CASE: IIMB-09-2010

DATE: 11 OCTOBER 2010

R. SRINIVASAN

CavinKare Private Limited (B): Vision and strategy

Mr. CK Ranganathan (CKR) had just completed a review meeting with his top management team (called
the core team), consisting of himself (Chairman and Managing Director), TD Mohan (Director Operations),
Ramesh Viswanathan (VP Marketing), Milan Wahi (GM Sales), Dr. T. Mukhopadhyay (VP R&D), and
Oommen Abraham (GM Corporate HR), at the beginning of the fiscal year 2007-08. As the meeting came
to a close, the team was woken up to the companys dream of achieving Rs.5200 Crores (Rs.52 billion)
by the year 2012. At the current turnover of around Rs.500 Crores (Rs.5 billion), the company needs to
expand vigorously in the next five years to be able to achieve their vision.

CKR retired to his well-furnished lounge adjoining his office in the Chennai corporate office, he jotted
down the following concerns in his workbook for his thinking on his drive back home. Firstly, he needed to
follow up on the vision document 2010 that Ramesh was coordinating. The document was largely
expected to provide direction to the company as to how they plan to achieve their incredible vision. As a
distant second in market share in most of their categories and the difference not reducing fast, it was
imperative that the company takes a harder look at its existing product portfolio. Second, he jotted down
in block letters, MEN. 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 significantly in the next few years,
this was another area of concern in his mind.

Third on his list was the expansion plan of their salons business Trends 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 plans both in number of outlets
and revenue growth forecasts.

As his driver walked up to his office to indicate his readiness to go, CKR picked up his bag and workbook
in hand, closed off the lights and walked out. His assistant Geetha was quick to remind him that he had a
long day ahead the next day, with crucial meetings scheduled with Ramesh.

The beginnings of the enterprise1

Mr. CK Ranganathan (CKR, aged 46 years as on August 2007) was born in a South Indian coastal town,
Cuddalore to educator-parents. He was believed to be consistently weak in studies, and therefore, his
father believed that his future was in agriculture/ farming.

1
For a detailed account of the origins and entrepreneurial evolutions of the organization, refer to IIMB Case, CavinKare Private
Limited (A): The entrepreneurial innovation

Associate Professor R. Srinivasan (Corporate Strategy and Policy) prepared this case for class discussion. This case is not
intended to serve as an endorsement, source of primary data, or to show effective or inefficient handling of decision or business
processes.
2010 by Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or by
any means - electronic, mechanical, photocopying, recording, or otherwise (including internet) - without the permission of Indian
Institute of Management Bangalore.

Ref. #09-2010
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 2 of 15

His father quit his teaching job to set up a pharmaceutical repacking business. His business was based
on the philosophy that ensured whatever a rich man enjoys, a poor man should also enjoy. The
pharmaceutical repacking business provided opportunities to reach 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 100g packs to 5g packs). The small single-use packs, though
would not be different in terms of unit prices, 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 efficient distribution.

In the year 1976, the company entered the hair-care business with packing shampoos in small sachets.
The first technology used for sachet making was primitive, but sufficient. 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 his father died of heart attack at the age of 48, his brothers were still in
college. He and his brothers focused 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 from Chemistry, but due to differences in management styles, he
walked out of home and the company with Rs.15,000 in his pocket.

When he walked out of his house, he had no idea what he would do. He was clear that he did not want to
be in the same business to avoid any conflict with his family. However, with no alternative in front of him,
he decided to enter the shampoo business it was the only thing he knew, and he was confident that he
could do better. Secondly, the market was filled 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 packet-shampoo 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 shampoos after his fathers name Mr. Chinni Krishnan.

Whereas his brothers who were managing the Velvette Shampoo outsourced their distribution to Godrej
Industries (one of Indias leading national marketing/ distributing companies), he decided that he would do
the distribution himself. Whereas outsourcing distribution would have largely enhanced the 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 will have no opportunity to interact with his channel partners/ end
consumers for valuable product-market feedback. This need for feedback and the decision not to out-
source distribution is considered as the foundation for the companys ability to innovate.

