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DOI: 10.1177/097282011000800105

2011 8: 41Asian Journal of Management CasesR. Srinivasan

CavinKare Private Limited (B) : Vision and Strategy

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ASIAN JOURNAL OF MANAGEMENT CASES, 7(2), 2010: 113–134

CAVINKARE PRIVATE LIMITED (B): VISION AND STRATEGY

R. Srinivasan

Case B on CavinKare describes the incredible vision the organization has set for itself. This case is set at a time when the company had achieved signifi cant progress towards its incredible vision, but needed a quantum jump in performance to sustain its growth. The case describes the FMCG industry and the fi rm’s capabilities, and evolves strategic challenges facing the company, including sustaining high growth, expanding the product focus to men’s range of products and investment in the services business.Keywords: CavinKare, FMCG industry, RBV, capabilities

At the beginning of the fi scal year 2007–08, Ramesh Viswanathan, Vice President (VP), Marketing, at CavinKare Private Limited (CavinKare) returned to his offi ce after a long meeting of the top management team (called the core team). As the meeting came to a close, the team was woken up to the company’s dream of achieving `52 billion by the year 2012. At the current turnover of around `5 billion, the company needed to expand vigorously in the next fi ve years to be able to achieve this vision.

During the meeting, three major concerns had been raised. Ramesh had been entrusted with the preparation of the Vision 2012 document, which was largely ex-pected to provide direction to the organization as to how they planned to achieve their incredible vision. As a distant second by a wide margin in market share in most of their categories, it was imperative that the company took a harder look at its existing product portfolio. They needed to clearly refocus their efforts on specifi c categories and brands among their existing product-brand portfolio.

ASIAN JOURNAL OF MANAGEMENT CASES, 8(1), 2011: 41–60SAGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DCDOI: 10.1177/097282011000800105

This case was prepared by R. Srinivasan, Associate Professor of Corporate Strategy & Policy, Indian Institute of Management, Bangalore, to serve as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The author would like to thank C.K. Ranganathan and the senior management of CavinKare for their support in documenting this case.




42 R. SRINIVASAN

Second, there were questions raised about the company’s capabilities to address the men’s segment. The company’s personal care division was largely focused on meeting the needs of women consumers, and there was a discussion about whether at all the company understood men as a segment. With the men’s grooming products market expected to grow signifi cantly in the next few years, this was another area of concern in his mind.

Third on their list was the expansion plan of their salon business—Trends in Vogue. He had largely believed that the salon business would provide the company with the much needed accelerator for growth in the coming years, and he needed to review personally the expansion plans—both in the number of outlets and revenue growth forecasts.

As his driver walked up to his offi ce to indicate his readiness to go, Ramesh picked up his bag and workbook in hand, switched off the lights and walked out. He was reminded that he had a long day ahead the next day, with crucial meetings scheduled with his Chairman and Managing Director, C.K. Ranganathan (CKR).

THE BEGINNINGS OF THE ENTERPRISE1

C.K. Ranganathan (CKR, aged 46 years on August 2007) was born in a South Indian coastal town, Cuddalore, to educator–parents. He was believed to be consistently weak in studies, and therefore, his father believed that his future lay in agriculture/ farming.

His father quit his teaching job to set up a pharmaceutical repacking business. His business was based on the philosophy that ‘whatever a rich man enjoys, a poor man should also enjoy’. The pharmaceutical repacking business provided opportunities to offer expensive medical products (for infectious diseases like typhoid and malaria) to the poor, who could not afford to invest in large packs, but only small single-use packs (from the usual 100-g packs to 5-g packs). The small single-use packs would not be different in terms of unit prices; however, they provided daily and weekly wagers with access to pharmaceutical products, which they would have never bought in large packs. These products were in great demand and there was no need for any advertisement or special sales/marketing efforts apart from effi cient distribution.

In the year 1976, the company entered the hair care business by packing shampoos in small sachets. The fi rst technology used for sachet making was primitive, but

1 For a detailed account of the origins and entrepreneurial evolutions of the organization, refer to the article ‘CavinKare Private Limited (A): The Entrepreneurial Innovation’.




