Cavin's to take on big boys

CavinKare, which went into the dairy business with Cavin's brand five years ago, wants half of its revenue to come from this segment in future.
CavinKare, the maker of Chik shampoo sachet, Fairever fairness cream, Spinz deo and Nyle herbal shampoo, closed FY14 with around Rs 1,250 crore revenue, of which the dairy business contributed around 20 per cent, food and beverages around 15 per cent and the balance came from personal care products. "While personal care will remain important for us as it is the growth driver for the group, we see tremendous growth opportunities in dairy products," says C K Ranganathan, chairman and managing director, CavinKare.

Ranganathan, who had once revolutionised the shampoo market by launching it in sachets, says his ambition is to make CavinKare the second largest national dairy brand after Amul and believes the company is well positioned to become a national player.

While that will be a tall order, to support this growth, the company plans to spend about Rs 200 crore in brand building.

Ranganathan says Nestle is also a leading company in the dairy sector, but it is more of a non-cold chain player, except for curd. Cavin's products include milk, milk powders, curd, lassi, butter, cheese, paneer and the company has options to extend to others.

The company forayed into this segment in 2009 and one of its successful products is milkshakes. In one year, it managed to capture around 24 per cent share in the southern market. While at present, only the milkshake is available across the country, the rest of the dairy products are expected to go national in the coming months.

The company, which has about a million distribution outlets, is planning to double the network to support the expansion. The effort is to focus more on value added products, where margins are also better. "We built an equity through milkshake. Considering that milkshake is a strong product in the dairy segment, the company is expecting to build the dairy business around it," says Ranganathan.

On the anvil are branded outlets and a trial will start in the next three months. "We need to have a right model, you have to strike a win-win as the investor and company need to make money," he says, adding the company will look at a franchisee model, which it is familiar with through its salon business, the Green Trends.

To address the supply chain issue, CavinKare plans to join hands with co-operative societies across the country. The company will give assured volume and will share technology and culture.

In Tamil Nadu, it is in talks with co-operative societies in Dindigual, Pollachi and other places. Currently, it has its own facilities in Erode and Kanchipuram districts.

To support the aggressive expansion, CavinKare plans to increase its brand building expenses to Rs 200 crore from the current Rs 150 crore. It has roped in cricketer Ravichandran Ashwin and will spend about two per cent of its revenue on research & development.

According to Rabo India Finance, the market size of organised dairy is around $14 billion (Rs 78,700 crore), with various sub-categories growing at 15-30 per cent. According to other market estimates, the milk market in volumes in Tamil Nadu and Kerala is around nine million litres a day, growing at 4 per cent, while the curd market in Tamil Nadu is estimated to be 160,000 litres a day, growing at 33 per cent.

CavinKare is also open to more equity dilution to support its aggressive growth plans. Last year, the company raised Rs 250 crore from Chryscapital and the money was used to pay debt and on brand building. Ranganathan says the company, which had a debt of about Rs 375 crore, is expected to become debt-free by end of this fiscal.

Ranganathan also sees a lot of potential in exports of milk-related products. While getting the codes for exports took some time, it would now look at South East Asian countries, including Singapore, Malaysia and Indonesia for exports. Demand is more for UHT milk (ultra-high temperature)."We have specific demand for our milk powders because of the processing technology edge," he says.

According to Ranganathan, in 2013-14, the company reported around 12 per cent growth, against the original target of around 21-22 per cent. That's because the company went in for consolidation, whereby all divisions were merged for better distribution synergy.

The process, though, should have been completed earlier." The company should have merged the divisions earlier. Each of the divisions had their own separate network and was operating like a separate company. You are weak in the market place, when you go as a separate company, "Ranganathan says.

Three or four salesmen used to go to the same store, leading to a lot of duplication of efforts. From now on, only one salesman will visit that store, offering a bouquet of products of the company.

"Some of the distributors said they wanted only one of our products, and we had to let them go. At some point, we had to bite the bullet," Ranganathan says, adding the company spent Rs 8 crore in technology to make the transition.