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Business News/ Companies / Instant recall, CavinKare style

Instant recall, CavinKare style

Instant recall, CavinKare style

On demand: Koyada Somalakshmi (left), a retailer in Nellutla village, Jangaon, says instead of asking for just shampoo or oil, customers are increasingly asking for specific products. Harikrishna Katr

Jangaon, Warangal: Till a couple of years ago, Vajramma would buy kunkudukai (reetha or soapnut) from the Jangaon market, 4km from her village of Nellutla, powder it with other natural ingredients and use the concoction to wash her hair.

She is “between 62 and 65 years old", and not your typical customer for hair care products. But now Vajramma is a regular buyer of “Chikcham" and “the other shampoo with the picture of a girl with long hair" on the sachet, for what even she considers a paltry 50 paisa.

“Chikcham" is Vajramma’s way of asking for Chik shampoo that CavinKare Pvt. Ltd launched in sachet form for the first time in India in 1983. Meera, another shampoo available in sachets, has the picture of a girl with long hair and a primary ingredient in the product is kunkudukai.

Why exactly did Vajramma switch to shampoo sachets? It became difficult to find kunkudukai in the Jangaon market and after her work at home and in the fields, she barely had the time to collect the necessary ingredients and prepare the mix to wash her hair.

“These days, everybody has money and they just get a shampoo sachet for 50 paisa that has kunkudukai in it," she says. Vajramma shops at her local retailer Koyada Somalakshmi’s, who owns a small grocery store in Nellutla, a village with a population of around 2,500, some 90km north-east of Hyderabad.

Also See Jangaon (Map)

Chennai-based CavinKare is counting on customers such as Vajramma, in nearly 600,000-odd villages across India, to sustain its growth even in the face of slowing demand in urban markets that have been hit hardest by a downturn in the economy.

When it ventured into the rural markets, CavinKare established an extensive distribution network and then used retailer incentives to push its products. With the competition catching up, CavinKare shifted focus to product differentiation through research in addition to getting even more aggressive and innovative with retailer incentives.

“Initially, women would just ask for a shampoo and I would sell those that give me the maximum benefit (as a retailer)," says Somalakshmi. However, of late, Somalakshmi is getting customers such as Vajramma who ask for the “blue shampoo" (Clinic Plus) or “black shampoo" (Chik) or the shampoo with “the picture of a girl with long hair" (Meera).

Half-rupee success

After CavinKare launched Chik in 1983 for as low as fifty paisa, the product went on to become a phenomenal success in rural markets.

Working for the early boarders of the rural markets bandwagon such as CavinKare is the growth in rural demand itself, thanks to the increasing levels of disposable incomes in rural households.

A recent Rural Markets Association of India study showed that healthy farm production, government-backed employment guarantee schemes and the farm loan waiver last year translated into higher spending power in Indian villages.

“Demand for FMCG (fast moving consumer goods) has definitely seen some constriction in urban markets, and there is also a shift from higher-priced products to lower-priced products," says Ramesh Srinivasan, head of consumer markets at consultancy firm KPMG. “Demand in rural markets, however, has not been impacted despite the slowdown."

Getting the pricing point and the product packaging right, especially the concept of sachets, did wonders for CavinKare in increasing its market share in the rural markets, which account for half its revenue.

“We made a conscious decision to keep their (rural consumers) affordability in mind rather than our margins and devised our marketing strategies without compromising on quality," said chairman and managing director C.K. Ranganathan.

CavinKare sells products across various divisions including hair care, skin care and personal care. Across its hair care products segment that includes Chik, Meera and Karthika, at least 65% of sales come from rural markets, says Ramesh Viswanathan, executive director.

For the overall industry, 52% of shampoo sales happen in the rural markets. Country-wide, nearly 75% of shampoo sales take place in the form of sachets.

Last-mile travel

When it entered the rural market, CavinKare diligently established a wide network of distributors to reach out to as many villages as possible. According to Vishwanathan, putting in place “multiple distribution systems to ensure (the) product travels that last mile" was critical to gain traction in the rural market.

