Origin of Patanjali
Patanjali was started in 1997 as a pharmacy store in Haridwar providing healthcare products. Patanjali Ayurved Limited was established on 13th January 2006 with its registered office in D-26, Pushpanjali, Bijwasan Enclave, New Delhi – 110061, India, founded by Guru Ramdev and Acharya Balkrishna. Patanjali Food & Herbal Park Haridwar – Laksar Road, Padartha, Haridwar -249404 (Uttarakhand) is the H.Q. of Patanjali. The Company is currently having 8 Directors (MCA website) and in the year 2007 it converted into a Public Limited Company. Acharya Balkrishna is the Managing Director having the highest stake in the company. Guru Ramdev, featured in television programs, has successfully made Indians realize the value of Yoga, Indian traditions and art forms. He offered Yoga as a solution to all the health problems, and it resulted in him getting wide acceptance and publicity. Guru Ramdev acts as the Ambassador for the entire Patanjali brand having no stake in the company, yet, he has very accurately decided the time period of actions and delivered remarkable success. The brand Patanjali has captured a lot of space in the Indian house hold shelves pushing away the bigger brands
Introduction of Patanjali
Patanjali provides a wide range of products from food, beverages to cosmetics, fabric care and it is involved in manufacturing as well as distribution of these products. It has expanded itself into various segments and has offered a plethora of products to its huge customer base since its inception. One of the principle reasons for its steep rise is the use of Ayurvedic / herbal essence in its Products, the raw materials used in its products are sourced locally from framers with a motto to uplift their lives while at the same time promoting Ayurveda and Herbal Products. It has been successfully providing the option to the Indian masses to move towards a healthy ayurvedic cum herbal lifestyle. Product Offerings which meet customer requirements is the principle which Patanjali has followed and it is one of main reasons for its huge success in the Indian FMCG Market. It started with Rs.60 crores revenue in the first year and from there it has followed a steep growth trajectory to presently generating a revenue of more than 10,000 cores (a third of the revenue of Hindustan Unilever Limited). Currently, it is posing a threat to all the well-established companies in the FMCG domain. Ayurvedic / herbal theme is common among all of it wide range of products across all categories. It currently is having four business divisions: food and beverages, cosmetics and health, health drinks and home care. Some of major business generating products of Patanjali include Cow Ghee (Rs.1467 crore), Dant Kanti toothpaste (Rs.940 crore), Ayurvedic Medicines (Rs.870 core), Keshkanti Shampoo (Rs.825 crore), Soaps (Rs.574 crore). The Ayurvedic / herbal theme has helped Patanjali achieving a huge customer base and this base keeps growing bigger with the introduction of new products. Having an employee strength of more than 2,00,000 employees (2011-12), they prefer hiring street-smart individuals, which results in keeping costs down and at the same time delivering exceptional growth. Because, of the huge demand for its products, the company was finding it difficult to cater to all the customers, so, it had increased its distribution channels and expanded its reach. Production has increased, and it has a huge variety of products in its portfolio. Patanjali took the emotional route and brought the Swadeshi viewpoint for marketing its products, keeping its vision constant of proving natural Ayurvedic – Herbal solutions to all the problems. The end user prefers Patanjali due to its lower price and no noticeable difference with the other expensive brands. One of the key reasons for the difference that it has effectively created in the FMCG sector is by offering free Ayurvedic Doctor Consultation along with the Ayurvedic – Herbal products at its centres. These centres are spread all across India and are known as Arogya Kendras / Chikitsalayas. It has increased its distribution channel through franchise and Kirana stores. To increase its distribution channel further it had entered into partnerships with retail chains. The gap between demand and supply persisted which made them invest in food parks and also outsource to SMEs, making sure that the quality was consistent. The unconventional strategy is the one of the key reason for its success and due to which it has provided a tough competition to some of the major players in the FMCG sector. The main focus of the company was to offer quality products to its customers which resulted in word of mouth branding/publicity and thus it didn’t invest much in marketing and promotion, and with time it has taken away the market share from many best-selling brands.
Patanjali products have found widespread acceptance among consumers for three broad reasons:
• The belief of consumers that the products have health benefits and are of high quality in terms of ingredients.
• Products are about 15 to 30 per cent cheaper than similar products from competitor companies.
• Marketing products with the catch line “Made in India”.
The food and beverages industry has been flooded by adulterated goods which have ill effects on the health of consumers. Patanjali has always stressed upon the pure and unadulterated nature of their products. This ideology has helped them get consumers looking for good quality products with no detrimental effects on health. The company’s insistence on using good quality and fresh ingredients is also getting them new buyers.