CAVINKARE PRIVATE LIMITED (B) 43

adequate. The demand for small packs was growing and there was no special need for any marketing. The shampoo product was branded Velvette and was distributed directly to the retail outlets. Other products that were packed in sachets included honey and coconut hair oil. When CKR’s father died of a heart attack at the age of 48, his brothers were still in college. He and his brothers refocused the company by exiting the pharmaceuticals repacking business and began advertising the shampoo product. The business grew slowly and steadily. CKR took charge of manufacturing after his graduation in Chemistry, but due to differences in management styles, he walked out of home and company with `15,000 in his pocket.

When he left his family business, he had absolutely no plans or ideas. He was clear that he did not want to be in the same business to avoid any confl ict with his family. However, with no alternative in front of him, he decided to enter the shampoo business—it was the only thing he knew and he was confi dent that he could do better. Second, the market was fi lled with a lot of imitations and the consumers were not very brand loyal. A typical consumer would walk into a retailer and ask for a ‘packet-shampoo’ and left the brand choice to the retailer. Very few customers recognized brands and still fewer were brand loyal. He saw a huge opportunity in this high-growth business, and entered the market in 1983 with the Chik brand of shampoos—after his father’s name—Chinni Krishnan.

CRK’s brothers, who were managing Velvette shampoo, outsourced their distribu-tion to Godrej Industries (one of India’s leading national marketing/distributing companies). He, on the other hand, decided to do the distribution himself. Even though outsourcing distribution would have largely enhanced scope, he preferred to have control and ownership of the product concept within his team. He also decided against a multi-product/multi-brand distributor, where he realized the organizational motivation would be restricted to the commissions earned from the brand, rather than the ownership and commitment in an in-house distribution system. He also realized that distribution outsourcing would make him just a manufacturer and therefore, he would have no opportunity to interact with his channel partners/end consumers for valuable product–market feedback. This need for feedback and the decision not to outsource distribution was considered as the foundation of the company’s ability to innovate.

One of the fi rst innovations the company created was a jasmine-fragrance shampoo. This differentiation was consistent with the traditional South Indian habit of women anointing their hair with fresh jasmine fl owers. This differentiation was a big selling point at the retail end and the company also marketed this differentiation through their commercials.




44 R. SRINIVASAN

CAVINKARE PRIVATE LIMITED (CAVINKARE) TODAY

The company had crossed the annual turnover of `5,000 million in the year 2006–07 (see Exhibit 1 for normalized summary of fi nancial statements.) The company’s all-India network of 1,300 stockists catered to over 2.5 million retail outlets. It had also registered its footprints in neighbouring international markets like Sri Lanka, Bangladesh, Nepal, Indonesia and Malaysia.

The company was organized into three strategic business units (SBUs)—personal care, foods and international business. The divisions operated on diversifi ed product portfolios pertaining to hair care (shampoos, hair wash powders, hair oils, hair dyes); skin care (fairness creams, moisturizing lotions, face washes, cold creams, face toners, deodorants, talcum powders); home care (toilet cleaners, dish wash bars); and foods (pickles, masalas, ready to cook, candy, dates). See Exhibit 2 for a list of CavinKare brands and their positioning. A dedicated R&D centre, equipped with the state-of-the-art equipment and technologies, supported the divisions. The company had also diversifi ed into services through its retail beauty salons under a wholly owned sub-sidiary, Trends in Vogue Pvt. Ltd. Exhibit 2 provides details about CavinKare’s personal care, foods and international brands (and positioning).

THE INDIAN FMCG INDUSTRY

The Indian Fast Moving Consumer Goods (FMCG) industry could be broadly classifi ed into three major segments—personal care, household care and food and beverages. The various sub-segments, their market sizes and growth rates are provided in the Exhibit 3 (Economic Times Intelligence Group 2006). The FMCG sector was worth `650 billion in 2006–07 and was growing at a rate of 6 per cent annually. The industry was expected to grow to `1,500 billion by 2015 with the growth rate climbing up to 10 per cent. While the growth rates in bigger segments like soaps, fabric wash and edi-ble oil were lower, the industry potential was considered substantial in these segments because the unbranded and unorganized sector accounted for a large proportion.

The sector was subjected to rising input costs, which signifi cantly impacted the margins of all the competitors. The prices of crude palm oil and palmolein (primary inputs for soap and hair oil manufacturers) rose from around $370 per tonne in January 2006 to around $450 per tonne in November 2006, and signifi cantly affected the operating margins of several soap and oil manufacturers. Similarly, the prices of



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milk, sugar and wheat affected players in the foods and beverages segments. Among the FMCG sectors, CavinKare focused on the personal products, home care and culinary products markets.

