CASE STUDY

CavinKare India Private Limited

Submitted to Professor ******************* ****** Institute of Management, ********* On June 27th, 20121

All data and recommendations presented in the report are based on the prevalent market scenario in FMCG business in 2007-08 (the time when the case was written)

Table of Contents
Introduction: ........................................................................................................................................... 3 Existing Resources of CavinKare: ........................................................................................................ 3 Analysis of the current situation: ........................................................................................................ 3 Personal and Household Care: ................................................................................................................ 3 Path Forward:...................................................................................................................................... 4 Evaluation: .......................................................................................................................................... 5 Food Segment: ........................................................................................................................................ 5 Path forward: ...................................................................................................................................... 5 Evaluation: .......................................................................................................................................... 5 Salon Business: ........................................................................................................................................ 6 Path Forward:...................................................................................................................................... 6 Conclusions: ............................................................................................................................................ 6 References: ............................................................................................................................................. 6 Exhibits: ................................................................................................................................................... 7 Exhibit 1: Analysis of available options in Personal and Household Care business ............................ 7 Exhibit 2: Brand promotion campaign of Emami's Fair & Handsome ................................................ 8 Exhibit 3: Analysis of available options in Food business ................................................................... 9

Introduction:
CavinKare is a diversified FMCG company whose business is organised into three strategic business units (SBUs) Personal care, Foods, and International Business. Innovation has been the backbone of the rapid growth of the company since its initial days and believes in creating competitive advantage through innovation. This belief has led to the significant investment in research and development by the company which is the backbone of their new product development.

Existing Resources of CavinKare:

Well established sales and distribution network as well as market knowledge of FMCG business Many well known brands in Hair care, Skin care, Household care and Food categories Skills in cash flow management along with a good image with creditors/banks Significant installed manufacturing capacity as well as good network of Third Party Manufacturing Units (TPUs) Significant investment in basic research and state of the art R&D facilities to support new product development Proven and structured process/framework (SIEMAL) for capitalizing on newer opportunities and very fast speed of idea to execution cycle Significant contacts in consumers home to develop new food products that retain local taste. Constant innovation in logistics, storage to reduce cost of production. Like- regional packaging center

Analysis of the current situation:

The company is presently garnering the plans of exponential growth and to achieve its ambitious targets innovation in terms of their product offerings is the best solution available as demonstrated in the past by the company. The company has identified the Mens grooming, OTC (Over the counter) products, Foods as the drivers of the companys growth in the coming years. To validate this claim the following section analyses the different segments of the company and analyse the respective markets to identify the gaps present in the market which can be filled by creating new products based on the availability of resources and the feasibility of the products to the company.

Personal and Household Care:

Available options for immediate future in Personal and Household Care business have been analyzed in Exhibit-1. The gaps mentioned in the Exhibit-1 are of two categories. First category is of the market gaps which are being offered neither by CavinKare nor by any other competitors. Second category is of the gaps identified in the CavinKares product line, which are being offered by other firms.

Path Forward:
In short term, CavinKare should try to fill existing market gaps as well as gaps in its own product portfolio in segments of Hair care, Skin care, Male grooming and Household cleaners because the firm already has its presence in these segments which makes requirement of acquiring new resources/skills significantly low. Also, since these segments have very high growth potential, Cavinkare should try to be present in all categories of these segments. Key recommendations for short term are as follows: Investments in R&D to assess the possibility and costs associated in developing Mens grooming products range that would also includes face wash and moisturizer o Though currently (in 2007) there is a stiff competition in mens fairness cream segment (Emamis Fair & Handsome, HUL's Fair & Lovely Menz Active, Nivea for Men Multi-White Whitening Facial Foam and Elder HealthCares Fair One Man Cream), there is a gap in market for products like face wash, moisturizers and hair care products which are specially designed for men. o Marketing department should be involved in assessing the market potential for such a range of products. o The issue of the reluctance of men to be seen using a beauty care products poses a challenge because cosmetics traditionally is viewed as a category meant for females. But above mentioned brands are trying to communicate the message that better looks enhances confidence and self esteem in men, through their promotional campaigns (Exhibit-2). This changing outlook is definitely indicating a big opportunity for CavinKare to leverage on these promotional activities of competitors. Brand value of Meera brand can be leveraged in introducing a brand in coconut hair oil segment. Introduction of a conditioning shampoo brand as brand extension of Chick Shampoo Brand value of Nyle brand can be leveraged in introducing a moisturizer Introduction of product in Surface cleaner segment as brand extension of Tex cleaner

In long term, CavinKare should focus on acquiring new resources and skills which are essential to foray into bigger segments of soaps, fabric wash and oral care. While the growth rates in these segments are lower, the industry potential is substantial in these segments, as the unbranded and unorganized sector account for a large proportion. These businesses could serve the purpose of Cash Cows for CavinKare by providing steady cash flows in long term future. The ongoing research CRC in the cosmaceuticals should be used to develop new OTC drugs which can be marketed through the trends in vogue salons which can also be used to understand the specific needs of the consumers which can be used by the research team to
4

come up with products that suit the target customers there by reducing the risk of uncertainty involved in the new product development.

Evaluation:
Investment: The investment in the R&D is significantly high as product innovation is very important for success and considerable market research is required to understand the needs in the segment as most of the needs are latent. Returns: The high growth in personal care and especially in the male grooming segment presents a great opportunity for cavinkare as the product portfolio is still not completely explored in the market and hence a good product could make good profits by charging premium prices and with research capabilities of cavinkare it surely promises to be a good avenue to invest.