Two factors that have made Patanjali Ayurveda the fastest growing FMCG Company in India
(a) Use of Natural Ingredients and Ayurveda
Pricing plays an extremely important role in putting Patanjali ahead of its competitors.
The company is educating people about the benefits of using their products and are also using price comparison as an effective marketing strategy. Its relatively newer production line has state of the art manufacturing and packaging facilities which allows it to be highly competitive in terms of production costs. Moreover, Patanjali works on low margin and high volume model while keeping advertisement costs to bare minimum. Hence, the products are available at a cheaper cost as compared to its competitors.
Traditionally, Patanjali has refrained from mainstream advertisements. However, it has utilized alternative forms of marketing quite effectively to bolster its presence in the market.
Word of mouth publicity—As per a study by Forbes, when a company goes about making a claim, its believability is only between 20 to 49%. The believability jumps to 70% when real people speak favorably about a brand, and when friends talk about a brand’s goodness the believability jumps to about 90%. Patanjali’s products have long been marketed by its consumers for their benefits and advantages as compared to other competition.
Publicity via Yoga Camps— The yoga camps organized by Baba Ramdev have been estimated to attract over 70 million people till date. A large number of people also witness these shows on television. Quite a many Patanjali products are marketed by Baba Ramdev in such yoga camps along with details of their benefits and usage. Over the years, this has proved to be an extremely helpful marketing tool for Patanjali.
Mainstream Advertisement— Patanjali has lately embraced conventional advertisements on national broadcasting networks. This further pushes the company’s products in the market. Through these ad campaigns, Patanjali has always conveyed the message to people that the revenue of the company is not for its brand owners but for charity. It also states that it is better that the revenue generated from day to day products remains within India rather than the profits going out to foreign companies.
Ads with information about price gap and how useful herbal Patanjali products are, has started influencing Indians. Patanjali has also started selling their products online through e-commerce, thereby, increasing their penetration even further.
Patanjali products theme is of Ayurvedic/herbal. It has 4 business divisions:
• Food and beverages,
• Cosmetics and health,
• Health drinks
• Home care.
It earns most of its revenue from Dant Kanti, Kesh Kanti, Patanjali cow ghee and Aloe vera juice.
Its customers are increasing almost exponentially. Baba Ramdev’s relaunch of Patanjali in 2014 made an impact. It has yet managed to keep the demand of its product super high in domestic market. Patanjali has therefore reworked on its distribution channels and its reach is now multifold from the point of its inception. Production has seen growth too, and it has now over 450 products in its portfolio.
Key success factor behind Patanjali’s growth are few products which became house hold name for masses.
Let’s talk about its top products a bit –
It is one uneven market where we have several unorganized players.
Its revenue was Rs 1,467 crore for product Ghee. Patanjali gave direct competition to Amul, in the organized branded ghee market. The market share of ghee has captured approx. 43%, according to market researcher Kantar World panel. Patanjali is one brand that has evolved to have presence across country, leading reports said. It has the high share in Indian household ghee market than comes the other brand names like Amul, Krishna, Nandini and BRB.
Dantkanti Herbal toothpaste
Revenue generation for Dantkanti toothpaste was Rs 942 crore (approx.). The company claimed of its 15% (approx.) market share by March end. As compared to 2015, the market shares of its rival and the market leader Colgate Palmolive India Ltd. and Dabur India Ltd. Colgate Palmolive which notched around 57.3% (approx.), year 2016 showed a drop to 55.7%, the source comes from its investor presentation.
Patanjali Ayurvedic medicines
Patanjali surpassed this segment from its rival Dabur India by almost 4 times, revenue generation figure for this segment, ayurvedic medicines, was INR 872 approximately
Patanjali Keshkanti shampoo
In the shampoo segment albeit the market top notch HUL which has nearly 44 to 46 % share but Patanjali was able to generate a revenue of INR 830 crore. Around INR 16,300 crore (approx.) was generated from personal care segment (soaps and shampoo and skin care products) by companies like Fair and Lovely, Lux and Sunsilk.