Personal Products

The personal products segment included fragrances, hair care, make-up, oral hygiene, personal hygiene and skincare. The personal products market was dominated by the personal hygiene market (53.70 per cent of the total value), followed by oral hygiene (26.80 per cent of the total value), hair care (11.70 per cent of the value), skincare (4.70 per cent of the value) and make-up/fragrances (3.20 per cent of the value) (Datamonitor 2005).

The Indian fragrance market was worth $41 million, with a CAGR of 9.7 per cent for the period 1999–2003. Female fragrances constituted 74.3 per cent of the volume, male fragrances 12.0 per cent of the market and unisex fragrances constituted 13.7 per cent of the total market (Datamonitor 2004).

The Indian hair care market generated total revenues of $325.4 million in 2005, representing a CAGR of 10.2 per cent for the period 2001–05 (Datamonitor 2006a). The conditioner market was the most lucrative in the year 2005, with total revenues of $137.7 millions, equalling 42.3 per cent of the total market value, whereas the shampoo market generated revenues of $110.8 million in 2005 representing 34.1 per cent of the market. Hair colourants accounted for 19.80 per cent of the market; perms and relaxers for 2.30 per cent and styling agents accounted for 1.50 per cent of the total Indian hair care market in the year 2005.

The make-up market in India was made up of lip make-up (47.80 per cent of the total value), nail make-up (26.90 per cent of the value), face make-up (14.20 per cent of the total value) and eye make-up (11.20 per cent of the total value) in the year 2005. The total revenue of the make-up market was $74 million, growing at a CAGR of 6.1 per cent for the year 2001–05 (Datamonitor 2006b).

Personal hygiene market consisted of bath and shower products, deodorants and soaps. The Indian personal hygiene market generated aggregate revenues of $1349.2 million in 2005 and grew at a CAGR of 5.3 per cent for the period 2001–05. The market was dominated by the sales of soaps (84.40 per cent of the total value), followed by bath and shower products (9.10 per cent of the value) and deodorants (6.60 per cent of the total value) (Datamonitor 2006c).




46 R. SRINIVASAN

CAVINKARE ORGANIZATION—CAPABILITIES AND COMPETENCIES

The CavinKare organization was headed by CKR, designated as the Chairman and Managing Director (CMD). As the organization diversifi ed into multiple businesses, it was managed as an SBU-based structure in 2005–06, which was subsequently modifi ed to a functional structure in 2006–07, as the organization felt the need for increased coordination among its businesses. It was envisaged that by the year 2007–08, the organization would be reorganized again, providing CKR and his top management team with the much-needed time to focus on strategic initiatives.

The following sections discuss CavinKare’s capabilities across various operational/ functional domains.

Research

For a company that advocated the intent of ‘creating competitive advantage through innovation’, it was considered imperative to invest in long-term research and develop-ment. CavinKare, unlike most FMCG companies, had made signifi cant investments in basic research, as a backbone for their new product development. The investment stemmed from the belief that strong R&D could make the company reach out globally with both global products and technologies.

CavinKare invested signifi cantly in a dedicated research organization—CavinKare Research Center (CRC) in Chennai. The CRC was actively involved in all the stages of the product development process at CavinKare. The CRC scientists constantly worked with their marketing and product development counterparts in meeting with customers as well as retailers. Product testing was another area where the scientists at CRC continuously interacted with their current and potential customers. Typically, CRC along with the marketing department would evolve a brief about the new product jointly. The brief would then be shared with the cross-functional team (CFT) formed for that purpose. The scientists in the CFT would translate this ‘voice of the customer’ (VoC) into technical parameters referred to as the ‘voice of the scientist’ (VoS). The R&D team would subsequently work on the VoS and develop alternate product samples. These alternate product samples would be tested in dedicated parlours by the CRC, before they went for home use testing. Subsequently, the marketing department would make the choice among the alternate product samples that had been produced and the chosen product samples would be subjected to blind tests and concept-in-use tests, with the help of external market research fi rms. The CRC and the R&D team





took the responsibility for evolving the brand’s reason-to-believe and the resultant claim substantiation.

