Chic- Shampoo Sachet

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

High

MNC Brands
Shampoo Bottles

Price

Local Players

Chik
Low
Poor

Need Gap
Good

Quality

Chik Targeting
High

Cost to Consumer

Chik

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

Low

Availability of Product

Target audience
Lower middle-class/ semi-rural (Sec B2,C,D) MHHI Rs 1,5003,000 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, CavinKares 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
Population size < 1000 1000-5000 >5000 Villages 459465 58029 143248 % 70 9 21

1993- Chik shampoo mulled a national presence Then, the Indian rural market only outgrew the urban market, now it grows at double the pace Chiks 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

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 HLLs Clinic Plus

Key factors in rural purchase

Factors influencing purchase of shampoos in rural markets Looking at the wrapper Retailer recommends Looking at the price Logo identification % of respondents 60 25 4 2

Doesnt bother to check 9 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

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 couldnt 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
Chiks 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 UP MP Bihar AP TN Orissa No. of Villages 107440 55392 45113 28123 16870 55352 MS % (Volume) 67 22 32 39 46 19 Rank 1 2 1 1 1 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 Chinnis 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 CavinKares 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