Patanjali Herbal Soaps
Compared to the close neck to neck competitors in the soap segment like Hindustan Unilever which dominated the market with their sensational product Lifebuoy, others like Nirma, ITC and Godrej Patanjali’s segment for herbal soap bagged revenue for INR 575 crore
What is driving Patanjali FMCG business? “A differentiated Unique Selling Proposition
“Prakriti ka aashirwaad”
Product Efficacy – the ultimate USP
Baba Ramdev, renowned face in the yoga sector being the promoter of the herbal products produced by Patanjali is the vital factor that Patanjali has over any other FMCG company in India. Having huge number of product line ranging between 400 to 500 products with differing SKU’s made up of herbal and natural components being cost effective and of superior quality are helping the company to survive in FMCG market. Less count of promotional activities and low promotional expenses are helping the company make prices affordable to the customers without compromising on quality. Baba Ramdev being the face of the promotions of the Patanjali products is supporting the brand in maintaining huge amount of awareness, reach and lasting impression in the mind of customers. Also, the products packing is such that it is helping the brand to be a household name in India.
Over a period, it has created a perception of Value for Money and Good for Health. Patanjali brand is building through word of mouth publicity and its brand ambassadors are sitting right in our homes (Parents and Grandparents)
Patanjali as a Brand, has become a trusted household name.
How? Amidst the pessimism around the conundrum of unhealthy, chemical lifestyle, by infusing authentic herbal ; ayurvedic products with a touch of Desi flavor, Patanjali scored brownie points ; disrupted the FMCG segment. Whilst the FMCG giants were battling an overall industry slow down, Patanjali emerged a winner with simple, word of mouth marketing using a trusted brand ambassador.
Were the aforementioned, only reasons behind the success of Patanjali? Not really. Knowing the agrarian situation in India, Patanjali sapped raw materials directly from farmers. Doing so, not only did they eliminate middlemen, but also related overhead costs. Thus began their tryst with rural India. In parallel, the still green FMCG giant slowly built up a strong distribution network. From its dispensaries ; health centers, they realized the success formula behind multiplying their revenues, is to venture into retail.
With semantics in place, Patanjali brought in Mr. Dependable into the fore. With his honest ; humble background, Baba Ramdev had in him the Indianess to instill patriotism ; imbibe into people the Indian ethos. As quoted in one of his interviews, he did his 10% by becoming the face of Patanjali ; media did the rest. They created an aura of honesty around him ; it reflected in its sales. With Brand Patanjali recognized ; people’s positive perception in place, a slew of products was brought in. This left us to tell a tale about their furtherance in the Indian market.
Customer Target Group
Patanjali Ayurveda, does not segment the customer base as such and thereby making the whole population its potential user. As per Patanjali’s vision of bringing unadulterated natural Ayurveda products easily available from farm to market to the common masses, this stance of not segmenting the market as such seems aligned. However, on analysis, a broad segmentation can be observed.
Patanjali uses the mix of demographic, psychographic, geographic and behavioral segmentation strategies to make its offerings appropriate/ relevant to the particular set of customer groups.
It is observed that Patanjali products are a huge hit in the North Indian markets but not that much in South India. One reason stated as Ramdev being from the Hindi belt and Aastha channel airing in Hindi language, its prominence is not that much down in south. The same reason holds true for its packaging, which uses either English or Hindi.
The consumers can be segmented based on their social lifestyle ; health preference. The main users of Patanjali products are the people who are health conscious and are proactive to use pure and natural Ayurveda products.
Demographic segmentation (based on age):
A broad segmentation is done based on age. The young generation, i.e. typically children to young adult below the age of 35 years, while the rest of the population aged more than 35 years form the part of other segment. This segmentation based on age is as young adults ; children enjoy life and often are not serious about health or lifestyle, which makes them not a potential user of these products. On the other hand, once people turn a little old or onset of middle age, they become conscious about health.
Based on the psychology of the people, this segmentation is considered. Huge overlap is found among the people who attend Ramdev’s Yoga camps/sessions or follow him on Aastha channel. People perceive him as an ascetic; hence his products as well shall be good which makes them purchase these products of Patanjali. Baba Ramdev’s urge to generate a wave of Swadeshi sentiment among the customers and thus positioned the product against FMCGs which are mainly MNCs, thereby creating the mindset among the customers regarding the Indian Origin of products.
The Indian FMCG sector is driven by Hindustan Unilever Limited. Established in the year 1933 in India and now it acts as a subsidiary of British – Dutch firm Unilever in Mumbai-India. Nine out of ten households use HUL products in India. With a rich mix of 35+ sub brands compensating 20+ different categories are the strength of HUL. To sustain the lead role in the market the company always focus on innovation and adopting itself to the market changes. Total number of direct Employees are more than 18000 and it indirectly employees more than 65000 people and contribute good Employment rate for the country.
In the recent quarter ending June 2018, the company’s net profit has grown by 19% to Rs:1529/-crores with the EBITDA margin achieving more than 100bps. This quarter also was a success for the company by achieving more than 16% domestic consumer growth and 12% volume growth. The areas contributed to the recent quarter are from Home care products, Beauty & Personal care products and also in Foods & Refreshment products.
