model based on outsourcing
Indian FMCG company takes
on the giants in Sri Lanka
By Feizal Samath
Move over Unilevers and Hemas, two of Sri Lanka's
biggest FMCGs - there's a new kid on the block! "I want to
conquer the world," says C.K. Ranganathan, Chairman and Managing
Director of Tamil Nadu-based CavinKare, perhaps Unilever India's
biggest competitor in the deodorant, shampoo and fairness cream
sector. In Colombo last week for meetings with local distributors,
45-year old Ranganathan plans to help set up a manufacturing facility
in Sri Lanka within a year that would not only meet the demand here
but also in South India and Pakistan.
an (Indian) Rs 15,000 investment in 1991, CavinKare has become a
billion-rupee organisation in the shampoo and cosmetic industry
with its success based on a simple business model - outsourcing.
The company has never owned a production facility and relies on
outsourcing, as Ranganathan simply didn't have the money to own
gamble has paid strong dividends with outsourcing of production
in most of the biggest FMCGs being the name of the game now. Unilevers
outsources, so does Reckitt & Colman and many other outstanding
firms. The company has been selling its range of brands - Chik,
Nyle, Meera, Fairever, Indica and Spinz - since 1995 here but began
active marketing only 3-4 years with East West Marketing as its
Unilever sells through 100,000 outlets across Sri Lanka, CavinKare
markets through 40,000 sales points. "Our business model is
based on providing what the consumer wants with constant change
to consumer tastes.
focus is on research and development … not production which
we leave to others. Our product formulation differs from country
to country based on preferences," he said. Ranganathan is now
keen to set up an outsourcing production facility in Sri Lanka not
only to feed constant demand here but also to market to Pakistan
and South India.
South India when you probably have an outsourced facility there?
"Because the Free Trade Agreement between Sri Lanka and India
provides us concessions which make it cheaper to produce here and
export to India," he said.
is one problem however that CavinKare has been unable to overcome
- the initial investment requirement to set up base in Sri Lanka.
Under BOI rules, the minimum investment for a production facility
is $50,000 while for anything else is $1 million. CavinKare belongs
to the second category as the production facility would essentially
be a local company.
investment is too high and we are looking at options. Nevertheless
if we don't have a choice we will still set up our own facility
within a year because Pakistan is an attractive market for us,"
employs his skills in marketing, distribution and R & D. "This
makes sense as we have less headaches. Everything is outsourced
including cleaning the office," he said. CavinKare now has
8-9 large outsourced facilities compared to 100, many years and
most produce exclusively for the rapidly growing Indian multinational.
enterprising entrepreneur is setting his sights on a global brand
in 5-7 years. "I want to be global, " he says.