On October $30,2004,$ C$.$ K$.$ Ranganathan, Managing Director, and K$.$ S$.$ Ramesh, Chief Executive Officer of CavinKare were reviewing the company$$s sales plans. Its performance for the year had been good. It had successfully introduced several new products to the

market. Ranganathan was recently conferred the $$Entrepreneur of the Year$$ award by The Economic Times.

Ranganathan and Ramesh were now keen to find a way forward for the company. The major challenge was to put in place a strategy to translate the vision of making CavinKare a billion dollar $($INR $52,000$ million$)$ entity by $2012$ into reality. They had to make several important decisions that would not only decide the company$$s future course of action but also achieve the set vision within the next decade.

Background

CavinKare was established by Ranganathan in $1983.$ His father was involved in the family business of pharmaceutical packaging and beauty care products manufacturing in Cuddalore, a small town in the Southern Indian state of Tamil Nadu. After graduating from college, Ranganathan joined the family business. In $1983,$ he started his own company in a small room. His entrepreneurial zeal and single$-$minded commitment to the business helped it grow and succeed$\mathrm{.}1$ Twenty years later, his company emerged as a dominant consumer product company, manufacturing a variety of products in the hair care, skin care and personal care categories.

The company began operations under the name Chik India in $1983.$ It changed its name twice along the way. It was renamed Beauty Cosmetics Private Limited in $1990,$ and later, in $1998,$ it changed its name again to CavinKarea Private Limited with the aim of going beyond

a Cavin is a word in the Tamil language which means elegance, grace and good looks, while Kare is a commercial variant of the English word care.

Prepared by Professor Anand Kumar Jaiswal, Indian Institute of Management, Ahmedabad.

The author wishes to thank C$.$ K$.$ Ranganathan, Managing Director, and K$.$ S$,$ Ramesh, former Chief Executive Officer, for providing valuable suggestions and support. He is also thankful to senior managers of CavinKare: Tushar Sadanand Murdeshwar, Saumitra Prasad, Soumik Chakraborthi, Varun Chopra, and Arun Kumar. The author is grateful to Professor P$.$ Venugopal of XLRI, Jamshedpur for his help and valuable suggestions in preparing this case. This case is based on another case by the author: CavinKare Private Limited: Serving low income consumers. $(2008).$ Asian Case Research Journal, $12(1),$ pp $1-28.$

Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for class discussion. They are not designed to present illustrations of either correct or incorrect handling of administrative problems.

$2007$ by the Indian Institute of Management, Ahmedabad.

cosmetics and offering a wide range of consumer products. $($See Exhibit $1$ for key milestones in the journey of CavinKare$).$ The company had several well$-$known brands in its portfolio such as Chik $($shampoo and talc$),$ Meera $($hair wash powder, liquid hair wash, shampoo and hair oil$),$ Nyle $($herbal shampoo$),$ Fairever $($fairness cream$),$ Spinz $($perfumes$,$ deodorants and talcum powder$),$ Indica $($hair colourant$),$ Raaga Cool $($cooling hair oil$)$ and Karthika $($hair wash powder$).($See Exhibit $2$ for CavinKare$$s product portfolio$).$ Most of these brands held top positions in terms of market share. The company was credited with the best new brand success ratio in the fast moving consumer goods $($FMCG$)$ industry in India$\mathrm{.}2$ From $1994$ onwards, it had been growing at a compounded annual growth rate of about $31\%\mathrm{.}3$ In $1998-99,$ it had a turnover of INR $850$ million, which rose to over INR $2,640$ million in $2003.($See Exhibit $3$ for CavinKare$$s turnover from $1999-2003$ and Exhibit $4$ for the estimated revenue contribution of different product categories$).$

Identifying Consumer Needs

CavinKare identified gaps that were overlooked by established players in the market. It conducted its first gap identification study in the early $1980$s$.$ The shampoo market was cluttered with some $70$ plus small labels with very low brand awareness. There was a clear need for a superior quality shampoo with an appealing fragrance at an affordable price. National brands such as Clinic Plus and Sunsilk from Hindustan Unilever Limited $($HUL$),$b the Indian subsidiary of Unilever, were targeted mainly at urban consumers, virtually ignoring the regional and rural markets. $($The price performance matrix in Exhibit $5$ illustrates the need gap identification by CavinKare in the shampoo industry$).$

The company introduced Chik shampoo in $1983.$ This brand was of superior quality and its price was affordable to most consumers. The formulation included French perfume. Chik tried to lure lower middle$-$class and semi$-$rural consumers with a monthly income of INR $1,500-3,000\mathrm{.}4$ The company$$s sales of INR $0\mathrm{.}5$ million in $1984$ increased to INR $3\mathrm{.}8$ million the following year. By $1990,$ sales figures went up to INR $35$ million a