Revenue of FMCG companies (2014-2015); Source: IJETMAS
• Adopting green initiatives: It fulfils 80% of its power requirement from Sumepur plant using Solar energy and also reduced the carbon footprint in its manufacturing units by 13%
• Analytics: HUL invests a lot in Analytics for tracking and staying ahead of the competitors.
• Connected for growth: To make effective decision making and also help the business growth by speed delivery they introduced a program called Connected for growth
• Product Innovation: To stay ahead HUL always keen on inventing new products and due to recent surge of Patanjali they are driving more on Organic Product innovations.
• UN sustainable development goals: Contribute a large towards sustainable development
Some of the notable achievements by HUL are
• Highest tax payer for the year 2014/2015,2011/2012 etc. for many years
• Focuses more on Environment and awarded Environment friendly company consecutively many years by ministry of Indian government and Nepal government
• Frost & Sullivan awarded
• Best presented accounts and corporate Governance award
Effect of Foreign Players
As per the recent changes by the Policies adopted by the Indian government some notable action items are;
• 100% FDI is allowed in India with the minimum capitalization for foreign companies is 100 million US dollars in Single brand retail chains
• If a Corporate is operating on a multi brand portfolio, then 51% is the minimum cap of the Investment for an International company
• Government also provided subsidies through tax free land for factories, reduction in material taxes, reduction in Exercise duty etc.
• 100% FDI investment boosted the companies’ way of operating in launching new products, spend more on Research and development and operate efficiently in the consumer markets
• Comparing the FDI investment with all the sectors the FMCG industry was the one which peaked with investment of 12186 million+ US dollars from various countries.
• And within the largest share of FMCG, food processing was the largest with close to 70% companies invested.
Source: Department of Industrial Policy and Promotion – DIPP statistics
India is also a key player in allowing FDI’s and competing with Global nations. The below reference says about the FDI investments across the globe.
Source: AT Kearney 2017 FDI Confidence Index
As per the recent Mergers and Acquisition, Merlin Entertainments, Kohler Corporation, Mountain Trail Food acts in a single brand retail food sector and it has two FDI proposals more than 62.5 million US dollars within retail sector.
Various methods, product portfolio, ayurvedic products, price decrease, M&A
In order to compete and stabilize in the market and also to compete with Patanjali many major players act through Mergers and Acquisition as one method to diversify their Product Portfolio.
Source: IBEF – July 2018 report
Future Growth Strategy
According to Indian Brand Equity Foundation (IBEF), the Indian textiles industry which is currently estimated at around $120 billion is expected to reach $230 billion by 2020. The apparel market in India is expected to grow at an estimated compounded annual growth rate of 11.8 percent to reach $180 billion by 2025.
After making its presence felt in the fast-moving consumer goods (FMCG) space and making MNCs firmly entrenched in India for years to change some of their products to herbal variant, Patanjali Ayurveda is planning to come out with a ‘Swadeshi’ portfolio comprising clothing line and footwear by November 2018.
The textile portfolio will comprise of products ranging from kids wear to yoga wear and sportswear. It will also have accessories and footwear. The clothes will not only offer value for money for the masses but also that the apparel will have a snob value for the classes. And the aim is to hit Rs. 5,000 crores sales in the first year of operation.
Patanjali Ayurveda has grown strongly in the past decade. But to sustain its momentum, the company would have to tick a few boxes.
The rural market in India accounts for over 70% of the population but contributes only 9% in the FMCG industry. Thus, increasing distribution and support infrastructure in rural areas are a key area where it needs to focus.
Increase in Research and Development:
Any FMCG brand needs to focus on R&D and innovation for sustained growth. In this age of extreme competition, companies can only do well if it uses customer insights and create the next generation of products or in some cases a new product category. Therefore, to stay relevant in the market Patanjali would have to invest a lot of capital and effort into significant R&D and generate newer product categories.
Focus on Exports:
Right from inception, Patanjali has largely focused to cater to the domestic market, exports being a very low fraction of the total sales. The strategy of the company is to use the Sahibganj multi-modal terminal in Jharkhand to start exporting products to the East Asian nations. The terminal would have facilities for two ship-houses, storing stockyard, conveyor belt system with fixed hoppers, class loader, ramps and parking area, roads, and terminal buildings. Patanjali is also in talks with the Inland Waterways Authority of India and shipping ministry to use the terminal, which will help it save significant logistic costs.