One of the first innovations the company created was a jasmine-fragrance shampoo. This differentiation
was consistent with the traditional south Indian habit of women anointing their hairs with fresh jasmine
flowers. This differentiation was a big selling point at the retail, and the company also marketed this
differentiation through their commercials.

CavinKare Private Limited (CavinKare) today

The company had crossed the annual turnover of Rs.5000 million in the year 2006-07 (see appendix 1 for
normalized summary financial statements). Its all India network of 1300 stockists caters to over 2.5
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 3 of 15

million retail outlets. It has also registered its footprints in neighboring 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 diversified product portfolios pertaining to Hair care
(shampoos, hair wash powders, hair oils, hair dyes); Skin care (fairness cream, moisturizing lotions, face
wash, cold cream, face toner, deodorants, talcum powder); Home care (toilet cleaners, dish wash bar);
and Foods (pickles, masalas, ready to cook, candy, dates). The following three tables describe
CavinKare brands and their positioning. A dedicated R&D center, equipped with the state-of-the-art
equipment and technologies, supported the divisions. The company had also diversified into services
through its retail beauty salons under a wholly-owned subsidiary, Trends In Vogue Pvt. Ltd. Appendix2
provide 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 classified into three major
segments Personal care, Household care, and Food and beverages. The various sub-segments, their
market sizes and growth rates are provided in the appendix 3i. The FMCG sector was worth Rs.650
billion in 2006-07, and was growing at 6% annually. The industry was expected to grow to Rs.1,500 billion
by 2015 with the growth rate climbing up to 10%. 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, as the unbranded and unorganized sector account for a large proportion.

The sector is subject to rising input costs, which significantly impacts the margins of all the competitors.
The prices of crude palm oil and palmolein (primary inputs for soap and hair oil manufacturers) have risen
from around $370 per ton in January 2006 to around $450 per ton in November 2006, and have
significantly affected the operating margins of several soap and oil manufacturers. Similarly, the prices of
milk, sugar and wheat affect players in the foods and beverages segments. Amongst the FMCG sectors,
CavinKare focuses on the personal products markets, home care, and the culinary products market.

Personal products

The personal products segment includes fragrances, haircare, make-up, oral hygiene, personal hygiene,
and skincare. The personal products market was dominated by the personal hygiene market (53.70% of
the total value); followed by oral hygiene (26.80% of the total value); hair care (11.70% of the value);
skincare (4.70% of the value); and make-up/ fragrances (3.20% of the value)ii.

The Indian fragrances market was worth $41 million, with a CAGR of 9.7% for the period 1999-2003.
Female fragrances constituted 74.3% of the volume, male fragrances 12.0% of the market, and unisex
fragrances constituted 13.7% of the total marketiii.

The Indian hair care market generated total revenues of $325.4 million in 2005, representing a CAGR of
10.2% for the period 2001-05iv. The conditioner market was the most lucrative in the year 2005, with total
revenues of $137.7 millions, equaling 42.3% of the total market value, whereas the shampoo market
generated revenues of $110.8 million in 2005 representing 34.1% of the market. Hair colorants accounted
for 19.80% of the market; Perms and relaxers for 2.30%; and styling agents accounted for 1.50% 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% of the total value), nail make-up
(26.90% of the value), face make-up (14.20% of the total value), and eye make-up (11.20% of the total
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 4 of 15

value) in the year 2005. The total revenue of the make-up market was $74 million, growing at a CAGR of
6.1% for the year 2001-05v.

Personal hygiene market consists of bath & shower products, deodorants and soap. The Indian personal
hygiene market generated aggregate revenues of $1349.2 million in 2005 and grew at a CAGR of 5.3%
for the period 2001-05. The market was dominated by the sales of soap (84.40% of the total value),
followed by bath and shower products (9.10% of the value) and deodorants (6.60% of the total value)vi.