In the case of foods, CRC scientists faced different challenges. The idea of taste was so subjective that in the ready-to-eat (RTE) category of foods, preferred tastes of traditional foods varied across homes. Therefore, it was a great challenge to identify and document the traditional knowledge of both products and processes, and develop unique products. The primary challenge was to innovate on the processes of producing traditional products. In doing so, the formulators would have to ensure that apart from retaining the fl avour and taste of the food product, the scientists had to ensure standardization, cost-effi cient processes, and processes that were scalable to large-scale manufacturing. Quite a few of these processes were developed by scientists who would tap into traditional processes at homes—through their personal contacts or otherwise, and document the recipes.

The focus of the CRC over the coming years would be to help the company establish a foothold in the personal care and foods categories through innovative research on new products and process innovations. As basic research would proceed on cosmetic applications of products like sunscreen and anti-aging products, they would seek to narrow the differences between cosmetic products and therapeutic products—now popularly referred to as ‘cosmaceuticals’. Logical extensions of cosmaceuticals would take the company towards dermatological products that could otherwise fall under prescription drugs or over-the-counter (OTC) drugs.

Product Development

The company had grown over the years on the backing of a 25-year-old brand Chik that was positioned on a ‘good product’ plank. An added advantage to the product image was its affordable pricing that connected with the segment it targeted. As the organization grew, it capitalized on newer opportunities that came along the way—for instance, the herbal wave was met with the brand, Nyle, which used the traditional herbs of India, and the need for an off-the-shelf shikakai powder was met with the Meera brand. For every gap that would be identifi ed in the market, the company created a unique brand—one brand for each position–segment combination. However, in the case of food products, a single mother-brand—Chinni—was preferred to signify the common positioning.

A signifi cant activity in the company’s opportunity identifi cation process was the intensity and extensiveness of customer interaction. After the secondary research was done, signifi cant time and effort was invested by the marketing organization to




48 R. SRINIVASAN

understand customer behaviour. Every employee of the marketing organization had to necessarily visit fi fteen consumers each month and spend close to 30 minutes at each home, observing and discussing consuming habits. These interactions were open-ended and at the end of these interactions, the employee fi lled up a form (see Exhibit 4) that summarized his/her experience with the consumer. This included infor-mation about the consumers, their buying behaviour, their usage patterns, expectations (fulfi lled as well as unfulfi lled), and media habits and preferences. The employees would also be expected to share their insights with the rest of the team through systematic presentations and group interactions. These consumer interactions and internal sharing sessions were the backbone of a systematic opportunity identifi cation process.

The primary criterion for evaluating an opportunity was the competitive context of that category, including the investments required, the margins that were available and the positioning opportunities. The new product development process went through six stages (gates), referred to by the abbreviation SIEMAL—started, interested, excited, marketed, advertised and launched. Across the stages, the various parameters evaluated included category size and compound annual growth rate (CAGR), estimated profi tability, concept test results, estimated costs, blind product test results, clinical trial results, marketing mix elements and fi nal launch plans. After the launch was completed, each project was evaluated on various metrics through the next six months, matching the expectations from the brand with actual performance. Monthly reviews were carried out to ensure that either the product expectations were set right, mid-course corrections on the marketing mix elements were carried out, or the product was dropped from the portfolio.

The institutional business for their products included the salons that used their brands and served as major sources of information on usage patterns of various cat-egories and products. The company’s forward integration into salons helped their cause signifi cantly—with over twenty-fi ve Green Trends and Limelight brands of salons spread across Chennai, Delhi and Bangalore, the company gained signifi cant insight into both salon managers’ as well as consumers’ category and product preferences. Trends in Vogue, a group company of CavinKare that owned and operated the salons (without any franchises), intended to grow the network of salons to 100 by the next two years.

The company was considered commercial savvy by both insiders and outsiders. For a company of its size, it spent on an average 16.5–17.0 per cent of its sales on advertising and a signifi cant amount on product research and consumer research.





This focus on consumer research and promotion ensured that the company retained its consumer centricity across divisions.

Operations—Sourcing, Logistics and Manufacturing

The CavinKare organization was largely marketing driven, with manufacturing being considered a support function. The prevalent belief was that manufacturing and logistics needed to respond to the changes in the market with superior backend capabilities. For instance, when the marketing and sales departments needed a quick response (say, packaging changes or pack size changes as promotion packs, for example, 10 per cent free), manufacturing should be able to respond fast. Such speed could be critical when such changes were mandated by the competitive context.

