Today the Indian FMCG space is rattled by this new brand Patanjali and all the MNC are breaking their heads to figure how this baba could make so much in such short time which took them decades to build. Patanjali today clocks a staggering INR 2000 Cr and is on road to hit INR 5k Cr in 2016 and this is all in a space of 4 yrs. Now that’s growth 66% in topline in 2015 to hit the INR 2k Cr mark, no wonder it’s the fastest growing FMCG brand.
The Patanjali story began in 2003 with yoga with a channel called “Aastha Tv” where the early morning slot was done by Baba Ramdev, who would come every morning in a saffron dhoti, bare-chested, twisting and twirling his body to eye-popping angles, while elucidating on Yogic rituals. Baba Ramdev also conducted free yoga lessons, his easy-to-follow breathing techniques, combined with his friendly saint appearance made him connect with the mass followers.
The idea of monetizing his popularity came from his close associate Acharya Balkrishna where he envisioned the amalgamation of the yoga guru’s popularity with his knowledge of ancient Ayurveda. This brought about the birth of Patanjali Ayurved Limited that began manufacturing medicinal products and ventured into the market with its dental care, cosmetics, and food range products.
Headquartered out of Haridwar the holy town on the banks of Ganges Ramdev this began his journey from a yoga guru to a business tycoon with the end goal of reaching INR 1 trillion in sales in less than 10 yrs. Already Patanjali has recorded sales INR 2k Cr in 2015 and is on its way to hit INR 5k Cr in 2016. To give a perspective to this no Hindustan Unilever Ltd started in India in 1888 and in 2015 touched net sales of INR 32k Cr, that’s how fast this FMCG is growing. As per FICCI and KPMG this segment was projected to grow by 12-15% over the next 5 yrs and Patanjali targets to grow at almost 3-4 times this pace, that’s the ambition of Baba Ramdev.
Ramdev openly ridicules his multinational competition.“It’s just the start. Ab tak Colgate ka toh gate khul gaya, Nestle ka toh panchhi urne wala hai, Pantene ka toh pant gila hone wala hai; aur do saal me, Unilever ka lever kharab ho jayega (By now, Colgate’s gate has opened; Nestle’s bird has flown (a reference to Nestle India Ltd’s logo), Pantene’s (a shampoo brand by Procter and Gamble India) pants are going to get wet, and in two years, Unilever’s lever will fail),” Ramdev said on 27 April at a press conference in Delhi.
Patanjali’s focus would be on six areas: natural medicine, natural cosmetics, natural dairy products and food, natural cattle feed and feed supplements, bio-fertilizers and bio-pesticides, and natural indigenous seeds to meet that growth as per Ramdev.
And it’s not just about entering the right segment but also getting the distribution right, over the next year, Patanjali will increase its retail presence through 4,000 distributors, more than 10,000 company-owned outlets, 100 Patanjali-branded stores and supermarkets. They also plan to set up 6 more factories to make sure production is in line with sales to avoid stock outs.
Baba Ramdev has hit all the right buttons from a 4 Ps perspective as he has managed to get a good product based on ancient Ayurveda that people trust, extremely competitive prices, a good distribution and an expanding production line. And most importantly he has managed to converge the ayurved with the trust/faith people had on his name, which made Patanjali grow so big in such short time. Brands spends millions of dollars and years to build credibility but here Ramdev had that credibility already that took years to build and he just transferred that credibility to the products by endorsing them and by offering no side effect ayurved medicine.
And just to make sure that each Indian was exposed to his products Patanjali spent massively on their A&P spends. Their weekly ad insertions on television jumped 102% from 11,897 in the first week of January to 24,050 in the week ended 25 March, according to BARC. Ad insertions by Patanjali are 20% more than those by the next most-advertised brand on TV—Cadbury, a chocolate brand owned by Mondelez India Foods Pvt. Ltd.
Disruption is always good and in this era of startups and uberization every company’s wants to project that they are innovative but very few actually are disruptive. Patanjali Ayurveda Limited (PAL) scores high on creating a new market and beat competition on the pricing front as well. In a relatively crowded FMCG space dominated by the HULs and ITCs, PAL has emerged as a dark horse posing a serious challenge to the erstwhile barons.
Their goal of making products available to the consumer at the most reasonable price, and giving substantial discount to existing alternatives. The price differential itself may be enough for some consumers to make the shift and for those in the low income class to become loyal customers of the given product category. Given its significant price discounts vis-à-vis competitor brands, one wonders whether the competition will eventually cut prices to lock horns with the PAL challenge.
It will force the MNC counterparts to either lower prices of come up with low cost products which may be inferior in quality in comparison to Patanjali’s line up.
A mystic who started his journey by offering free yoga camps to the masses and strongly propagating ancient Ayurveda to the world, is today, the cause of a frown for many FMCG companies in India and globally.
But there is a twist in the tale this FMCG sector may be in for some more disruption as after Baba Ramdev’s Patanjali, Sri Sri Ravi Shankar’s Sri Sri Ayurveda (SSA) products will now make the going tougher for the existing consumer players and for Patanjali as well.
Sri Sri is yet another more popular monk who has entered this market in 2003 and plans to roll out the same way as Patanjali. This may spell doom for existing players if they don’t act quickly. Sri Sri has 37 crore followers, estimated to be more than five times that of Baba Ramdev, owner of the Patanjali brand. Sri Sri has products across categories such as breakfast cereals, health drinks, oil, spices, personal care, oral care, cookies and ready-to-cook items. But unlike Patanjali, which has a strong presence, SSA has still to develop a network that can sell its products.
Other spiritual gurus such as Sadhguru Jaggi Vasudev, Guru Ram Rahim and Aurobindo Ashram are planning to take the same route to exploit this lucrative segment and I look forward to this and the answer that the MNC giants have to give. This I feel will be the true test for these MNC giants which may lead to consolidation in the industry or some players leaving the playground has to be closely watched.