CavinKare Organization capabilities and competencies

The CavinKare organization was headed by CKR, designated as the Chairman and Managing Director
(CMD). As the organization diversified into multiple businesses, it was managed as a SBU-based
structure in 2005-06, that was subsequently modified to a functional structure in 2006-07, as the
organization felt the need for increased coordination among its businesses. It is envisaged that by the
year 2007-08, 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 CavinKare capabilities across various operational/ functional domains.

Research

For a company that sports 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, has made significant investments in basic research, as a backbone for their new product
development. The investment stems from the belief that strong R&D can make the company reach out
globally with both global products and technologies.

CavinKare had invested significantly in a dedicated research organization CavinKare 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 work with their marketing and product development
counterparts in meeting with customers as well as retailers. Product testing is another area where the
scientists at CRC continuously interact with their current and potential customers. Typically, CRC along
with 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 parlors by the CRC, before they
went for home use testing. Subsequently, marketing department would make the choice amongst the
alternate product samples that have 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 firms. The CRC and the
R&D team took the responsibility for evolving the brand reason-to-believe and the resultant claim
substantiation.

In the case of foods, CRC scientists faced different challenges. The idea of taste is 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 flavor and taste of the food product, the scientists had to ensure standardization, cost efficient
processes, and processes that were scalable to large scale manufacturing. Quite a few of these
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 5 of 15

processes were developed by scientists who would tap into traditional processes at homes through 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 sun screen and
anti-aging products, they would seek to narrow the differences between cosmetic products and
therapeutic products now 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 has 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 way for instance, the herbal wave was met with the brand Nyle, that 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 identified in the market, the company created a unique brand one
brand for each position-segment combination. However, in the case of food products, a single mother-
brand Chinni was preferred to signify the common positioning.

A significant activity in the companys opportunity identification process is the intensity and extensiveness
of customer interaction. After the secondary research is done, significant time and effort is invested by the
marketing organization to understand customer behavior. Every employee of the marketing organization
had to necessarily visit fifteen consumers every 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 filled up a form (see appendix 2) that summarized her experience with
the consumer, that included information about the consumer, her buying behavior of the specific product/
brand, her usage patterns, expectations (fulfilled as well as unfulfilled), and her media habits and
preferences. Also, the employee would be expected to share her 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 identification 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 SIEMAL
that stands for Started, Interested, Excited, Marketed, Advertised, and Launched. Across the stages, the
various parameters evaluated included category size and CAGR, estimated profitability, concept test
results, estimated costs, blind product test results, clinical trial results, marketing mix elements, and final
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, mid-course 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 did help their cause significantly with over twenty-five Green Trends and
Limelight brands of salons spread across Chennai, Delhi, and Bangalore, the company did gain
significant insight into both salon managers as well as consumers category and product preferences.
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 6 of 15

Trends In Vogue, a group Company of CavinKare that owned and operated the salons (without any
franchisees), 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, 16.5-17.0% of its sales on advertising and a significant amount on product
research and consumer research. This focus on consumer research and promotion ensured that the
company retained its consumer centricity across divisions.

Operations sourcing, 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 need to respond to the changes in the
market with superior backend capabilities. For instance, as the marketing and sales organizations require
response to marketing challenges like sales promotions that mandate changes in the packaging or even
pack sizes, manufacturing departments should be able to respond fast, as demanded by the competitive
realities.

The primary driver of this responsiveness was the periodic meetings of the cross functional teams (CFTs).
At the top level, these CFTs specify what changes were required, and would be passed down to the
operational level CFTs, who would define how to implement those changes. The constant interactions of
the manufacturing teams with the marketing and sales teams ensure that the manufacturing team is in
constant touch with the customer and channel 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 firm 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 chilies) 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 centers by experienced procurement staff.

The complexity of the manufacturing process in the case of food products made it extremely difficult to
earn high margins. For instance, pickle processing involved an inevitable process of aging, where the
product has 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. Add to this, the seasonality of
production of agricultural commodities like mangoes that further enhanced the cycle time.

