Case: Chic Shampoo- Rural Revolution

Chic- Shampoo Sachet

Dr Amit RangnekarDec 2007

Dr Amit [email protected]

Case Objectives

• To understand Indian rural dynamics and Indian rural consumer behaviour

• To provide a backdrop of the Indian Shampoo Market in the rural context

• To highlight the successful strategies that Chik Shampoo employed in the rural market


The concept of sachets

• C K Ranganathan, CMD, CavinKare, has shown the world it is possible to beat MNCs even in FMCGs

• Born in Cuddalore in TN, started a business with Rs 15,000, now worth Rs 500 crore (Rs 5 billion)

• “My father introduced the sachet concept as he felt liquid can be packed well in sachets. When talcum powder was sold in tin containers, he sold it in 20/50/100 gm packs. When Epsom salt came in 100 gm packs, he sold it in 5 gm sachets ”

• “Whatever I make, I want the coolies and rickshaw pullers to use. I want to make my products affordable to them, he used to say”

• “Sachets are going to be the product of the future, he said. But my father was a great innovator, but a poor marketer”


How Chik Shampoo was born• The family launched Velvette shampoo sachet

successfully in the South in the late 1970s• 1982- Ranganathan joined, but separated over

differences with family members• Started Beauty Cosmetics, with Chik Shampoo

named after his father, Chinni Krishnan• Chik began with only 20,000 sachets, but made

profits from the second year• 1989- Office in Chennai, manufacturing in

Cuddalore• Beauty Cosmetics name was restrictive• 1998- in-house contest suggested CavinKare• Cavin in Tamil means beauty and grace, and C

and K (father's initials) spelt in capitals


Snippet

• “Took me 3 years to get my first loan as banks asked for collateral, I had none. One bank gave me a 25,000 loan, which we rotated & upgraded to 4 lakh & then 15 lakh. The bank manager wrote on my loan application that this person has no collateral, but something interesting about this SSI unit is that unlike others, this company pays income tax!”


Shampoo Rural Market

• CavinKare- pioneering attempt to offer shampoos in small pillow packs

• Market flooded with 70-odd small shampoo labels with little differentiation

• Velvette (family business), synonymous with ‘sachet shampoo’, aggressively marketed by Godrej

• Consumers would ask for a Velvette but walk away happily with whatever label the retailer gave them

• Many never knew the difference, for others it did not matter


Indian Shampoo Market 1980s

Pric

e

Quality

High

Low

Good

Chik

Poor

Local Players

MNC BrandsShampoo Bottles

Need Gap


Chik TargetingC

ost

to C

onsu

mer

Availability of Product

High

Low High

Chik

The right distribution strategy must make the brand available to the rural consumer at a cost he is Willing to pay


Target audience

• Lower middle-class/ • semi-rural (Sec B2,C,D)• MHHI Rs 1,500–3,000• Females• Age group of 16-plus


Accessibility & Affordability

• The success of the sachet changed the structure of the shampoo industry

• New layers of consumers, mainly from rural pockets, could now afford shampoos

• The ‘upper class’ tag attached to shampoos fast faded away

• Extremely cut-throat market emerged• Significant trade influence on what the

consumer bought


Chik Launch

• 1983- Chik shampoo launched by CavinKare• Initial launch in 10 ml pack• Later launched in sachet form• Market cluttered with low-cost shampoos• “But there was a clear opportunity for a good

quality shampoo with appealing perfume at a price to delight the consumer”

• Chik endeavoured to provide to the masses a significantly superior product than those available at similar price points

• Chik shampoo used French perfume to differentiate itself on the plank of superior fragrance


Promotion• Ad strategy based on the powerful appeal of

cinema among common masses• Innovative radio ads based on popular cinema

dialogues, unlike plain radio jingles of competitors• “Cinema is the most cherished means of family

entertainment and cine stars have cult following in the south. Therefore, the communication strategy was to leverage popular cinema dialogues to drive home the message”

• Popular southern cine stars endorsed Chik- Amala, Khushboo, Manorama and Charlie

