Cavin's stores to whet its dairy appetite

Mid-tier fast-moving consumer goods (FMCG) player CavinKare is rolling up its sleeves to start retailing its own dairy products. The Chennai-based company is in the process of setting up standalone outlets, which will mainly focus on its dairy brand Cavin's. Not just consumers, these stores will cater to smaller retailers as well.

Cavin's, which has dairy products such as milk, butter, cottage cheese and curd, would soon be stocked in Cavin's Parlours. Also jostling for space would be the company's idli and dosa batter brands, Hema's and Chinni's. Its snacks brand Garden, food products Ruchi and beverage range, Maa are likely to follow suit as well.

C K Ranganathan, chairman and managing director, CavinKare, has set his eyes on growing in a segment that has major food players like Nestle, Danone and Britannia already working to match the scale of Gujarat Cooperative Milk Marketing Federation's Amul. Amul's hold over various dairy segments remains unparalleled, with private players such as Britannia failing to find a chink in its armour.

Ranganathan, though, had earlier given multinationals, with deeper pockets, a run for their money. His Chik shampoo satchets firmly established and triggered the influx of satchet units in the market.

Even as CavinKare puts its supply chain in place, an aspect that dairy players grapple with when expanding, it hopes to get a better grip on its front-end through the retail entry. Ranganathan says that this would offer better margins (no middle-men). It is in the process of developing new products, for rolling out in a phased manner, for these stores.

The company would expand through both company-owned and franchisee outlets. To begin with, it plans to open 50 outlets across Tamil Nadu by the end of 2014-15, and would add 50 more next year, covering its catchment areas in the southern states. By 2016-17, it would also enter other parts of the country, says Ranganathan. He says that in the next two years, the company would clock around Rs 100 crore, from the new stores.

The catchment for Cavin's Parlours would be market and residential spaces, and mostly in tier-II and -III cities (rentals lower than metros). Even though the first outlet was launched recently in Chennai, the next towns would be Kanchipuram, Salem, Madurai and Trichy, to be covered by the year-end. The franchise model would help expand the footprint fast, though company-owned stores would cater to some strategic locations.

The franchise partners would be required to invest around Rs 7 lakh, and Ranganathan says they are estimated to break even in a month's time.

That could also be because these partners would double as distributors of the brand. In effect, the parlours would not only cater to the end consumer, but also smaller retailers.

"For every 100 small retailers, these parlours will act as a distribution centre," says Ranganathan.

Given the span of target consumers, Ranganathan says that the model would also bring higher margins into the supply chain and remove the need to subsidise the brand, Cavin's, for the retailers.

However, he admits that reaching the fresh products to the shop shelves in time would be a challenge to work around, as would finding the right space for an outlet in cities.

Ranganathan says that besides strengthening its dairy offerings and fresh food, the outlets would let CavinKare increase the reach of products like its batter range and eventually, even ice creams, which would be a natural extension of the dairy business.

Branded ready-to-cook idli and dosa mix is packaged by CavinKare under two brands, named after Ranganathan's parents - Hema's (sold through super-markets) and Chinni's (priced lower, sold in neighbourhood stores).

"We will be bringing in more such products aggressively in the fresh dairy products space, which, in turn, will bring customers to try other products," Ranganathan says. Using dairy items as pull factors, he wants to start stocking other of its food brands and even personal care brands such as Fairever and Chik.

Earlier, Ranganathan had said that to support growth, the company plans to spend about Rs 200 crore in brand-buidling, and entering the retail space was one of the steps.

CavinKare forayed into the dairy segment in 2009 with Cavin's. Ranganathan says that one of the popular products of Cavin's is its range of milkshakes. According to him, Cavin's has a share of around 24 per cent in all the southern markets taken together.

Both packaged and fresh food remain tricky segments within FMCG to crack. While Britannia was not able to make a mark in the dairy space, ITC is yet to carry out a much-reported plan of entering the dairy space. In ready-to-cook segments, Cavin's would have fellow South-Indian brands such as MTR to reckon with. How it balances the supply chain with the new hands-on retail foray would decide the future for Cavin's.