Posted in Marketing & Strategy Articles, Total Reads: 2383
, Published on 20 July 2016
Patanjali Ayurveda Limited, an Indian FMCG company based out of Haridwar, is now creating a lot of buzz in the FMCG space. The brand garnered a lot of space in Indian household shelves pushing away the big brands. The journey so far has not just baffled the marketing gurus, but it also stands as a testimony for the principle “Product Offerings which meet customer requirements turnout successful”.
Patanjali was started in 1997 as a Pharmacy store to manufacture healthcare products in Haridwar. It got incorporated as a company in 2006 and soon started to demonstrate its flair. The company which had revenue of 162 cr in FY 10 has raised to humungous revenue of Rs 2500 Cr Company in FY15, registering a 14-fold growth. The company also sets a herculean target to become Rs 10,000 Cr Company by the end of FY17.
Image: company site
A critical analysis on the company brings out few competencies which are transforming this unbelievable target into reality.
1. Customer Centricity
Right from its inception, Patanjali Ayurveda has focused on one key aspect, to understand the need for healthy and ayurvedic products and offer them to the customers. The company which draws its inspiration from the Yoga guru Baba Ramdev and its CEO Acharya Balakrishna has strived to amalgamate ancient Ayurveda with modern science and technology which resulted in remarkable products. The company’s key standing is to provide best products at the affordable range and accordingly positions its products at 20-30% cheaper than the regular FMCG companies.
2. Distribution Network
Right from the beginning Patanjali is known to break the conventional paths. The company has established a robust distribution network which works in a three level processes.
The company also entered into tie up with the biggest retailer, Future group in 2015 in order to increase its presence and take natural products more closely to the consumers. This strategic tie up will give access to 35 crore Future group customers along with presence in 240 cities across India.
• The tie up is expected to bring Rs 40 crore per month business in the initial period which is expected to scale up to 80 crore per month after 12 months
• As per the Dunnhumby, a UK based research company, Patanjali has bagged a share of 7-12% in the categories of detergents, toothpastes, shampoos and soaps at Big Bazar stores
• Products of Patanjali were purchased by 21% of Future customers in January 2016 as compared to 2% in October 2015
• Patanjali & Future group are also planning to strengthen their alliance by entering into a manufacturing partnership in future
• Direct selling to Future group is expected to reduce the operating expenses which would further bring down the price of products
• Franchise partnerships with Reliance retail, Hypercity and Star Bazaar
• Increase in the Swadeshi Kendra outlets to 4000 in 2015
3. Product Quality
At a time when all the FMCG brands were facing quality complaints and ban on their products, Patanjali is the only product which stood the test and sustained to its commitment of making quality as its benchmark. Though there were a few allegations against the substandard quality products, the company proved against them. To strengthen their commitment, they have displayed the quality certificates of various products on the website and also encourage the customer to verify the same with their unique product ID
4. Growing Preference of Ayurvedic Products
The core of Patanjali is the ever growing strong customer preference towards Ayurvedic products. This is evident from the robust growth figures reported by Patanjali and other Indian FMCG companies operating in the herbal market space. While sales of Patanjali have jumped 64% in FY16, Dabur and Himalaya also reported a double digit growth which was otherwise confined to 6-7% growth according to IMRB data. The growth in market share of Patanjali in Big Bazar stores emphasizes the same.
Few quick facts which reinforce the data are as follows
50% from 36%
16% from 21%
6% from 21%
• Share of ayurvedic brands in face washes increased to 50% from 36% earlier while the non- Ayurvedic companies have reported a drop from 21% to 16%
• Sales in shampoo segment have more than doubled to 194%while a decline of 6% from 21%was reported by non-Ayurvedic products
• Categories like Chyawanprash, alma and aloe Vera juices saw a growth of 52%
• Emami is planning to launch natural healthcare products and are already in the phase of test marketing a few products
• Himalaya brand is chalking out plans to enter into men grooming segment, which as per the study is Rs 5000 crore market
• Top FMCGs companies like Hindustan Unilever Limited facing recent drop in profits vs expectations. They reported slowest growth figures in the recent times
• While Colgate sales grew at slowest pace in the last 44 quarters, Ian Cook, global CEO of Colgate-Palmolive first time acknowledged that the competition in the herbal product range and also announced their plans to foray into the herbal space.
5. Future Plans
• Aggressive expansion plans to tap further revenues across geographies
• To set up 6 manufacturing facilities in addition to current Food & Herbal park at Haridwar
• Company has plans to venture into new portfolios and thereby expand its product offerings to the customers. Currently Patanjali manufactures 444 products which include 44 types of health products and 30 types of food products.
A few of its recent product launches are as follows.
o Baby care products under brand name Shishu Care
o Beauty care products under brand name Saundarya
o Health supplement products under brand name Power Vita
o Dairy Products
• Strategizing moves as per the changing requirements & recent trends
o Allotted Rs 300Cr for Brand marketing & advertising campaigns in the coming FY 2016-17
o Expansion of product portfolio- entry into face packs, conditioners etc.,
o Maintained itself as the most viewed brand during Nov-Jan 16
While a lot of speculation happens over the success of Patanjali Ayurveda and its tough fight against the established multi-national and cash rich FMCG brands, the company is currently riding on high tide banking on the strong loyalty shown by its customers. However, it is granted that the FMCG market is about to witness a lot of changes and disruptive methods in the coming years. The rivalry between the MNC’s who strive to maintain their market share and Patanjali which, with its innovative and effective products, aims to capture a major market share will be one of the strong rivalry fights to look for and follow.
This article has been authored by Karteek Kala from IIM Raipur