Chennai: The Chennai-based company that was among the first to popularize the sale of shampoos in sachets plans to take on fast food multinational corporations (MNCs) such as McDonald’s Corp. not just in India, but also overseas with a multi-cuisine fast food restaurant format that it is currently testing.
Considering most Indians spend far more on food than on personal care, India has a potential for 500 restaurants, said C.K. Ranganathan, chairman and managing director of CavinKare Pvt. Ltd.
Dishing it up: In July, CavinKare decided to study the fast food business by opening its first outlet, branded CK’s Foodstaurant, in Puducherry.
While CavinKare invested nearly Rs75 lakh for the first restaurant it opened a month ago, the cost for each additional restaurant is likely to come down to Rs60 lakh, he added. The restaurants are branded CK’s Foodstaurant, like CavinKare, a play on the name of the founder.
CavinKare, maker of shampoos, fairness creams as well as pickles and juices, started life as Beauty Cosmetics. Ranganathan’s brother C.K. Rajkumar is known as the man who launched the sachet revolution in India when he started selling a brand of shampoo, Velvette, in sachets. Ranganathan followed suit with his own shampoo-in-sachet offering, Chik.
The menu for the chain in India will be a combination of Indian fare such as idlis, dosas and sandwiches, and American favourites such as burgers and fries, but the restaurants will take on a slightly different avatar overseas. “In Italy, we could be selling a combination of pasta and burgers, while in Taiwan the restaurant menu will feature noodles, dumplings as well as fries and burgers,” said Ranganathan.
In July, the Chennai-based company decided to study the fast food business by opening its first restaurant in Puducherry (formerly Pondicherry).
“Food is very localized and something that works in Chennai may not work in Mumbai or Delhi,” said Anand Shah, a research analyst with Angel Broking Ltd.
Delhi-based fast food chain Nirula’s planned to go national with its restaurants two years ago, but is yet to be successful, Shah said. “So, it is very easy to say (you want to build a national or international chain), but it is actually very difficult to implement and expand.”
The family-owned CavinKare logged sales of Rs700 crore in 2008-09 and expects to nearly double its sales to Rs1,500 crore in 2009-10, excluding the expected sales from the restaurant business. Ranganathan declined to give any sales forecast for the fast food business, but said that a chain spread over a state such as Tamil Nadu could yield Rs1,000 crore in annual revenue. More financial details of the privately held company weren’t available.
Through the 1990s and 2000s, CavinKare has held its own—and even won some skirmishes—with Hindustan Unilever Ltd (HUL), India’s largest consumer goods company. HUL posted a net profit of Rs2,115 crore on sales of Rs16,476 crore for the year ended March 2009.
“You need to be right on two counts to unsettle a leader—product innovation and pricing. CavinKare worked well to get both of them right,” said Nikhil Vora, an analyst with IDFC-SSKI Securities Ltd.
Still, that may not work in the fast food business.
“CavinKare’s expertise is in consumer goods, so I don’t understand the logic of them moving into the fast food outlets,” Angel Broking’s Shah said.