CASE STUDY

CavinKare to take on fast food MNCs in India, abroad

The menu for the chain in India will be a combination of
Indian fare such as idlis, dosas and sandwiches, and
American favourites such as burgers and fries
Chennai: The Chennai-based company that was among the
first to popularize the sale of shampoos in sachets plans to
take on fast food multinational corporations (MNCs) such
as McDonald’s Corp. not just in India, but also overseas
with a multi-cuisine fast food restaurant format that it is
currently testing.
Considering most Indians spend far more on food than on
personal care, India has a potential for 500 restaurants, said
C.K. Ranganathan, chairman and managing director of
CavinKare Pvt. Ltd.
While CavinKare invested nearly Rs75 lakh for the first
restaurant it opened a month ago, the cost for each
additional restaurant is likely to come down to Rs60 lakh,
he added. The restaurants are branded CK’s Foodstaurant,
like CavinKare, a play on the name of the founder.
CavinKare, maker of shampoos, fairness creams as well as
pickles and juices, started life as Beauty Cosmetics.
Ranganathan’s brother C.K. Rajkumar is known as the man
who launched the sachet revolution in India when he
started selling a brand of shampoo, Velvette, in sachets.
Ranganathan followed suit with his own shampoo-in-sachet
offering, Chik.
The menu for the chain in India will be a combination of
Indian fare such as idlis, dosas and sandwiches, and
American favourites such as burgers and fries, but the
restaurants will take on a slightly different avatar overseas.
“In Italy, we could be selling a combination of pasta and
burgers, while in Taiwan the restaurant menu will feature
noodles, dumplings as well as fries and burgers,” said
Ranganathan.
In July, the Chennai-based company decided to study the
fast food business by opening its first restaurant in
Puducherry (formerly Pondicherry).
“Food is very localized and something that works in
Chennai may not work in Mumbai or Delhi,” said Anand
Shah, a research analyst with Angel Broking Ltd.
Delhi-based fast food chain Nirula’s planned to go national
with its restaurants two years ago, but is yet to be
successful, Shah said. “So, it is very easy to say (you want
to build a national or international chain), but it is actually
very difficult to implement and expand.”
The family-owned CavinKarelogged sales of Rs700 crore
in 2008-09 and expects to nearly double its sales to
Rs1,500 crore in 2009-10, excluding the expected sales
from the restaurant business. Ranganathan declined to
give any sales forecast for the fast food business, but
said that a chain spread over a state such as Tamil Nadu
could yield Rs1,000 crore in annual revenue. More
financial details of the privately held company weren’t
available.
Through the 1990s and 2000s, CavinKare has held its own
—and even won some skirmishes—with Hindustan
Unilever Ltd (HUL), India’s largest consumer goods
company. HUL posted a net profit of Rs2,115 crore on
sales of Rs16,476 crore for the year ended March 2009.
“You need to be right on two counts to unsettle a leader—
product innovation and pricing. CavinKare worked well to
get both of them right,” said Nikhil Vora, an analyst with
IDFC-SSKI Securities Ltd.
Still, that may not work in the fast food business.
“CavinKare’s expertise is in consumer goods, so I don’t
understand the logic of them moving into the fast food
outlets,” Angel Broking’s Shah said.

SUBMITTED BY:-
ROHIT MEHRA
MBA(IB) - E
ROLL NO-30