Given that the margins in the foods 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 (2006-07), the food processing business had grown from 500 to
5000 tons.
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 7 of 15

The operations in the company were integrated through SAP based enterprise resource planning
software systems. The logistics were routed through four regional distribution centers (RDCs) located at
Chennai (South), Ghaziabad (North), Kolkatta (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 efficient routing of
trucks that ensured efficiency, 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 office supported by five Regional
Managers. They managed the regular channel of sales through the Carrying & 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% for high turnover RS, to about 36%
for RS with lower turnovers.

The CavinKare strategy of recruiting RS was unique. The company focused on recruiting average size,
but financially strong stockists who would give the company and its products a significant push in the
market place. Most often than not, the company chose RS for whom CavinKare products were the
primary business, leading to significant commitment.

Weekly sales data at the RS stock were captured by the field sales people every Thursday and logged
into the SAP system through an Internet based interface. These sales data formed the basis for
preparation of the manufacturing plan at the company factory and the TPUs.

The regular channel described above accounted for about 72% of the business of the company. Apart
from the regular channel, the company distributed its products through the super-stockist channel (24% of
sales), the modern trade channel (1% of sales), and the hawker channel (2% of sales).

The super-stockist channel was focused on the rural markets with population less than 200,000. These
super-stockists were supported by the sub-stockists who would pick up the stock from these super-
stockists and would manage their sales through their salesmen known as Rural Sales Promoters (RSPs).
These RSPs, who were on the rolls of the super-stockists were responsible for ensuring that the
company's 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
Officers. It was realized that this channel required very different skill sets in 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 significantly at rates over 10-15% per annum.

The hawker channel on the other hand was focused on products that were much lower priced less than
Rs.5. The products in this channel were not supported by a lot of advertisements, and the entire sales
was 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 significant demand generation exercises through brand building without significant
advertisements. This channel was perceived to be very crucial as it contributes to much higher demand
generation through word of mouth, and product availability at markets that were hitherto not serviced by
the company.
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 8 of 15

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 capabilities across the ranks. Added to this, is the rate of attrition in the company (that
reflected the trends in the sector/ industry).

Human Resources

Across the organization, everyone held significant pride on two parameters that distinguished the
company innovation and the speed of execution. The company had promoted a scheme, popularly
known as Breakthrough Innovations (BTI), through which they promote innovative initiatives. The scheme
looked like a suggestion scheme, but went well beyond it the breakthrough ideas received were
discussed within the respective teams, and then the parameters for success were defined. Immediately, a
pilot site would be chosen, where the idea would be tested and the success parameters defined 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 in the company Intranet, with an intent of
replicating it across all applicable regions/ divisions/ markets. The testing and replication of successful
BTIs formed a significant part of the Regional Managers' key result areas, 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 flow 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 level they had 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 is to provide them with freedom, informal
culture, and opportunities for experimenting. The company culture was also fiercely performance driven
evaluations 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 organization capacity building (OCB). And the
proportions between BR and OCB in the KRAs would vary across sales (typically, 60% BR) and service
(typically 40% on BR) functions, as well as across levels of management (more OCB at senior levels).

The company also spent significant effort in learning programs. Every employee was mandated specific
learning programs that would fit her role in the achievement of the company objectives as specified in the
company's balanced scorecard. The performance management system included learning programs as an
essential component of measurement at every level.
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 9 of 15

Opportunities and challenges

Ramesh believed that their flagship 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 significantly winning (referred to SIGWIN)
significantly 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 significant 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 confidence 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 first or results first debate in the beginning of fiscal 2007-08, three strategic
imperatives emerged. First, the company needed to strengthen its presence in the categories that they
existed. In a lot of categories, they were distant seconds, and the gap between the first and the second
was not shrinking as fast. 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.

