With that one innovation, the hitherto non-existent rural market was well within Ranganathan's grasp. As brand consultant Harish Bijoor puts it, "It democratised shampoo usage."
Building on that, by the early years of 2000, Chennai-based CavinKare (named after the classical Tamil word for beauty) and known for its Chik shampoo managed to come across as a doughty challenger to the big guys of the FMCG industry. It had started getting termed "the giant killer". By 2004-05, when CavinKare was about Rs 400 crore in revenue, the momentum was so good that Ranganathan predicted joining the billion-dollar club by 2012.
Billion Never Happened
Eight years later, it is clear the company hasn't lived up to its promise. CavinKare has just managed a fifth of what Ranganathan had predicted: Rs 1,070 crore in revenues. A recent PINC Research study gives details. In skin care, a money spinner for fast-moving consumer goods (FMCG) companies, CavinKare has just about a 5% market share.
HUL has a whopping 58% of the market while L'Oreal, P&G and Emami have a 13%, 10% and 9% market share, respectively. In the shampoo market, CavinKare may have a better record, with a 11% market share, but still lags the likes of HUL, P&G and Dabur. As Nikhil Vora, managing director of IDFC Securities, puts it, "They have taken a backseat. They are no longer challenging the leader."
What Went Wrong?
You can get the answer by comparing Ranganathan's business interests a decade back and now. Then, he was essentially building a base in the FMCG sector. In fact, in 2002, his talcum powder foray itself was just three years old. Now, his interests go beyond FMCG. In the past 10 years, he has forayed into salons, into food, into beverages, into home care, into snacks, into restaurants and into dairy.
New businesses in themselves aren't bad. But, critics point out, they have come at the cost of the core FMCG business. "They were aggressive in entering new spaces but weren't growing their existing business," says Vora. Ranganthan may have lost the opportunity of scaling up his core business as he had to spend management bandwidth and money on newer interests. And, diversifications such as food and beverages won't work without big marketing spends.
Losing Its Core
One of the key fallouts of the defrayed focus is seen as CavinKare's inability to read the market in certain instances in its core business. Take the example of shampoo. While the market was moving toward anti-dandruff shampoo, it didn't. Today, a fourth of the market is anti-dandruff shampoo.
Also, Vora says, "The market was moving towards premium brands and CavinKare was at the bottom end." Bijoor agrees: "The brand still suffers the mindset of a down-market player."
Also, MNCs, whom CavinKare is competing against, have deep pockets for R&D. So, there's virtually a pipeline of new products and innovations at all times. A smaller player over time needs to match that. For CavinKare, innovations such as sachet may have become far and few. Also, to do it in multiple businesses is a bit too much for a medium-sized player.
'We Will Grow'
Ranganathan does agree to the criticism that his company has spread itself quite thin. "Having taken those steps, we can't reverse it. We will not take any more step in diversification. We will only look at consolidating and growing," he says.
Ranganathan the person is actually quite like Ranganathan the businessman on the point of wide-ranging interests. He is interested in the Tamil language and loves birds (he has 200 different species of birds). What more, he has even modelled for a shirt brand.
In business, however, his wide-ranging interests haven't paid off till now, he admits. "We don't leverage the advantage of one division to another," he says. That's especially true of his food, beverages, snacks and dairy businesses. "If all the products get into the same distribution line, then I can leverage."
Ranganathan gives the example of his foray into dairy four years back. It was a market that was completely different from what he had experienced earlier. That included everything from the highly perishable nature of the product, the cold process distribution, the profile of people who were willing to invest and also the systems and processes to be used. "So I don't leverage anything here," he says.
New Revenue Hopes
Diversifications done, lessons learnt, the CavinKare chief believes growth will follow now. His hope is that his group would double its revenues in two years. Those who have tracked the company believe some positive moves have been taken of late. Raveendra Chittoor, a strategy expert who teaches at the Indian School of Business, Hyderabad, says the move to go slow on the restaurant business is one such.
Also, Ranganathan also moved his marketing team to Mumbai from Chennai last year. One reason is to effect a pan-India presence, something that CavinKare has struggled with until now. That's a pragmatic move, says ad veteran Suguna Swamy. "This move reflects the realism of the man. If he has to go national, he needs to be located in Mumbai, both for resources and bandwidth of talent," she says.
Ultimately, focus, Chittoor believes, is inevitable. "It should focus on a few product categories in which it has a competitive edge and try and achieve national leadership in those." That's the lesson one can learn from successful companies such as Marico, says Chittoor. That could be key to its future.
