C K Ranganathan, chairman and managing director of CavinKare, has shown the world it is possible to beat the multinationals even in the most difficult market of fast moving consumer goods.
Ranganathan's journey, which started from a small town of Cuddalore in Tamil Nadu, has been an amazing one. A business which he started with only with Rs 15,000 is now worth Rs 500 crore (Rs 5 billion).
He learnt the first entrepreneurial lessons from his father, Chinni Krishnan, who started a small-scale pharmaceutical packaging unit, before moving on to manufacture pharmaceutical products and cosmetics.
the CavinKare chief speaks about his inspiring journey.
His father, his inspiration
My father, Chinni Krishnan, an agriculturist, was also into pharmaceutical business. As I was poor in academics, he wanted me to either do agriculture or start a business.
My siblings were good in studies -- two of them became doctors and another a lawyer. I was the odd one out. While my siblings studied in English medium schools, I was put in a Tamil medium school. I used to suffer from an inferiority complex because of my poor academic record.
Studies did not interest me, but rearing pets did. When I was in the fifth standard, I had a lot of pets -- more than 500 pigeons, a lot of fish and a large variety of birds. I used to earn my pocket money out of pet business at that time. Perhaps, the entrepreneurial spirit in me showed its first streak.
The origin of the concept of sachets
My father died as I entered college. He had come out with the sachet concept a couple of years prior to his demise. He felt liquid can be packed in sachets as well. When talcum powder was sold only in tin containers, he was the one who sold it in 100 gm, 50 gm and 20 gm packs.
When Epsom salt came in 100 gm packets, my father brought out salt sachets of as low as 5 gm.
'Whatever I make, I want the coolies and the rickshawpullers to use. I want to make my products affordable to them,' he used to say.
Selling things in sachets was his motto as he said, 'this is going to be the product of the future.' But my father could not market the concept well. He moved from one innovation to another but never thought of marketing strategies. He was a great innovator, but a poor marketer.
Joining the family business
After my father's death, my brothers took charge of the family business. In 1982, when I joined them after my studies, they had launched Velvette Shampoo. Within eight to nine months, I left the business because my ideas clashed with theirs.
As I was in the manufacturing unit, I did not know anything about marketing or finance. But, my inferiority complex notwithstanding, I was somehow confident of doing business better.
Starting his own business with Rs 15,000
I had left my brothers saying that I did not want any stake in the property or business. That was a defining moment for me. I had saved Rs 15,000 from my salary and that was all I had. Yet I was confident of achieving success. I did not feel anything about riding a bicycle after having got used to cars.
For a week, I could not make up my mind as to what business to do. I knew only two things; making shampoo and rearing pets. I didn't want to venture into the shampoo business as it would initate a fight with my brothers. However, I decided to do the same later as I could only make shampoo.
I rented a house-cum-office for Rs 250 a month against an advance of Rs 1,000. I took another place for the factory for a rent of Rs 300 a month and against an advance of Rs 1,200. I bought a shampoo-packing machine for Rs 3,000.
How Chik Shampoo was born
I named it Chik Shampoo after my father. The product did not succeed immediately; we learnt many things during the process. In the first month, we could sell 20,000 sachets and from the second year, we started making profits.
I moved to Chennai in 1989 but our manufacturing unit continued to be in Cuddalore. It took me three years to get the first loan because banks asked for collateral. I did not have any. But one particular bank gave me a loan of Rs 25,000 which we rotated and later upgraded to Rs 400,000, Rs 15 lakh (Rs 1.5 million), etc.
You know what the bank manager wrote in our loan application? 'This person does not have any collateral to offer but there is something interesting about this SSI unit. Unlike others, this company pays income tax!'
I must say my business never looked back because I was very particular about paying income tax.
Strategies that made Chik Shampoo No. 1 in South India
When Chik entered the market, Velvette Shampoo was being marketed aggressively by Godrej. But a scheme of ours became extremely successful -- we exchanged five sachets of any shampoo for a Chik Shampoo sachet, free.
Later, we altered the scheme -- we started giving one free Chik Shampoo sachet in lieu of five Chik Shampoo sachets only. Soon, consumers started asking for Chik sachets only. The sales went up from Rs 35,000 to Rs 12 lakh (Rs 1.2 million) a month.
