2302947 case-chic-shampoo-rural-revolution

Chic- Shampoo Sachet
Dr Amit Rangnekar
Dec 2007

Dr Amit Rangnekar
amitrangnekar@gmail.co
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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!”

Dr Amit Rangnekar
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

Dr Amit Rangnekar
Indian Shampoo Market 1980s
Price
Quality
High
Low
Good
Chik
Poor
Local Players
MNC Brands
Shampoo Bottles
Need
Gap

Dr Amit Rangnekar
Chik Targeting
CosttoConsumer
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

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

Dr Amit Rangnekar
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

Dr Amit Rangnekar

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
‘Champi’ on schoolboys

Dr Amit Rangnekar
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

Dr Amit Rangnekar
School Demo

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
Consumers
start
demanding
Chik

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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”

Dr Amit Rangnekar
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

Dr Amit Rangnekar
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

Dr Amit Rangnekar
• 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

Dr Amit Rangnekar
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”

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