Food Segment:
The company is presently operating in the culinary products in the food segment whose market size is a healthy INR 15000 million and is growing at a rate of 20% which is the highest growth rate in the food segment. The gaps that can be identified in their existing offerings are shown in the exhibit-3 Apart from the culinary products health foods and drinks is a sub segment which has a sizeable market size and is growing at an impressive rate of 10% providing opportunities to be tapped such as flavoured milk, packaged beverages.

Path forward:
Short term: Dates and candies, masala, pickle are variety seeking products. Cavinkare should constantly add more flavours to remain competitive in market. Also these products provide constant stream of cash. R&D in these products can be done with higher success rate and low investment. Long term: Ready to cook category can be broaden by innovating on ready to eat category. CavinKare should target in for business families. Although high investment on R&D is required, CavinKare can charge premium by providing high value.

Evaluation:
Investment: Moderate investment is required as the company has presence in the segment and can leverage the existing manufacturing facilities. In the food industry as taste is very vital extensive research would be required and also the products need to be advertised extensively and hence requires significant R&D and marketing expenditure. Returns: The sub segments suggested are growing at a healthy rate and have good potential to earn returns as the sales would involve high volumes. The risk in flavoured milk beverages could be the fluctuating prices of milk.

Salon Business:
The institutional business for their products included these salons as they also use their brands These salons serves as major sources of information on usage patterns of various categories and products The company gains significant insight into both salon mangers as well as consumers category and product preferences The alternate product samples developed by R&D team are tested in dedicated parlors like Trends In Vogue by the CavinKare Research Centre, before they are cleared for home use testing. These salons helped the company leverage the confidence customers placed on the advice of the beauticians to increase their product sales. The company should increase the number of salons in existing states to reach out to more customers. The bulk of their salons are in the southern states of Karnataka, Tamil Nadu, Andhra Pradesh and Kerala, they need to expand their salons range beyond these states to cater to more people either by investing more capital themselves to build new salons or by utilizing the strength of existing small salon chains in other states.

Path Forward:

Conclusions:
CavinKare has believed in growing through continuous innovation in its products and in the current situation they should continue to innovate to introduce new products as discussed in the above analysis to expand their portfolio in the various segments of the FMCG market which would help them achieve their target of becoming INR 52 Bn Company by 2012. This target requires CavinKare to become market leader in most of the segments where they have been a distant second since a long time and innovation in products and marketing which have been the core strength of CavinKare have a vital role to play.

References:
1) http://marketingpractice.blogspot.in/2007/07/fair-and-handsome-be-fair-be-handsome.html 2) http://punjabnewsline.com/content/indian-men-chase-fairness-creams-and-create-glowing-

market
3) http://www.fairandhandsome.net/yourface.php 4) http://fmcgmarketers.blogspot.in/2008/07/household-cleaner-market-in-india.html 5) http://www.domain-.com/companies/companies_h/hind_lever/20060204_conditioners.html

Exhibits:
Exhibit 1: Analysis of available options in Personal and Household Care business
Segment Current Offerings Gaps identified/ Analysis/ Comments Possible Offerings

Personal Care Personal hygiene Spinz Deodorant Soaps, Deodorant Stiff competition, expected growth rate (for girls) for men, Bath and is only 1%. shower products Acquiring new resources is essential for entering into Soaps business. Chik Shampoo, Nyle Herbal Shampoo, Meera badam hair oil, Meera hair wash powder, Karthika hair wash powder, Meera herbal hair oil, Indica hair colorant Conditioner, Conditioning shampoo, Coconut oil The conditioner market is 42.3% of the Hair care segment and CavinKare doesn't have significant presence in this market. The hair oil market is dominated by coconut hair oil with a 72% market share and CavinKare doesnt own any coconut oil brand.

Hair care

Skin care

Fairever fairness Moisturizer cream, Spinz talc, Nyle cold cream, Nyle lotion None

Significant growth rate of 15%

Oral care

Mouthwash, Already many established players are Toothpaste, Tooth there in the market, expected growth powder, rate is also not very high. Toothbrush Entry into this segment requires acquisition of new resources. Hair gel/oil, Shampoo, Fairness cream, Face wash, Moisturizers Growing market (expected growth rate is 20% p.a.) and competition is also limited. According to a report, the men's fairness products market alone is growing at the rate of 25 percent, while the women's fairness market is growing at 7 to 8 percent. Since CavinKare has specialized in the Hair care and Skin care segments, new resources requirement is low. Entry into this segment requires acquisition of new resources. Also

Male grooming

None

Feminine Hygiene

None

Sanitary pads

market is already dominated by 2-3 established players. Household Care Fabric Wash Dish wash None Washing powder, Washing bar Dish wash powder/liquid Stiff competition and absence of any identifiable market gap, expected growth rate is only 4% No identifiable market gap, expected growth rate is also not very high Entry into this segment requires acquisition of new resources/skills. Toilet cleaner segment is growing at 35% annually while Surface cleaner segment at 18%

None

Household Tex toilet cleaners cleaners

Surface cleaner

Exhibit 2: Brand promotion campaign of Emami's Fair & Handsome

Exhibit 3: Analysis of available options in Food business

Product category
Masala

Current offering
Chinnis

Gaps
Add various types of masala. Like- chaat masala, paav-bhaji masala Add North Indian taste

Analysis/ comments
Leverage existing home contacts for these masala recipes Since cycle time is low for Pickle. Not be much profitable Need to spend on Research because taste play a lot of role. Low investment, existing brand can be leveraged by adding new taste Require much investment on Research. But we charge premium from working individuals

Pickle Ready to cook Dates and candies Ready to eatNew category

Ruchi

Ruchi Gulab Add more mixes like- Idli Jamun mix mix, Dosa mix( specially for south India) Health plus Add various flavoured candies Various currys and desserts targeted towards working families