When we introduced jasmine and rose fragrances, our sales went up to Rs 30 lakh (Rs 3 million) per month and with actor Amala as our model, our sales rose to Rs 1 crore (Rs 10 million) a month! Each idea of ours was rewarded by our customers. There has been no looking back since then.
Our market share increased and in 1992, we became the numero uno in South India. It took nine years for me to overtake my brothers' business.
How Chik Shampoo conquered the rural market
Multinational companies sold products in big bottles and not in sachets and they sold only from fancy stores. They did not look at the small kirana stores, nor did they look at the rural market.
We went to the rural areas of South India where people hardly used shampoo. We showed them how to use it. We did live demonstration on a young boy. We asked those assembled to feel and smell his hair.
Next we planned Chik Shampoo-sponsored shows of Rajniknath's films. We showed our advertisements in between, followed by live demonstrations. We also distributed free sachets among the audience after these shows. This worked wonders in rural Tamil Nadu and Andhra Pradesh. After every show, our shampoo sales went up three to four times.
Today, the Indian rural market is growing at a pace double than that of the urban market.
Launching Meera Herbal powder
We continued with Chik Shampoo for seven years before venturing into anything else.
Meera Herbal powder was actually not our idea. Shaw Wallace already had a herbal product but it was marketed very poorly. We felt there was a demand for herbal products and we made a good product. I felt we should be the leader if ours was a good product. And guess what? In the third month itself, we topped the market. In six months, we had 95 per cent market share, while Shaw Wallace had only 4-5 per cent.
How Beauty Cosmetics became CavinKare
As we planned to expand to new products, we thought the name Beauty Cosmetics would be restrictive. In 1998, we ran a contest among our employees for a name and one of them suggested CavinKare; with C and K spelt in capitals. CK, my father's initials. Cavin in Tamil means beauty and grace.
Perfumes for the poor
We wanted to cater to those who cannot afford (high priced) perfumes. Good perfumes came at a huge price -- they were beyond the means of ordinary people. We decided to come out with a Rs 10 pack Spinz. We were successful in that too.
Shampoo market share
In the last two to three years, our market share has come down though we are growing. It is mainly because of the anti-dandruff shampoos in the market. We do not have an anti-dandruff shampoo yet. From 0 per cent, the anti-dandruff shampoos have taken over 25 per cent of the market.
Only 75 per cent of the market, therefore, constitutes ordinary shampoos. We hold 20 per cent of the market share.
But we are the largest brand in rural Uttar Pradesh, Andhra Pradesh, etc. and we are the number one in many other states as well.
On the decision to launch a fairness cream
We decided to launch Fairever in 1997 as we saw a huge demand fairness cream. We are the second largest player in the market in this.
Research states that when a product is good, consumers do not shift to a new brand. Our team told me not to venture into the fairness cream market as the consumers were quite satisfied with the existing products. But we went to launch our product containing saffron -- which is traditionally used to get a fair complexion. In six months, our sales galloped.
This was followed by Indica hair dye.
Two and a half years ago, we launched Ruchi pickles in sachets and we became number one there too. We sell close to 5,000 tonne of pickles per annum. We hope to double this in two to three years. Food is a huge market: we have understood that.
Our target is to be a Rs 1,500 crore (Rs 15 billion) company in another three years.
Reasons behind his 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. We have executed innovative ideas as well.
CavinKare Ability Award
This month, we presented the 5th CavinKare Ability Foundation awards for physically disabled achievers.
I stayed as a tenant at Jayashree Ravindran's place (the woman who started the Ability Foundation). Once, she said she wanted to start a magazine for the disabled. Though she did not ask for sponsorship, I gave her a cheque of Rs 25,000. I also became one of the Foundation's founder members.
Once we came to know about the disabled who have climbed the ladder of success, we -- Ability Foundation and CavinKare -- decided to institute an award for them.
I feel each of us has to give something back to the society. I have great admiration for those who fight against all odds and attain success. When I started my career, I only faced shortage of funds but these people tide over graver difficulties. We must applaud their fighting spirit.
C K Ranganathan, chairman and managing director of CavinKare.
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