Britannia and Nestle are strong players in the southern region

The group’s move into the dairy business (butter, ghee, paneer, ice-creams) – for which it has already acquired two plants – is another feather in its pan-Indian ambition cap. T. D. Mohan, Director, CavinKare insists that the group will invest about Rs.180 crore into the dairy biz over the next two years. For now, Britannia and Nestle are strong players in the southern region, but CavinKare is confident that through its unique model of procuring milk from farmers, it will be able to make its dairy business worth Rs.1,000 crore in the next couple of years. “Our core strength is product development, distribution and brand building and we’re leveraging these in our dairy business,” adds Mohan. Besides, only last month, CavinKare forayed into the restaurant business by launching an outlet in Puducherry. And CKR’s team is actively scouting for potential acquisition of existing restaurants so that CavinKare can move in quickly to lend its brand.

To be fair, CavinKare has a lot going for it. Besides, Nirma may not have succeeded, but there are too many instances of regional brands making it big on the national scene. Anchor toothpaste, which started in Rajasthan is today ubiquitous all over U.P., M.P. and Bihar. Likewise, Ghadi Detergent kicked off in U.P. and has a huge presence in M.P., Rajasthan and Gujarat now. Kerala’s Jyothi Laboratories, is doing particularly well in the North-East and West Bengal.

CavinKare itself has beaten expectations. For instance, Chik shampoo is the market leader in U.P. and Nyle derives 90% of its sales from non-south regions. Even Spinz is a top-selling brand in M.P., while its deodorants sell spectacularly in Maharashtra too; Indica hair dye is going great guns in Gujarat. In fact, the group derives less than 50% of its sales from the south these days, primarily because it has maintained its low and mid income positioning in these regions too. And while its ambitions to straddle the urban SEC A segment in retail ventures like foods and beauty salons may yet come true, the same may not really hold true for the FMCG category per se. On the contrary, its past FMCG forays in the SEC A segment have not met with much success. Perhaps the astute entrepreneur CKR has an inkling of the potential bottlenecks. “If I’m asked who is CavinKare, I would say we are someone comfortable playing in the mass market as well as at the top end of the middle class. We are not present in the SEC A category as of now. For that matter even Sunsilk is not penetrating the SEC A category. So we are comfortable with the positioning we have given ourselves,” he says carefully.

They can however still do it. At the end of the day, it’s all about innovation, distribution and understanding the consumer and CKR has proven himself time and again on all three fronts. Most importantly, he has his eyes set high. He wants to be an “HUL in the making” in just another decade. Well, talk about the sheer joy of thinking big!!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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In the Pink of health

Economic development and health insurance go hand in hand; yet in the Indian context the correlation seems more skewed towards economic development. With enormous potential, glimmers of hope are emanating for the industry.

“Meant for the rich, educated or those in business… benefits hospitals more than holders” is the common (negative) perception about health insurance in India where the healthcare expense is a mere (3.6% of the GDP). What is startling is the fact that the health insurance market is still grossly under-penetrated with only 2% of the billion plus population possessing a health insurance cover. Juxtapose these with the fact that during 2008-09, the general insurance industry recorded total health insurance premium of Rs. 6,625 crore (a 30% improvement over the previous year).

Moreover, for the last six years health insurance industry has been growing at a CAGR of 35% to reach the current level. That clearly indicates the huge potential that the industry has in India. For private players in the domain, health insurance is emerging as an increasingly significant line of business. V. Vaidyanathan, MD & CEO ICICI Prudential Life Insurance Co Ltd, avers “health insurance contributes to 7% of the total premiums and we expect it to increase to 15%.”But then, as J. Hari Narayan, Chairman IRDA says, “the growth in numbers is also fraught with numerous challenges of ensuring accessibility, affordability and efficiency in the health insurance system, which requires sustained and focused efforts on the part of all stakeholders.”

But the question remains the same – why do people have a negative perception? It’s simply for the fact that approximately 70% of the health expenses are out of pocket. As a matter of fact out of the Rs.2 trillion health insurance spread, almost Rs.1.3 – 1.4 trillion are out-of pocket expenses. There is some inherent problems viz. definition of pre-existing disease/ critical illness, et al, which makes matter worse. 30% of health insurance claims are rejected and unbelievably 90% of these rejections are due to pre-existing diseases. If the industry has to grow, “the communication between sales force and policy holders must increase,” says Hari Narayan.

It is true that increasing awareness, rising healthcare costs, recent detariffing of the general insurance industry have been key drivers, but the real need is of products, which can capture other expenses. Standard definitions and list of critical illnesses and non-medical expenses will not only enhance customers understanding of these terms but will also help smoothen the interaction between the patients, hospitals, TPAs and insurers by minimising ambiguities.

Gyanendra Kumar Kashyap

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
Management guru Arindam Chaudhuri’s latest blockbuster book, Discover The Diamond In You
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