Once the last-mile reach was ensured, the next priority was to create adequate visibility for its products.

CavinKare adopted a two-pronged strategy of getting retailers to push its products such as shampoos by offering them competitive incentive schemes, besides free distribution of shampoo sachets and product demonstrations in public to ensure at least rudimentary brand recall among rural customers such as Vajramma.

“CavinKare products usually have 1-2% higher margin for the distributor than similar products from competitors. There are other incentive schemes also available," says Gattu Venkateshwarlu, owner of Sri Sai Ram Agencies, a CavinKare distributor in Jangaon village in Warangal district of Andhra Pradesh.

Venkateshwarlu, who started distributing CavinKare products in 1993-94, says that during the initial years, wholesalers would pick up CavinKare products worth around Rs2,000 every month. That figure currently stands at around Rs3 lakh for Venkateshwarlu. “The sales have been growing continuously till date. We are yet to see any slowdown."

Wholesalers pick up products from Venkateshwarlu and, in turn, sell them to at least 25 retailers who reach a minimum of 20 villages in just one corner of Warangal district alone. There are 23 districts in Andhra Pradesh.

To ensure better visibility for products, CavinKare enticed retailers with display incentives, over and above all other benefits.

Product visibility

“Company (CavinKare) offers Rs100-200 (a month) to retailers just for displaying the products prominently in store racks to ensure product visibility to potential consumers," says Venkateshwarlu.

To stay ahead in the competitive incentives game, CavinKare introduced the 8+1 and 12+1 schemes, where free bonus packs are given to retailers who buy a certain quantity of CavinKare products.

To top it off, “There is a concept called ‘quantity purchased and sold’, wherein those who procure more and sell more are given commensurate rewards," says S. Jayaker, who owns Niranjana Agencies, a wholesaler of household and consumer care products in Jangaon.

As part of such a rewards scheme, Jayaker won a cycle last month by redeeming points he earned by procuring and selling CavinKare products. Needless to mention, Jayaker is happy to push CavinKare products.

The push strategy of offering competitive incentives to retailers helped CavinKare scale up its rural market share, but knowing that the competition will catch up sooner or later, the firm started working on creating brand awareness so that consumers would specifically ask for a CavinKare product and not just any shampoo or oil.

Activities such as free distribution of shampoo sachets at festival venues were started to raise awareness about CavinKare products. This has seen demand for CavinKare products going up, evidenced by the increasing market share of the firm, says Vineet Trakroo, vice-president (marketing) at CavinKare.

Raising market share

Along with creating brand awareness, CavinKare invested in product differentiation to stay ahead of the competition.

Through a study by its markets research team, CavinKare learnt that a natural ingredient called kunkudukai was widely used by women in rural Andhra Pradesh, as well as in other parts of the country, to wash hair.

Taking its cue from the study, CavinKare introduced Meera (six years ago), and Karthika (two years ago) shampoos in 50 paisa, Re1 and Rs2 sachets.

The brands were an instant hit and helped the company increase its sales and market share significantly in Andhra Pradesh market, says Trakroo.

Karthika shampoo now occupies the third position brand-wise in Andhra Pradesh, the first two being Chik and Hindustan Unilever Ltd’s Clinic Plus.

In a span of two years, the Karthika brand has managed to get a market share of 7% in Andhra Pradesh while Meera, which was introduced around seven years ago, has a market share of 15% in the state.

Consumer market analysts warn that demand in rural markets can be prone to cyclical swings, depending on the monsoon that waters much of the country’s crops.

“If there is a bad monsoon and agricultural income takes a hit, then demand in the countryside could shrink as well," said Srinivasan of KPMG.

In fact, in the quarter ended 31 December, despite a good monsoon, the nation’s agricultural output fell by 2.2 %, a factor that could have implications for disposable income in the villages.

Armed with the experience of being in the rural market since the 1980s, CavinKare chairman Ranganathan, however, isn’t worried. He has seen only growth and expects to see more of the same in rural markets—slowdown or no slowdown.

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