Secondly, the company had to invest and nurture new product categories continuously. These new
product introductions required significant investments and long-term commitments of resources. Some of
these new products required building new capabilities (for example, sourcing of agricultural products for
the foods business), whilst 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 flows to fund their expansion and achieve their vision of becoming a
Rs.5,200 Crore (Rs.52 billion) company by the year 2012. The vision had emerged out of their dream in
1997, when they were Rs.52 Crores (or Rs.520 million), and they resolved to multiply their revenues 100
times in the next 15 years by the year 2012.

In order to address these concerns, a Strategy Document 2010 was 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.
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 10 of 15

Appendix 1: Summary Financial Statements

CAVINKARE PRIVATE LIMITED
PROVISIONAL BALANCE SHEET
As at 31 Mar 08 As at 31 Mar 07
SOURCES OF FUNDS
Shareholders' funds :
Share Capital 0.98 0.98
Reserves and Surplus 23.78 15.00
24.76 15.98
Loan funds :
Secured Loans 11.59 11.41
Unsecured Loans
11.59 11.41
Deferred Tax Liability -
TOTAL FUNDS 36.35 27.40

APPLICATION OF FUNDS
Fixed assets :
Gross Block 37.23 31.98
Less: Accumulated Depreciation and Amortization 8.64 6.55
Net Block 28.60 25.43
Add : Capital Work-in-progress including Advances 0.58 1.95
29.18 27.38
Investments 7.98 2.36
Deferred Tax Asset 0.32 0.32

Current Assets, Loans and Advances :

Inventories 8.50 6.72
Sundry Debtors 2.61 2.93
Cash and Bank Balances 0.18 0.86
Other Current Assets 0.19 0.11
Loans and Advances 8.44 3.79
19.92 14.40
Less : Current Liabilities and Provisions :
Current Liabilities 20.60 16.58
Provisions 0.45 0.49
21.05 17.07
Net Current Assets -1.13 -2.67
TOTAL ASSETS 36.35 27.40

All numbers normalized to total assets as on 31 March 2007

CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 11 of 15

CAVINKARE PRIVATE LIMITED

PROVISIONAL PROFIT AND LOSS FOR THE YEAR ENDED
31-Mar-08 31-Mar-07
Income
Sales 112.39 100.00
Other Income 0.35 0.48
112.74 100.48
Expenditure
Material Costs and Other Expenses 99.72 93.61
Interest 1.65 1.49
Depreciation and Amortization 2.59 2.46
103.96 97.56
Profit / (Loss) before Taxation 8.78 2.93

Provision for Taxation

- Current Tax 0.65
- Fringe Benefit Tax 0.22
- Deferred Tax Charge / Credit -0.37
0.49

Profit / (Loss) after Taxation 8.78 2.43

Balance brought forward from previous year 0.71

Dividend
- Proposed Final Dividend on Equity Shares 0.09
- Proposed Dividend on Preference Shares 0.00
Corporate Dividend Tax
Equity 0.02
Preference 0.00
Balance carried forward 8.78 3.03

