amortization Net block Add: Capital work-in-progress including advances 37.23 8.64 28.60 0.58 29.18 7.98 0.32 8.50 2.61 0.18 0.19 8.44 19.92 20.60 0.45 21.05 1.13 36.35

11.41 27.40

31.98 6.55 25.43 1.95 27.38 2.36 0.32 6.72 2.93 0.86 0.11 3.79 14.40 16.58 0.49 17.07 2.67 27.40 (Exhibit 1 continued )

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Investments Deferred Tax Asset Current Assets, Loans and Advances Inventories Sundry debtors Cash and bank balances Other current assets Loans and advances

Less: Current Liabilities and Provisions Current liabilities Provisions

Net Current Assets TOTAL ASSETS

All numbers normalized to total assets as on 31 March 2007

(Exhibit 1 continued )

CAVINKARE PRIVATE LIMITED 31 March 2008 112.39 0.35 112.74 99.72 1.65 2.59 103.96 8.78 31 March 2007 100.00 0.48 100.48 93.61 1.49 2.46 97.56 2.93

PROVISIONAL PROFIT AND LOSS FOR THE YEAR ENDED

Income Sales Other income

Expenditure Material costs and other expenses Interest Depreciation and amortization

Prot/(Loss) before Taxation Provision for taxation Current tax Fringe benet tax Deferred tax charge/credit

8.78

0.65 0.22 0.37 0.49 2.43 0.71 0.09 0.00

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Prot/(Loss) after Taxation Balance brought forward from previous year Dividend Proposed nal dividend on equity shares Proposed dividend on preference shares Corporate Dividend Tax Equity Preference Balance carried forward

Earnings per share (`)Basic & diluted (nominal value of `10 (previous year: `10) each All numbers are normalized with 200607 sales as 100.00

8.78 0.98

0.02 0.00 3.03 0.27

Source: Company documents.

Exhibit 2 CavinKare Brands and International Business A. CavinKare Brands and Positioning Target Market Positioning Softness and manageability of hair

Category Chik shampoo Nyle herbal shampoo Meera Badam shampoo Meera hair wash powder Karthika hair wash powder Meera herbal hair oil Girls and women in rural and semi-urban India Women in the age group of 1835 years Rural and urban women in the age group of 1835 years Rural and urban women in the age group of 1835 years Rural and urban women in the age group of 1835 years Rural and urban women in the age group of 1830 years

Sub-category Brand

Personal care

Hair care

Skin care

Indica hair colourant Fairever

Men in late-20s and mid-30s Contemporary women of today

Spinz talc Spinz deodorants Nyle cold cream and lotion

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18- to 26-year-old girl from SEC A and B 18- to 26-year-old girl from SEC A and B Women of all age groups and SEC classes

Home care

Tex toilet cleaners

Housewives of all age groups

Herbal shampoo that nourishes the hair Strong and healthy hair using a combination of owers and herbs Traditional method of taking an oil bath once a week Combination of herbs to provide soft, lustrous and healthy hair Herbs nourishing the oil, in a packaging that makes the herbs visible in the oil Forever young Natural ingredients including Kashmir-saffron and milk; triple sun-screens Mild lasting fragrance that keeps you fresh all day Mild lasting fragrance that keeps you fresh all day Nourish the skin from deep within, and reduce winter dryness, leaving the skin smooth, exible and glowing even in the harshest winters Extra thick and complete clean (Exhibit 2 continued )

(Exhibit 2 continued ) Target Market Premium packs Positioning

Category Ruchi

Sub-category Brand

Foods

Pickles

Chinnis

Healthy alternative to locally packed pickles Key ingredients sourced from prime locations Affordable, convenient option Affordable, convenient option Products that stand for health and energy

Masala

Chinnis

Vermicelli Ruchi gulab jamun mix/ asafoedita Health Plus

Chinnis

Ready to cook Dates and candies

Highest levels of taste and qualitywith a South Indian tradition Quality, nutrition, value-for-money and conveniencepickle as a sidedish with a meal Highest quality ingredients to make the masalas and foods taste nger-licking good Hygienic packaging and competitive price Hygienic packaging and competitive price Nutritious, tasty snacks that are hygienically packed and can be consumed whenever, wherever

B. CavinKare International Business Year of Entry 1999 2004 1999 Brands

Country

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Sri Lanka Bangladesh Nepal

Middle East (GCC)

Malaysia USA New countries

Chik shampoo, Fairever fairness cream, Nyle lotions Fairever fairness cream and Chik shampoo (manufactured and marketed) Fairever fairness cream, Nyle shampoo, Chik shampoo, and Indica hair colourant 2005 Fairever fairness cream (Asian community) and the Nyle herbal hair oil (both Asian and Arab communities) 2002 Fairever fairness cream targeting the strong Tamil population 2006 Ruchi Pickles and Asafoedita targeting Indian expatriates Enter Myanmar, Yemen, Philippines, Africa in the next three years

Source: Company documents. Note: SEC: Socio-economic classication.

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Exhibit 3 FMCG Categories Segment/Sub-segment Personal care Personal wash Hair care Oral care Skin care/cosmetics Male grooming Feminine hygiene Household care Fabric wash Household cleaners Dish wash Market Size ( ` million) 45,000 30,000 25,000 13,000 2,000 2,000 Growth Rate (%) 1 15 8 15 20 20 Segment/Sub-segment Food and beverages Edible oil Bakery Tea Dairy products Soft drinks Coffee Culinary products Mineral water Chocolates Health food and drinks Branded wheat our Market Size ( ` million) 120,000 80,000 80,000 55,000 45,000 6,000 15,000 10,000 10,000 25,000 5,000 Growth Rate (%) 5 2 8 5 5 10 20 5 6 10 8

50,000 11,000 5,000

4 15 7

Source: Economic Times Intelligence Group, 2006. Exhibit 4 Consumer Contact Information Details of the consumer contact Who contacted: Consumer name: SEC: Occupation: Product: 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 conrmed my earlier ideas/ thoughts. Date: Sex: F Age: Current brand: Where:

CAVINKARE PRIVATE LIMITED (B) 59

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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.

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