Che Guevara proved that everyone loves a rebel. Seventeen years ago, when C.K. Ranganathan set up CavinKare, many say he challenged the FMCG status quo in India. By targeting the rural market, he took on Big FMCG on turf they had called their own - and hadn't figured out. To understand and supply rural markets, he used all the commonsense skills his father taught him and reinforced it with technology. Today, he continues to use IT to back up 'gut-feel' with numbers and to orchestrate differentiated marketing strategies across multiple markets.
CIO: CavinKare was among the first to offer products sold in sachets. What was behind this idea?
Actually, my father worked on that concept before I did. When he started, Godrej's Velvette (a shampoo sold in sachets) was already present in the market. He thought something like that would work for him as well. So, he developed a sachet-making machine. He made small bags, which could be filled with liquid and sealed off, and the small sachet was born. My elder brother carried on the family business and when I branched out, I took up the idea of marketing via small pouches. This is because we had observed that a man in the rural market prefers a fifty-paisa sachet of pickle that is enough for one meal, rather than buy a 200-gram bottle.
CavinKare started as a small-scale unit. How did you handle growth?
When you're growing from a small unit, it is fundamental to handle the emotions of the people who have made your growth possible. People grow with your growth but when you reach a certain level, suddenly opportunities fan out and some people cannot handle such a large canvas. Then, the organization must make an effort to train them and keep them growing. Despite this, sometimes people have limitations and are not able to hold up to the challenge. I don't think this is a permanent limitation, just that people work differently at different times. That's when organizations must come together and handle such people appropriately. They need to talk to the individual and see what the organization can do. If this is not handled well, you will be allowing some incapable individuals to move on, which can harm both him or her and the organization.
There are other challenges in expansion. You need to create infrastructure, IT, bring in money and recognize the needs of people. All of these are important. You need numbers as well as quality. Sufficient capital is needed, so is IT infrastructure. These are our growth drivers, and I think some of these are underestimated. In an attempt to get accurate data on time, people end up doing many repetitive exercises. Entrepreneurs who need to grow have to identify these problems.
What role did IT play?
IT is a fundamental growth driver for us. Had we not transformed into an IT-enabled company, I don't think we would have achieved the kind of growth we have. With
so many distributors, it requires a lot of time to draw up such a large canvas across India. Getting sales data, production data - if these are done manually, no information can come on time. Then you start taking decisions based on gut-feel. This may be okay for small decisions but for growth, decisions based on gut-feel can be very costly. Gut-feel is important but it has to be backed by numbers and statistics. Fortunately, we were able to get into technology very early - when none of our competitors did. When we were only about Rs 150 crore we chose to implement SAP. This was not something that many companies did. In those days, SAP was a huge product for a small organization. We could have been afraid since we weren't sure we had the competence or expertise to handle it. But we had decided to develop those skills, and if you are committed to growth, everything will fall in place.
If, in fear, you say you are not capable, nothing will work out. At CavinKare we have a nationwide distribution management system and vendor management systems to help us. These are Web-enabled processes and provide us with sales data from across the country on a weekly basis. We are also implementing stockist-tracking software. This will allow a stockist to be connected to our Web-enabled system and give us sales data on a daily basis. Because this data will be connected to our ERP we will know how much inventory needs to be maintained. We will also get data for better supply-chain management. I will know if production planning is on track. It's quite dynamic, and thanks to this network of information, I need not maintain too much inventory.
Differentiated marketing strategies play a huge role in CavinKare’s success. Is growth a driver?
We base product development on customer feedback. As far as the importance of customer insight is concerned, at CavinKare, we consider it our fundamental driver.
Understanding customers and their needs, and translating those into direct innovations, makes us what we are. I think that is the fundamental for marketing strategies.
What is technology’s place in the FMCG industry? Do is more or less important than marketing strategies
I would say that marketing strategies and product technology are complimentary.
Especially in the FMCG market, both are imperative. These two complete each other like a train rides on the rails laid below it - neither can function without the other.
You said money was a major consideration. Did innovation bring in funds?
Many people who would like to start a business plan for the long term and gather experience. They never end up doing it. Then when they retire they look back and regret. Typically, people want grow in their career, get to comfortable level and then they don't want to take chances. To be an entrepreneur, you have to be ready to let go, be ready to take risks. The fear of losing is the biggest enemy and many people suffer from it. When starting any business, 'vitamin M' is a very important resource. We used many innovative approaches to bring money into the system. We were perhaps the first in our segment to start outsourcing production. In those days, many companies did not consider it prudent. Fundamentally, we did it for two reasons: to keep cost under control and, contrary to what many people believed, to ensure that quality was delivered consistently. We broke that myth.
The next thing was that we had very little capital investment. We just started focusing on infrastructure planning, distribution network and innovative strategies to develop products. No energies were wasted in daily production. And then people said 'if you are not known, you have to sell on credit'. That's another myth we broke. We might not have been known then, but still sold only on cash. We had many small innovations. Actually, as an entrepreneur, I think nobody has money problems, only a lack of ideas. People keep lamenting about a lack of money, but in most cases it is money-making ideas that they need to mobilize funds.
How does IT drive innovation at CavinKare?
Consumer insight backed by technology is what drives innovation at CavinKare. For us technology permeates across the organization. It's like the veins in a body.
Today, without technology, you will be pushed back by two decades. You can't compete in today's world without technology. FMCGs are no exception, we need to innovate using the newest technology just as much as the other sectors.
For growth, what do you focus on: planning strategy or executing it?
If you are aiming at growth, fundamentally both are important, planning as well as execution. Excellent plans fall flat if not executed well, neither will great execution skills amount to anything without a good plan. You'll only become a 'me-too'. Both need to go handin- hand for you to become a force in the market.
The Indian rural market is growing at double the pace of the urban market. How do you plan to meet this challenge?
We have a separate channel for rural markets and another for department stores and malls. All product development is done keeping those channels in mind. For example, a person with a rural background will be uncomfortable in a superstore. He will feel better buying from a kirana store. What I need to do is to provide products that he can buy from the smaller shop. Even though department store products are very competitive, we have to undertand that people from a particular level have a different comfort level with these stores. Today 52 percent of our revenues comes from rural markets, the urban markets give us about 48 percent. From this last 7.5 percent comes from the export market in neighboring countries like Sri Lanka, Bangladesh, Nepal. We are now expanding aggressively into Singapore, Malaysia and the US. We have also developed products for supermarkets and launched in Gulf countries. We are doing exceedingly well with the products in those channels.
What one needs are channels within channels. This calls for a different kind of people. We have translated this very efficiently into our sales strategy. That helps us hugely in coming out with products that are relevant to the markets we operate in.
What plans do you have for your next generation of products?
We are on a constant expansion spree. Over the last few years, we have been adding seven to eight products to our kitty every year. We just started floor cleaners, in our food range we are adding value-improved cashews and dates. As far as innovations are concerned, our floor cleaners are high-powered - only 1 ml is required against 8 to 10 ml of our competitors.
Does your head of IT have a role in the development of these products?
The technology head at CavinKare contributes hugely, particularly to sales operations and data collection across the country. IT is a major enabler in these activities. It's very very important, especially to our most critical function: supply
chain management. If you look at the formulation front of product development, data is captured before R&D can play its role. I need to do a huge number of formulations depending on product attributes. Ingredients need to be optimized. I have done about 10,000 formulations in the last three years, but to focus on the formulation that will give me the best results, I need help from technology. And that is why IT and technology play a huge role in our processes.