• Radio used as the sole mass advertising medium• Annual ad spends about Rs 2 lakh


Trials

• Shampoos getting encouraging trials from rural consumers, but extremely low penetration levels

• Many people had no clue how to use a shampoo• To encourage trials, CavinKare’s team travelled

extensively in rural pockets• Trials on schoolboys to demonstrate how to

lather and wash, comb hair and show the difference

• “We were as thrilled & excited as the volunteers during the demonstrations. This exercise had a significant impact in breaking ice & made people comfortable with the concept”


‘Champi’ on schoolboys


Impact

• “We also encouraged trial through a consumer scheme, where anyone could take any 4 empty shampoo sachets to a retailer and take home a Chik sachet free. Though more risky, this scheme paid off and more and more people began asking for Chik at their local retail outlet”

• “Later, we altered the scheme- we started giving 1 free Chik Shampoo sachet in lieu of 5 Chik Shampoo sachets only. Soon, consumers started asking for Chik sachets only

• Sales rose from Rs 35,000 to Rs 10 lakh a month


School Demo


1990s

• Chic, quite popular in the southern markets• Shampoo market growing at a healthy 15%• “For the 1st time, floral fragrances (rose, jasmine)

were offered in shampoos. Consumer insights in the Southern markets conveyed that women keep flowers in the hair for fragrance. The concept was a hit, and sales jumped three times from Rs 10 lakhs to Rs 30 lakhs a month”

• “When Amala endorsed, sales rose to Rs 1 crore a month! Each idea was rewarded by our customers”

• Chic continued to use popular cinema celebrities and extended endorsements to TV in 1992

• In 1992, we became the numero uno in South India


Taking on the MNCs

• “MNCs sold products in bottles, not in sachets and sold only from fancy stores. They did not look at the small kirana stores, nor at the rural market”

• “We went to rural areas in South India where people hardly used shampoo. We showed them how to use it by doing live demonstration on a young boy. We asked people to feel & smell his hair”

• “Chik sponsored shows of Rajniknath's films. We showed our ads in between, followed by live demonstrations. We distributed free sachets among the audience after every show, which worked wonders in rural TN & AP. After every show, our shampoo sales went up 3-4 times”


Consumers

start demanding Chik


National footprint

• 1993- Chik shampoo mulled a national presence• “Then, the Indian rural market only outgrew the

urban market, now it grows at double the pace”• “Chik’s objective was to expand the market,

and get new consumers in the category”• Focus- largely rural, value-conscious sections in

urban areas were also attracted • Distribution in rural areas is driven through

innovative trade schemes & consumer offerings

Population size Villages %

< 1000 459465 70

1000-5000 58029 9

>5000 143248 21


Rural Dynamics

• Most villages in India are of very small size• 70% villages have population < 1,000• With low accessibility and undeveloped local

markets, how do you market your products to these villages?

• Opportunity- The 47,000 haats & 25,000 melas organised in such villages

• Average daily business in these haats was Rs 2 lakh

• CavinKare created availability in smaller villages through the wholesale network

• “The right marketing strategy for the rural market is to balance the conflicting dimensions of ‘availability’ on the one hand and ‘affordability’ on the other”


Mid 1990s• The shampoo market surged by 25%• Small packs contributed 40% of total

shampoo volumes• Rural markets grew much faster than urban

markets and continue till date • The key challenge was to reach rural markets• Packaging became critical for rural marketing• 1999- Chik, second largest shampoo brand in

India- (also in rural markets)- next only to HLL’s Clinic Plus


Key factors in rural purchase

• Packaging & branding made prominent to enable quick identification by the rural consumer”

• Chik- Mnemonic & pack changed to bring in design & colour elements, enable ‘onshelf’ differentiation and aided recall

Factors influencing purchase of shampoos in rural markets

% of respondents

Looking at the wrapper 60

Retailer recommends 25

Looking at the price 4

Logo identification 2

Doesn’t bother to check 9


Shampoo Economics

• “Years back on a market visit, a rural consumer recalled he had used soap to wash his hair for ages, and that he had no visible damage to his hair. Though the hair felt rough, he was fine with that. So why should he start paying for shampoos?”

