SNAP#6 Chic Shampoo - The Sachet Revolution in India
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In India, close to 76% of the people in workforce are working without any employment contract. And approximately, half of these are daily wage earners earning anywhere between 150 INR (2 $) to 1000 INR (13.5 $) per day. Hence, unlike the more fortunate ones, they buy products of daily use (food items, toiletries, etc.) very frequently (either daily or after every 2-3 days). And to reach to this underserved customer base, FMCG companies introduced sachets. A daily wage earner cannot afford to spend 300 INR (4 $) on a bottle of shampoo but can buy a 2 INR (2.5 cents) sachet which would last him for 2 days. And that's why almost every FMCG product in India: toothpaste, shampoos, detergent, hair oil and even coffee has a SKU which is sold in a sachet.
But close to 40 years back, most of these FMCG products were sold in large packets and bottles. Hence, they were only limited to those who were well off. There was no concept of sachets back then. But, a small entrepreneur from Tamil Nadu introduced the concept of sachets to the entire country forcing even the large MNCs to follow suit. In the process, he ended up building a 500 crores INR shampoo brand called Chik. And today, almost 70% of the shampoo sales in India happen in sachets.
In today's Simplanation, we would go through the growth story of Chik, its effective marketing and sales strategy.
The Beginning of Chik
In 1978, Chinnikrishnan, an agriculturist also ran a small pharmaceutical business in Cuddalore, Tamil Nadu. In an attempt to innovate packaging of products, he created the concept of sachets. First he packed talcum powder into small sachets and started selling them to nearby shops. After sometime, he also thought that liquid could also be packed in sachets. And that's when he started selling shampoos in sachets as well. His vision was to make affordable products which could be used by coolies, rickshaw pullers and other daily wage earners. But, he couldn't market these products well. He passed away in 1982.
The small business was overtaken by his sons who started a small regional company called Velvette shampoo which sold its products in small parts of Tamil Nadu. The youngest brother, CK Ranganathan decided to part ways with the brothers in 1983 and started his own cosmetics business with savings of 15000 Rs. He started manufacturing shampoo sachets in a small shed and hired two chemistry graduates to work on formulations. He named the shampoo Chik, priced at 0.75 INR which was affordable for even the poor daily wage earners. His primary target was the south indian rural market. In its first month, Chik sold 20k sachets.
In its second year of operations, Chik became profitable and started gaining good traction. After becoming a common name in the rural markets of TN, the company shifted base to Chennai in 1989 and named itself Beauty cosmetics Pvt Ltd. By then, few other players like HUL and Godrej had also entered this segment but Chik was still much ahead of them in the sachet segment. Unlike his family business which was slow to grow, CK Ranganathan deployed multiple marketing and sales tactics which helped Chik become a famous brand in the state of Tamil Nadu.
Marketing and Sales strategy
The success of Chic shampoo lies solely in understanding the needs and behavior of their customers well. And all their marketing strategies reflect a great empathy for their consumers.
Firstly, to attract and educate rural customers, a lot of whom had never used a shampoo in their life, Chik sales staff started running free movie shows in the villages of southern states of India. With limited access to any kind of entertainment, these free shows drew huge crowds. Between the movies, they played ads and showed live demonstration of using a Chik shampoo. They also gave free sachets to audience to try. This helped them gain a great brand awareness to the extent that the name became synonymous with the shampoo category.
With bigger FMCG players entering around 1988, Chik adopted an innovative scheme where a customer could return 5 sachets of any shampoo to a retailer and get a Chik Sachet free. The scheme was later altered where they started giving a free shampoo in exchange of sachets of only Chik Shampoo. The price sensitive customers started buying only Chik Shampoo. Though the scheme was discontinued after 10 months, the habit of the customers continued. This scheme worked wonders for the company with sales almost doubling to 10 lacs sachets per month in just an year's time. The turnover crossed 1 crore INR in 1989.
In 1990, the company launched two variants with floral fragrances: rose and jasmine. In the southern part of the country, women typically decorate their hair with jasmine flowers. This move again worked very well for Chic and they tripled their sales to 30 lac sachets per month by 1991. All these efforts bore fruit and Chic became the number one shampoo brand in South India.
Expanding to other parts of the country was a tougher challenge given that Chik was famous only in the southern part of the country. So, it wanted that the distributors push their products more to the wholesalers and retailers and the retailers display Chik in more prominent parts of the store and ask the customers to buy this new product. Hence, they started offering the distributors and retailers 1-2% extra margins compared to the competition. The competition brands didn't want to give up on their margins and hence decided to stick to the older structure. This helped Chic grow some good traction in other parts of the country as well. By 1992, the annual revenue of the company had reached 12 crores INR.
In 1998, the company's name was changed to Cavin Kare (Cavin means beauty in Tamil) from Beauty Cosmetics. In 1998, the company had a market share of around 6%. The shampoo sachets from most of the companies used to cost between 1 and 2 INR. Basis the consumer research, they found that still a good segment of customers were not buying shampoos because they found the price point costly. So, they launched a 0.50 INR shampoo in 1998 which became a blockbuster hit. By 2003, Chik had become the second largest national brand in India with 22% market share, just a little below HUL's Clinic Plus. The revenues had reached close to 200 crores INR by 2003.
Chik was always known for being a low cost shampoo. With more demand for premium shampoos like Sunsilk, Dove, etc, Chik also tried to upgrade its positioning by launching Chik Satin as a premium product. But given the associated brand image, it was very difficult to extend the same into premium shampoos as well. Hence, the new product was a failure. With this handicap of positioning, Chik's growth plateaued and other brands started growing through premiumization. One more trend that Chik couldn't catchup on was the introduction of anti dandruff shampoos which went on to become 25% of the total market size by 2011. Chik did not introduce any anti dandruff shampoo. Chik's market share had gone down from 22% in 2003 to a mere 5% in 2011.
But even today, Chik is a famous brand in the rural parts of the country which made sachets so popular that almost every FMCG product has a sachet version today. Today, it clocks close to 500 crores INR in revenues every year & is the biggest brand of the 2000 crores INR Cavin Kare group. Apart from the shampoo, company launched some more interesting products like Spintz perfume sold in 10 INR bottle and Fairever cream with Kesar (saffron) which also became big hits. Today, the group has over 100+ products in F&B and personal care space. Chik did manage to introduce sachets on a large scale making daily use products affordable for millions. But, at the same time, these sachets have been one of the major causes for pollution of rivers and landfills. And that's something that both the company and the society should have been thoughtful about.
Ok, before I finish, I got to know one more interesting point that I never really noticed. The per unit price (per ml price) in a shampoo sachet is always cheaper than the per unit price in a shampoo bottle. And, the same hold true for other products as well. Ever thought why is that the case ? Do share your thoughts in the comments 🙂
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