Earnings per share (Rs.) - Basic & Diluted (Nominal

value of Rs. 10/- (Previous year: Rs 10/-) each 0.98 0.27

All numbers are normalized with 2006-07 sales as 100.00

CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 12 of 15

Appendix 2: CavinKare brands and positioning

Category Subcat Brand Target market Positioning

Personal Hair care Chik shampoo Girls and women Softness and manageability
care in rural and semi- of hair
Nyle herbal shampoo urban India
Women in the age Herbal shampoo that
group of 18-35 nourishes the hair
Meera Badam shampoo Rural and urban Strong and healthy hair using
women in the age a combination of flowers and
Meera hair wash powder group
Rural 18-35
and urban herbs
Traditional method of taking
women in the age an oil bath once a week
Karthika hair wash powder group
Rural 18-35
and urban Combination of herbs to
women in the age provide soft, lustrous and
Meera herbal hair oil group 18-35
Rural and urban healthynourishing
Herbs hair the oil, in a
women in the age packaging that makes the
Indica hair colorant group in
Men 18-30
late 20s herbs visible
Forever young in the oil
and mid 30s
Skin care Fairever Contemporary Natural ingredients including
women of today Kashmir-saffron and milk;
Spinz talc 18-26 year old girl triple sun-screens
Mild lasting fragrance that
from SEC A and B keeps you fresh all day
Spinz deodorants 18-26 year old girl Mild lasting fragrance that
from SEC A and B keeps you fresh all day
Nyle cold cream and lotion Women of all age Nourish the skin from deep
groups and SEC within, and reduce winter
classes dryness, leaving the skin
Home Tex toilet cleaners Housewives of all smooth,thick
Extra flexible
andandcomplete
glowing
age groups even in the harshest winters
clean
care

Foods Pickles Ruchi Premium packs Highest levels of taste and

quality with a South Indian
Chinnis Healthy tradition
Quality, nutrition, value-for-
alternative to money and convenience
Masala Chinnis locally
Key packed
ingredients pickle
Highestasquality
a side-dish with to
ingredients a
pickles
sourced from meal the masalas and foods
make
Vermicelli Chinnis prime locations
Affordable, taste finger-licking
Hygienic good and
packaging
convenient option competitive price
Ready to Ruchi Gulab Jamun Mix/ Affordable, Hygienic packaging and
cook Asafoedita convenient option competitive price
Dates and Health Plus Products that Nutritious, tasty snacks that
Candies stand for health are hygienically packed and
and energy can be consumed whenever,
wherever
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 13 of 15

CavinKare International Business

Country Year of Brands

entry

Sri Lanka 1999 Chik shampoo, Fairever fairness cream, Nyle lotions

Bangladesh 2004 Fairever fairness cream and Chik shampoo (manufactured and marketed)

Nepal 1999 Fairever fairness cream, Nyle shampoo, Chik shampoo, and Indica hair
colorant

Middle East 2005 Fairever fairness cream (asian community) and the Nyle herbal hair oil
(GCC) (both asian and arab communities)

Malaysia 2002 Fairever fairness cream targeting the strong Tamil population

USA 2006 Ruchi Pickles and Asafoedita targeting Indian expatriates

New countries Enter Myanmar, Yemen, Philippines, Africa in the next three years

Appendix 3: FMCG Categories

Segment/ sub- Market size Growth Segment/ sub- Market size Growth
segment (Rs. Millions) rate (%) segment (Rs. Millions) rate (%)
Personal care Food and beverages
Personal wash 45,000 1% Edible oil 120,000 5%
Hair care 30,000 15% Bakery 80,000 2%
Oral care 25,000 8% Tea 80,000 8%
Skin care/ 13,000 15% Dairy products 55,000 5%
cosmetics
Male grooming 2,000 20% Soft drinks 45,000 5%
Coffee 6,000 10%
Feminine 2,000 20% Culinary 15,000 20%
hygiene products
Household care Mineral water 10,000 5%
Fabric wash 50,000 4% Chocolates 10,000 6%
Household 11,000 15% Health food 25,000 10%
cleaners and drinks
Dish wash 5,000 7% Branded 5,000 8%
wheat flour
CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 14 of 15

Appendix 4: Consumer contact information

Details of the consumer contact
Who contacted: Date: Where:
Consumer name:
SEC: Sex: F
Occupation: Age:
Product: Current brand:
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 confirmed my earlier ideas/
thoughts.
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:

CavinKare Private Limited (B): Vision and strategy, IIMB-09-2010 Page 15 of 15

i
Source: Economic Times Intelligence Group, Quarterly Update: FMCG (Q2 FY07), November 2006.
ii
Source: Datamonitor: India Personal Products market (October 2005).
iii
Source: Datamonitor India Fragrances market (May 2004).
iv
Source: Datamonitor India Haircare market (September 2006).
v
Source: Datamonitor India Make-up market (December 2006).
vi
Source: Datamonitor India Personal Hygiene market (September 2006).