• “There were 5 adults per household in rural India, & @ Rs2 per sachet & 4 washes per month meant Rs40 for hair wash alone. They couldn’t spend such money on hair wash every month. If the cost of hair wash could be cut to Rs2 per person per month they would try a shampoo. This meant he wanted something as marginal as a 50-paise shampoo pack. The initial thought of offering a 50-paise shampoo sounded ridiculous”


The 50-paise shampoo sachet

• “We worked backwards, developming the formula & packaging took us a few years. We launched Chik shampoo sachet @ 50 paise in September 1999, the first ever such price point”

• The result- rural shampoos grew at twice that of the urban sector

• Price point helped penetrate deep rural pockets

• Chik market share flared from 5.6%(1999) to 23%(2004)

• 2005- Chik was a Rs 100 crore brand on MRP value

• No.1 Indian rural shampoo, 65% rural market sales


Rural Chik • “Chik’s value proposition helped us become No.1 in

many states in rural India. Recruiting customers is the key issue as the rural consumer is rational & value conscious. To be successful, the marketing mix must deliver superior value to the rural consumer at a price point he is comfortable with”

Rural Hold of Chik

States No. of Villages MS % (Volume)

Rank

UP 107440 67 1

MP 55392 22 2

Bihar 45113 32 1

AP 28123 39 1

TN 16870 46 1

Orissa 55352 19 2


The Chik Promise

• A year round tropical climate makes it difficult to maintain hair softness and shine

• Tangled hair- Common complaint in girls & women

• Softness & manageability- key issues in the maintenance and nourishment of hair

• Unique formula – Active Double Conditioners• “The iconic Chik Girl in every ad treated her

hair with the shampoo and demonstrated with utmost ease and confidence, her ability to untangle her hair with just a single motion of running her fingers through her hair”

• Tagline- “Yun Kiya Ho Gaya” popular phrase amongst both girls and women today


Current status

• “In the last 2-3 years, our market share has come down though we are growing. It is mainly due to the anti-dandruff shampoos in the market which from 0% have taken over 25% of the market. We do not have an anti-dandruff shampoo yet”

• “Ordinary shampoos constitute only 75% of the market, of which we hold 20% market share. But we are the largest brand in rural UP, AP, etc. and the number one in many other states as well”


Range• Chik penetrated the Indian market

with a wide range, 4 refreshing fragrances, sensistive pricing and right sizing

• Chik Black• Chik Jasmine• Chik Egg• Chik cool• Sachet packing and pricing at Re.1 and 50p• Bottles sized-60 ml, 120 ml, 250 ml & 500ml• Anti Dandruff Shampoo, containing

climbazole and lemon extracts for dandruff and itching


Other successes

• We focused only on Chik for 7 years • Meera Herbal powder-95% share• Spinz perfumes @ Rs 10, a runaway hit• Nyle- Herbal Shampoo- Transparent

packaging • Fairever fairness cream (1997)- 2nd largest

player, with saffron, traditionally used for fair complexion

• Indica Hair dye- ”Baalon ko de dil ki umar” • Ruchi Pickle sachets (2004)- No.1, 5000

tpa pickles• Chinni’s Masala range


• 2006-2007- CavinKare 500 crores• 576 employees• All India network of 1300 Stockists catering

to about 25 lakh outlets nationally• Manufacturing plant at Haridwar

(Uttaranchal)• Third Party manufacturing at Pondicherry,

Noida, Assam and Faridabad• Exports- Nepal, Srilanka, Malaysia,

Singapore, Bangladesh, US and the GCC region

• Target- 1500 crore company by 2010


Reasons behind CavinKare’s success

• “Teamwork is the main reason for our success. We have good professionals who work really hard. The second reason of our success is innovation and thirdly we have executed innovative ideas well”

Case: Chic Shampoo- Rural Revolution

Documents

Transcript of Case: Chic Shampoo- Rural Revolution