The primary drivers of this responsiveness were the periodic meetings of the cross functional teams (CFTs). At the top level, these CFTs specifi ed what changes were required and would be passed down to the operational level CFTs, who would defi ne how to implement those changes. The constant interactions of the manufacturing teams with the marketing and sales teams ensured that the manufacturing team was in constant touch with the customer and channel/sector requirements.

At CavinKare, manufacturing was done through a combination of company-owned production facilities and third-party units (TPUs). Taking advantage of the tax holidays provided by the local government, CavinKare established its own manufacturing plant at Haridwar in Uttarakhand state. As on June 2007, CavinKare sourced its production from its own manufacturing facility at Uttarakhand (in North India) and seven TPUs located in Puducherry (formerly known as Pondicherry, in South India). These facilities provided the fi rm with an advantage in logistics of distributing throughout the country with its manufacturing distributed across North and South India.

In the foods business, the company used only contract manufacturing. Raw material (agricultural produce like garlic, turmeric, mango, lime, tomatoes and red chillies) were procured by the company, taking advantage of the superior economies of scale, and seasonality of production of these commodities. These commodities were procured from the major producing centres by experienced procurement staff.

The complexity of the manufacturing process in the case of food products made it extremely diffi cult to earn high margins. For instance, pickle processing involved an inevitable process of aging, where the product had to be stored in the processing plant for long periods of time. There was no technology available to speed up this aging process without affecting the quality and shelf-life of the pickle. Therefore, the cycle time from procurement to sales was necessarily high. Added to this was




50 R. SRINIVASAN

the seasonality of production of agricultural commodities like mangoes that further enhanced the cycle time.

Given that the margins in the food businesses were very low, it was imperative to reduce procurement, storage, processing and logistics cost as much as possible. In order to facilitate logistics, the company shifted their main contract manufacturer to a location close to the source of raw materials. The pickles, for instance, were centrally manufactured, but packed regionally to ensure consistent quality and cost reduction. Regional packaging also ensured local variations in terms of packaging, seasoning and garnishing. In four years of production (2006–07), the food processing business had grown from 500 to 5,000 tonnes.

The operations in the company were integrated through SAP-based enterprise resource planning software systems. The logistics were routed through four regional distribution centres (RDCs) located at Chennai (south), Ghaziabad (north), Kolkata (east) and Bhiwandi (west) that serviced the 29 depots across the country. The depots, in turn, served the various distributors (the redistribution stockists, RS). The stock at the RS was replenished weekly by a system of logistics that ensured effi cient routing of trucks that ensured effi ciency, cost reduction and quick response. The logistics system leveraged the requirements of both foods and personal care categories by consolidating the orders and thereby reducing costs.

Sales and Marketing

The sales organization was organized with the sales head at the head offi ce supported by fi ve regional managers. They managed the regular channel of sales—through the carrying and forwarding agents (CFAs), redistribution stockists (RS), the RS salesmen and the retailers. The RS salesmen were employed by the RS who were additionally incentivized by the company for the target achievement. The returns (ROI) the com-pany promised to the RS could vary from 20 per cent for high turnover RS, to about 36 per cent for RS with lower turnovers.

The CavinKare strategy of recruiting RS was unique. The company focused on recruiting average size, but fi nancially strong stockists who would give the company and its products a signifi cant push in the market place. Most often than not, the com-pany chose RS for whom CavinKare products were the primary business, leading to signifi cant commitment.

Weekly sales data at the RS stock were captured by the fi eld sales people every Thursday and logged into the SAP system through an Internet-based interface. These





sales data formed the basis for preparation of the manufacturing plan at the company factory and the TPUs.

The ‘regular’ channel described earlier accounted for about 72 per cent of the busi-ness of the company. Apart from the regular channel, the company distributed its products through the superstockist channel (24 per cent of sales), the modern trade channel (1 per cent of sales) and the hawker channel (2 per cent of sales).

The superstockist channel was focused on the rural markets with populations less than 200,000. These superstockists were supported by the substockists who would pick up the stock from superstockists and manage their sales through their salesmen known as rural sales promoters (RSPs). These RSPs, who were on the rolls of the superstockists, were responsible for ensuring that the company’s products reached the rural markets faster, and at lowest costs.

