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Cavin's dairy goes north

The master FMCG innovator, CavinKare, will ride on value-added products to take its dairy business to more markets

T E Narasimhan & Sayantani Kar  |  Chennai/ Mumbai 

The maker of Chik shampoo satchet, Fairever fairness cream, Spinz deo and Nyle herbal shampoo has a new brand ambassador on board. The Chennai-based company, CavinKare, has signed on the Indian cricketer, However, it is not for any of its personal care brands, which had seen innovations in the past that had given bigwigs a run for their money. Instead, Ashwin will endorse the of

Having launched the brand Cavin's, three years back, wants to go pan-India with it in the next 18 months. The markets in south India were its testing grounds. To expand, it will venture into the national capital region (NCR) at first. Cavin's already contributes 20 per cent to the FMCG company's overall revenue, clocking Rs 250 crore in 2012-13.

The dairy market in the south is more brand-focused than other regions which are commoditised. "Private players have been the prime movers in south India with a strong retail presence in packed milk and curd," says Shiva Mudgil, assistant vice president, food & agribusiness research and advisory, Rabo India Finance.

C K Ranganathan, chairman and managing director at and the one who launched shampoo satchets in India, among other FMCG innovations, says, "It (the dairy business) is an evergreen segment since it is a fundamental requirement. I am bullish about this business." 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 90 lakh litres a day, growing at 4 per cent, while the curd market in Tamil Nadu is estimated to be 1.6 lakh litres a day, growing at 33 per cent.

Ranganathan says, "We are not a pure-play dairy company, but an FMCG company with a good distribution network, combined with back-end strength in people, procurement, plants, and R&D, that allows us to innovate. Cavin's in special packs and Cavin's milk in UHT packs have long shelf-life which can last in areas with power-cuts".

Anand Halve, co-founder of Chlorophyll, the brand and communications consultancy, however, says, "The question is whether CavinKare can build a sustainable brand in a commoditised category. Not only do we have national players like Amul and Nestle, new entrants like Danone, but a host of local brands. Despite its personal care products with a difference, dairy will not an easy category to differentiate in. Indians are still wary about 6-months preserved dairy products."

Ranganathan will bank on value-added dairy products. The company started with milk and dahi, and diversified into ambience-stable products such as yogurt, paneer, UHT (ultra-high temperature-processed) milk and milk-based beverages like milk shakes from 2010.

These value-added products will first get marketed in the NCR. Balaji Prakash, general manager sales and marketing (dairy & beverage), CavinKare, says that the ambience-stable products would not require cold-chain infrastructure, and hence be more suited for an immediate launch.

While value-added dairy products hold the scope for high margins, they account for 10-15 per cent of the market, with pouch milk bringing in 60-65 per cent. Where basic dairy products allow only low single digits by way of margins, value-added dairy products can offer double digit margins on a large scale (could be three times more).

These bring in about 40 per cent of CavinKare's dairy revenue, and Ranganathan wants no less than 60 per cent from these when the business reaches the ambitious Rs 1,000-crore mark.

Having bought a Kanchipuram dairy farm to kickstart its diversification in 2009, CavinKare is nearly doubling its capacity at its Kanchipuram and Erode plants from 3.8 lakh litres per day to 6 lakh litres per day to produce more value-added products.

However, a national footprint will not be easy with a limited cold chain support. Afterall, dairy companies cannot ignore selling milk and curd since they account for a lion's share of the market. "We will invest around Rs 250-300 crore to set up a cold chain, R&D and our brand across the country," says Ranganathan, who is planning to fund it through debt and internal accruals. So far, 6 per cent of the segment's earnings have been ploughed back in brand-building. CavinKare is also looking at raising around Rs 350 crore from PEs, by diluting around 10 per cent, for its entire FMCG business.

Cavin's will tap groceries, general and departmental stores, modern trade (MT) and eating outlets. Mudgil says, "Modern trade provides an ideal platform to showcase value-added products like cheese, UHT milk, yogurts to targeted audience. However, general trade will still remain a major contributor to sales since MT penetration is low at around 8 per cent."

Milkshakes will be the first to get endorsed by Ashwin who fit in with associations of health, activity and energy - traits Cavin's wants to embody. While Ashwin will be the national ambassador for all its dairy products, the company will rope in regional celebrities to connect locally in different markets.

First Published: Wed, May 29 2013. 21:30 IST