Chik-Mate

Cavinkare's flagship shampoo brand has been addressing the rural and semi-urban markets since the eighties. Today, it is the second largest player in the sector "" after Clinic Plus. How did this happen?

The growing importance of the rural and semi-urban market is being thrown up as a seminal theme in almost all marketing forums worth their salt.

Exactly how seminal is made clear when we consider the case study of Chik "" a regional brand from the house of Chennai-based, Rs 230-crore Cavinkare.

Chik is big news today because it has become the second-largest shampoo brand "" after fast-moving consumer goods giant Hindustan Lever Limited's (HLL) Clinic Plus "" in volume terms.

In the last quarter of 2002-2003, according to the AC Nielsen ORG Marg retail audit, the Rs 100-crore Chik has grabbed a 22.49 per cent share of the 35,000-tonne shampoo market in India, and is just two percentage points behind Clinic Plus which has a market share of 24.27 per cent.

Significantly, Clinic's volume share has suffered a marked decline "" down from 30.62 per cent in 1999-2000 (even Lux and Sunsilk slid about 4 and 6 percentage points respectively over the same period).

How did this little-known brand generate so much lather that it's giving HLL's bestseller a run for its money?

"Cavinkare's strategy of occupying a strong regional niche and filling a need gap for an economical shampoo has taken Chik this far. It looked at areas that the national players overlooked," says Parmit Chadha, a Chennai-based strategy consultant.

While brands like Clinic Plus, Sunsilk and Pantene largely occupied the urban mindspace, the regional markets were ignored by the established players.

For instance, Clinic Plus's positioning as a health shampoo in the 1980s appealed largely to the urban middle-class consumers.

But then it didn't cut mustard with the rural consumer as HLL was never really focused on the volumes game "" till only recently.

Cavinkare crept into the gap left open by HLL by launching Chik in 1983.

"We targeted the rural and small-town consumers, who used bath soaps to wash their hair and had not seen any visible damage and were comfortable with the idea of a shampoo as long as it was within their means," says C K Ranganathan, managing director, Cavinkare.

The company also walked the talk by "connecting" with the masses, thereby establishing brand equity.

Before the launch, Cavinkare had done its share of groundwork. The average number of adults "" who washed their hair once a week "" per household in rural India was around five.

At Rs 2 per sachet of shampoo and four washes a month, it worked out to Rs 8 per person per month. This was clearly not economical. There was no way the rural consumer would be willing to spend this kind of money on washing hair.

"We conducted a survey in villages and the findings indicated that if the total cost of hair wash per person can be cut to Rs 2 per month, the rural consumer would be willing to try a shampoo," says Ranganathan.

Armed with that insight, Chik was launched in 50 paise sachets in 1983 in Tamil Nadu. In a year's time, the brand sold about 10 lakh sachets in the state, even as the shampoo penetration in the country grew from 17.90 per cent to 19.4 per cent.

The next year, Chik was launched in the neighbouring southern states of Andhra Pradesh and Karnataka.

At that time, however, the rural market was crowded with a slew of local brands like Velvette, Cute, Champak and Satin.

Velvette, the first brand to launch in pillow packs, had been a phenomenal success and had inspired the launch of 60-odd shampoo brands "" all by local entrepreneurs. The immediate challenge for Cavinkare was to rise above the clutter.

The company bought radio spots, and played out jingles peppered with dialogues from popular regional films on All India Radio.

Further, Cavinkare also realised that even if shampoos were being made affordable, many villagers would not know how to use a shampoo.

So it started aggressive road promotions in villages. Vans were driven to distant villages and popular film shows organised for villagers, sometimes with regional film celebrities doing a cameo.

During the two-minute intervals, viewers were shown clips on shampoo usage and product benefits.

Ranganathan claims that these promotions led to exponential gains: sales jumped from Rs 5 lakh in 1984 to Rs 38 lakh the year after.

Even so, the small town retailer's loyalties oscillated between a lot of brands who were wooing him with incentives.

"In order to induce the retailer to push our brand amidst so many, we had to create consumer pull," he adds.

The company then started a special scheme whereby anyone who returned five used sachets of Chik to the retailer got one sachet free of cost.

"In those days, this was a novel offer, and we met with an enormous response," recalls Ranganathan.

By 1990, Chik had overtaken Velvette and become the market leader in the southern rural markets with a market share of over 50 per cent.

An interesting trend was developing side by side: the growth rate of shampoos in rural markets became almost twice as that of the urban sector.

The company now wanted to extend its price differentiation to bottles, even as it toyed with the idea of launching nationally. It sought to tackle the price differential between sachets and bottles.

At that time, sachets were priced anywhere between 50 paise to Rs 2 while a 100-ml bottles was priced upwards of Rs 40.

For example, the 8 ml sachet of a high-end shampoo cost Rs 2.50 while a 100-ml bottle cost about Rs 50.

For the same quantity in sachets, one would spend only Rs 30 "" in real terms.

The company really upped the ante when, in 1990, it launched Chik in 100-ml bottles priced at Rs 17 "" which was way below real terms.

"If you want to increase volumes and usage then you have to work at making bulk buying more affordable," explains Ranganathan.

In 1993, the company launched the brand nation-wide. However, Ranganthan admits that it did encounter potholes as it tried to expand its distribution network of 325 distributors in the south to 2,000 in other markets.

For instance, in the beginning, the company used to transfer locally-hired area managers to the markets outside the south.

But that proved to be a mistake as most of them were south-based and weren't tuned in to those markets.

It took the company about three-four years to correct the recruitment process. (Now the company hires local managers who in turn hire local field force.)

Such teething problems delayed the growth plan for Cavinkare. After the nation-wide launch, Chik was able to grow up to only as much as 4 per cent till 1998. But the bottomline was that it grew consistently.

After 1998, the company focused on sniffing out rural markets outside the south. It broadened its distributors network to about 1,200 outside the southern market, where it had about 600 distributors.

Gradually, the brand gained acceptance among rural consumers accross India on the strength of its price-proposition (see chart).

As of the third quarter of 2002-03, Chik commands an all-India rural market share of 39.1 per cent and has overtaken Clinic (31 per cent) and Lux (8 per cent) in the rural areas.

Detractors, however, have a different story to tell. "Chik ranks poorly in terms of quality as compared to the bigger brands ," says one industry source.

According to a Chennai-based analyst, "Consumer perception rates Clinic as a higher-end brand while Chik is the 'economical' shampoo. I doubt if Cavinkare will be able to repeat their success on a national level."

For one, HLL has countered Chik's price advantage by introducing Clinic Plus in 50 paise and Re 1 sachets in 2002 in addition to the Rs 1.50 sachets launched in the mid-1990s.

Ranganathan acknowledges the threat. "However, low-priced sachets will not induce upgradation to bottles since the price disparity remains," he says.

But there's a hitch to Cavinkare's urban strategy. The company faces in-house competition from its own herbal shampoo brand Nyle, a popular brand in the metros.

Launched in 1993, it has grown to be a Rs 40 crore brand. Industry observers also point out that despite being launched in the metros in 2000, Chik is hardly visible in retail outlets.

Retailers in Mumbai feel likewise. "We stock Nyle but we stopped stocking Chik since there was hardly any demand. It has not been advertised by the company," says one retailer in Borivali, a Mumbai suburb.

The big cities and the bright lights don't seem to beckon Chik. Would the brand be better off lathering up the rural market?