The modern trade channel was focused on the emerging organized retail trade. This channel was managed by a National Key Account Manager, with his own staff of Area Managers and Territory Sales Offi cers. It was realized that this channel required very different skill sets—in this channel the front-end staff had to generate demand, and therefore, needed to possess strong marketing skills, apart from sales skills. This channel, though small, was expected to grow signifi cantly at rates over 10–15 per cent per annum.

The hawker channel on the other hand was focused on products that were much lower priced—less than `5. The products in this channel were not supported by a lot of advertisements and the entire sales were on cash. This channel reached the lowest end of the retail (small, multi-utility shops serving populations of less than 2,500 people), where brand consciousness was not very high. Success in this channel required signifi cant demand generation exercises through brand building without signifi cant advertisements. This channel was perceived to be very crucial as it contributed to much higher demand generation through word-of-mouth and product availability at markets that were hitherto not serviced by the company.

Intrapreneurship

Being an entrepreneurial organization, the company was characterized by fast pace of work (the speed from idea to execution was very fast). This speed was facilitated largely by the active involvement of the top management, including CKR himself. However, as the organization grew and professionalized further, lesser and lesser involvement of CKR was envisaged, and the organization would require building intrapreneurial




52 R. SRINIVASAN

capabilities across the ranks. Added to this was the rate of attrition in the company that refl ected the trends in the sector/industry.

Human Resources

Across the organization, everyone held signifi cant pride on two parameters that dis-tinguished the company—innovation and the speed of execution. The company had pro-moted a scheme, popularly known as breakthrough innovations (BTI), through which they promoted innovative initiatives. The scheme looked like a suggestion scheme, but went well beyond it—the breakthrough ideas received were discussed within the respective teams and then the parameters for success were defi ned. Immediately, a pilot site would be chosen, where the idea would be tested and the success parameters defi ned would be monitored. If the pilot test succeeded, then the initiative would be rolled out at a larger level. As the roll-out happened, it would be shared in a pool of BTIs maintained on the company Intranet, with an intent of replicating it across all applicable regions/divisions/markets. The testing and replication of successful BTIs formed a signifi cant part of the regional managers’ key result areas (KRAs) and such successful BTIs would be shared and discussed in all quarterly review meetings. The evolution of the hawker channel of distribution was a result of a BTI.

The company employees also prided themselves on the openness of the culture in the company. It was commonplace to see emails marked to the entire hierarchy to ‘keep them in the loop’. With strong systems and processes and free fl ow of infor-mation, the speed of execution was given the highest priority. Quite often, speed was achieved through low cost, small scale testing that would be escalated or rejected after measurement of the pilot test results. No idea/suggestion would be turned down or accepted at the proposal level—there was an obsession with testing. This culture of testing provided the organization with fast decision times, encouraging people to take initiatives, take risks and learn from experience.

The company behaving as a challenger in the marketplace inculcated passion in the workplace. They believed that the only way CavinKare could retain people was to provide them with freedom, informal culture and opportunities for experimenting. The company culture was also fi ercely performance driven—evaluations were based on long-term impact on the organization, rather than short-term results, which also promoted risk-taking and initiative. The performance management system in the company tried to strike a balance between business results (BR) and organizational capacity building (OCB). The proportions between BR and OCB in the KRAs would





vary across sales (typically 60 per cent BR) and service (typically 40 per cent on BR) functions as well as across levels of management (more OCB at senior levels).

The company also spent signifi cant effort in learning programmes. Every employee was mandated specifi c learning programmes that would fi t her role in the achieve-ment of the company objectives as specifi ed in the company’s balanced scorecard. The performance management system included learning programmes as an essential component of measurement at every level.

Opportunities and Challenges

Ramesh believed that their fl agship brands, Chik and Meera, were very strong, and with frequent updating of their advertising and communication strategy, they had sustained their brand strength. The primary challenge was to continue introducing products that were signifi cantly winning (referred to SIGWIN)—signifi cantly better than other brands on offer, in a blind test. In order to create more and more SIGWIN products, the company continuously focused on features that an average customer would be able to differentiate the product/brand on, referred to as strong ‘reason to believe’. It was also imperative that the company undertook the requisite cultural and organizational changes.

A signifi cant challenge (and opportunity) that loomed ahead was the growth in the men’s grooming product category. The company was actively considering launching a series of men’s brands (deodorants and perfumes) within the next few months. The salons operated under Trends in Vogue helped the company leverage the confi dence customers placed on the advice of the beauticians. The product development team and the entire marketing organization, therefore, had to be in constant touch with the beauticians, both within Trends in Vogue as well as other salons, to be able to create successful brands/product categories. Men’s grooming products, apart from foods, were expected to drive the company’s growth in the next few years.

