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CavinKare takes the spice route
Gouri Shukla |
May 17, 2005
There's no pan-Indian pickle brand. Instead, the market is composed of numerous unbranded players and some small, regional brands.
Still, such as it is, the organised segment is valued at around Rs 250 crore (Rs 2.5 billion), growing at 8 per cent a year. And that's spicy enough for Chennai-based FMCG company CavinKare.
"The very fact that no national brand has been able to do well in this market was reason to look at it," says C K Ranganathan, chairman and managing director, CavinKare.
In 2003, the company launched its pickle brand Chinni in the southern markets, followed last year by the acquisition of another regional brand, Ruchi. Now, CavinKare has extended Chinni's presence to western India, with plans to go national as well.
The Rs 500-crore (Rs 5 billion) company is used to the cautious approach. When it launched its shampoo brands Nyle and Chik, CavinKare was careful to guard them, at least initially, from a head-on battle with multinational superbrands.
Instead, it built a local and regional presence, advertising in local print and television, before taking the brands national. Now, of course, Nyle and Chik are well established, with a combined marketshare of 22 per cent in the Rs 1,300 crore (Rs 13 billion) shampoo market.
CavinKare's clearly hoping to replicate that success in foodstuffs. Apart from the Chinni range of pickles (three varieties) and masalas (12 types), its basket includes HealthPlus seedless dates and Freshwala mouth freshners.
All these brands have now been rolled out in Maharashtra, Gujarat and Madhya Pradesh as well. For Chinni, CavinKare was earlier sourcing pickles from small manufacturers.
Last year, though, it acquired Ruchi, the Rs 10-crore (Rs 100 million) brand owned by the south-based Shyam group, better known for its Savera hotel chain.
Included in the deal was a 150-tonne manufacturing plant at Godur, Andhra Pradesh. That capacity will now be used for both brands, although initially only Chinni will be extended to other markets.
Meanwhile, the company is taking some tips from its shampoo experience. The Chinni pickles are available in single-use sachets that cost Re 1 to Rs 3, as well as low-priced, upright pouches.
The rationale is simple: home-made pickle aside, the market is flooded with local brands. Consumers, therefore, have little incentive to upgrade to a branded product.
As CavinKare's shampoo business has proved, sachets at least induce trials. "We're aware of the enormous competition we face from the unorganised sector and we plan to tackle it with affordable packs," says Satish Mane, chief executive officer, foods, CavinKare.
Single-serve packaging will also serve another customer group: institutional sales. CavinKare is hoping the low price point and convenience of sachets will help rope in hotels and restaurants as bulk customers.
Pickle in sachets isn't the only innovation up CavinKare's marketing sleeve. The company is taking on competition from local pickle sellers by playing their own game: stockists will hire hawkers to Chinni pickles in residential areas.
A separate hawkers' channel is being created that will move from neighbourhood to neighbourhood. "The hawker channel will exist in all cities where we have a distribution network," says Mane.
Trial runs of hawkers have already been carried out in some markets in south India. Some learnings have already come through: to be cost-effective, the hawkers need to do high volumes of business. So the hawkers are selling only sachets, since the low price point will promote sales.
Also, points out Mane, "the hawker channel is prone to high attrition." Accordingly, the company is working on incentives such as insurance packages and loans for two-wheelers to help retain hawkers.
It's not easy to break into the branded ethnic foods market. Estimated at close to Rs 6,000 crore (Rs 60 billion), the market is run by an army of small, yet well-entrenched local brands.
Consider the odds in the pickles market: while industry sources estimate the organised segment at Rs 250 crore (Rs 2.5 billion), the unorganised segment is pegged at Rs 1,100 crore (Rs 11 billion).
There are no national brands: even Mother's Recipe, launched with much fanfare in the early 1990s, isn't too visible in the south and east, while Bedekar and Priya, too, remain big, regional brands.
The Rs 1,200-crore (Rs 12 billion) organised masalas market is somewhat better, with some four or five brands (including MDH, Everest, Catch and Badshah) that have a national presence. But it is still way behind the Rs 9,500-crore (Rs 95 billion) unorganised market.
Perhaps the biggest reason why organised players haven't found the condiments and pickle market palatable is that differences in tastes across regions make it nearly impossible to create a standardised product.
Consider mango pickle, a staple condiment across the country. But the variety of mango used, the oil and the spices vary greatly from region to region -- so, naturally, does the taste.
That's probably why companies like ITC, Pillsbury and Dabur would rather focus on the ready-to-eat and cook segment, where they can offer standardised products.
"There's too much variety to cater to, so condiments and ethnic foods are best meant for cottage industries. It's not a market for national brands," says a food marketer.
That's a lesson Dabur learnt well after a failed launch of papad in the mid-1990s. "Our research indicated that ethnic foods is a market for local and regional brands. There's far too much customisation required from region to region," says Sanjay Sharma, general manager, sales and marketing, Dabur Foods.
For CavinKare's food foray, though, the biggest threat is from within. The company needs to get a stranglehold on costs before it aims for a nation-wide presence.
"The unorganised players have been far more efficient than national players, as they operate on low overheads," admits Mane.
He adds that changes in the supply chain will lower costs by 5 to 7 per cent by end FY2005. The improvements will mainly be in plant-to-market transport time and raw materials procurement.
The company's also hoping that its research on consumption patterns will help it trim inventories. Mane says the company spent a year separating markets based on commonalities in eating habits and ingredients used in cooking, irrespective of state or city boundaries.
It will now service its outlets in these regions on the basis of consumption profiles. For instance, Ahmedabad and Mumbai have similar preferences in terms of food and ingredients. So the company will service both markets with similar product mixes, so that stock rotation issues are minimised.
Armed with such initiatives, CavinKare expects its food business to net sales of Rs 50 crore (Rs 500 million) by the end of this fiscal. "They are tackling the market differently -- the sachets are a great idea," admits a competitor.By 2010, Ranganathan expects sachets to pool in at least 40 per cent of food revenues. Does success comes in small measures? CavinKare seems to think so.