None of its competitors have a sachet and their bottles range between Rs 190 and Rs 230 (150 ml). CavinKare’s Spinz range started from Rs 65 (50-ml) before it launched the Rs 3 pack, and went up to Rs 190 (150 ml).
Now perfumes are a highly regionalised and increasingly diverse market. Plus consumer preferences are very rigid. So will sachets cut ice with the new age aspirational consumer in a low-involvement category? Here’s what Harish Bijoor, founder Harish Bijoor Consults, has to say: “A perfume in a sachet is a disruptive idea. It can click or die. It is important to remember that it is difficult to break mindsets.”
The company is upbeat. “We believe the perfume sachets will meet with the same kind of success (as those for shampoos) and more and more consumers who perhaps don’t use the product will start using it. This might also increase the number of occasions when they use perfumes,” Vijayaraghavan says. To borrow a phrase from the marketers’ play book, the idea is to increase both the width and depth of the market.
The importance of the rural markets in the company’s growth plan must not be underestimated — it contributes around 45-50 per cent of total revenue of the Rs 3.40 trillion FMCG industry as a whole, and also about 45-50 per cent to the company’s Rs 1,600 crore revenues. The LUP strategy ties in perfectly with CavinKare's plan to increase its footprint rapidly in markets beyond its comfort zone, the south. Small packs also lend themselves well to quicker distribution and less wastage, says the company. As it rolls out in the east, the company will also weigh its options and the next set of markets to target, says Vijayaraghavan.
Sandeep Goyal, chairman, Mogae Media, says sachets are the best way to retain and engage the customer. “It serves a dual (invite and engage) purpose. So instead of looking at it as an entry strategy for new markets, CavinKare should think of it as a long-term growth strategy.”
CavinKare divided its operations into four verticals two years ago — personal care, professional care (Green Trends salon and related products), dairy and beverages, and foods. The reorganisation allowed the company to focus on each vertical more sharply and cut down the time to market for new products. For example, in personal care, which contributes to around 60 per cent of the company’s revenue, CavinKare launched a new product (a Brightening and Beauty cream) and adopted some new ideas (perfumes in sachet, Indica hair colour which is also a shampoo in a sachet) in quick succession — in a matter of months, to be precise. Earlier, a new product launch would take up to a year.
But do LUPs in general and sachets in particular go down well with modern trade channels? Don’t retail chains prefer big packs and bundle offers?
CavinKare says it is following a dual strategy here. “We will have specific products for each of these channel segments,” Vijayaraghavan explains. The company currently services around 800,000 outlets directly and another 3 million indirectly. For rural and semi-urban markets, it will focus on innovative packaging solutions and for urban markets newer and disruptive products. So while LUPs will drive its growth in tier 2 and 3 cities, a range of “natural” products will woo the discerning urban buyers.
The “natural” segment in personal care stands at around Rs 20,000 crore and cuts across shampoos, oils, skin care and so on. It is growing at double digits. For Cavinkare, “natural” products make up 35 per cent of the personal care portfolio.
“Our strategy is to grow faster in modern trade, e-commerce and super markets as a channel segment. At present, around 7 per cent of our revenue comes from these channels. We intend to make this much more strong and we have put together a dedicated team for this,” says Vijayaraghavan.
The company has also carved out a separate e-commerce division to be able to address new challenges thrown up by the consumer. "Quality products at affordable prices continues to be the bedrock of our strategy," he adds.
CavinKare hopes to be present in a million outlets in the next two/three years. “While almost 60 per cent of our current sales come from south, going forward markets outside south India will contribute a disproportionate portion of our growth,” he adds.
The company is also making huge investments to improve technology support for its sales force, distributor management systems — in fact, the entire supply chain.
Wooing new consumers
60 % of CavinKare’s (CK’s) annual turnover of ~1,600 crore comes from the personal care segment; 40-45% from rural markers
The history: CK revolutionised the shampoo market by launching a 10 ml sachet shampoos targeting the “bottom-of-the-pyramid” consumers some decades ago
The plan: Replicating the strategy with perfumes by launching 2 ml sachets and penetrating large swathes of the untapped rural territory
The vision: Building the brand beyond its comfort zone by increasing both the width and depth of the markets