As the company grappled with the dilemma of ‘whether to invest resources or wait for results’, commonly discussed as ‘resources fi rst or results fi rst’ debate in the beginning of fi scal 2007–08, three strategic imperatives emerged. First, the company needed to strengthen its presence within the categories in which it existed. In a lot of categories, they were distant seconds and the gap between the fi rst and the second was not shrinking as fast as desired. The company realized the need to defend and grow their market shares in these categories. In most categories, they were competing with large products and brands from established multinationals with deep pockets.




54 R. SRINIVASAN

Second, the company had to invest and nurture new product categories continu-ously. These new product introductions required signifi cant investments and long-term commitments of resources. Some of these new products required building new capabilities (for example, sourcing of agricultural products for the foods business), while leveraging existing capabilities as well.

The third strategic imperative that emerged was the need to build some ‘cash cows’ that would provide the company with consistent cash fl ows to fund their expansion and achieve their vision of becoming a `52 billion company by the year 2012. The vision had emerged out of their dream in 1997, when they were at ̀ 520 million and resolved to multiply their revenues 100 times in the next 15 years—by the year 2012.

In order to address these concerns, a ‘Strategy Document 2010’ was also being prepared that would outline the categories the company would be active in the year 2010, the resource requirements (including production infrastructure and manpower capabilities) and the roadmap for reaching that vision. The document was intended to facilitate the process of alignment of the various divisions in the company and pro-vide much-needed clarity to the entire organization.

REFERENCES

Economic Times Intelligence Group. 2006. ‘Quarterly Update: FMCG (Q2 FY07)’, November. Available at http://www.etintelligence.com/etig/researchchannels/sectors/fmcgReport.jsp?leftNavMenu=Sectors|FMCG.

Datamonitor. 2004. ‘India—Fragrances Market’, product id 0102-0703, May. Available at www.datamonitor.com.

———. 2005. ‘India—Personal Products Market’, product id 0102-2124, October. Available at www.datamonitor.com.

———. 2006a. ‘India—Haircare Market’, product id 0102-2242, September. Available at www.datamonitor.com.

———. 2006b. ‘India—Make-up Market’, product id 0102-0700, December. Available at www.datamonitor.com.

———. 2006c. ‘India—Personal Hygiene Market’, product id 0102-0707, September. Available at www.datamonitor.com.




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(Exh

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2 co

ntin

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)





Exhibit 3FMCG Categories

Segment/Sub-segmentMarket Size ( ` million)

Growth Rate (%) Segment/Sub-segment

Market Size ( ` million)

Growth Rate (%)

Personal care Food and beveragesPersonal wash 45,000 1 Edible oil 120,000 5Hair care 30,000 15 Bakery 80,000 2Oral care 25,000 8 Tea 80,000 8Skin care/cosmetics 13,000 15 Dairy products 55,000 5Male grooming 2,000 20 Soft drinks 45,000 5Feminine hygiene 2,000 20 Coffee 6,000 10

Culinary products 15,000 20Household care Mineral water 10,000 5Fabric wash 50,000 4 Chocolates 10,000 6Household cleaners 11,000 15 Health food and drinks 25,000 10Dish wash 5,000 7 Branded wheat fl our 5,000 8

Source: Economic Times Intelligence Group, 2006.

Exhibit 4Consumer Contact Information

Details of the consumer contactWho contacted: Date: Where:Consumer name:SEC: Sex: FOccupation: Age:Product: Current brand:Address:

Key learnings about the consumer as a person:

Key learnings about how the consumer purchases the product/brand:

Key learnings about how the consumer uses the product/brand:

Key learnings on expectations from the product/brand; what problems currently solved by the product/brand

Key learnings on ads that they remember/like/dislike

Key learnings on their media habits

Please tick one of the following1. This consumer contact did not give me any new ideas. Merely confi rmed my earlier ideas/

thoughts.




60 R. SRINIVASAN

2. This consumer contact, though did not give any new ideas to me, made me think somewhat differently about some ideas.

3. This consumer contact gave me some really new ideas.

Key reasons why you ticked the above:

Key product/communication ideas that you got from this interview:

Other products used/any other info:

Source: Company documents.



Documents

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