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BW Businessworld

Meteoric Rise Of Yoga Guru Ramdev's Business Under Modi Rule

The Bharatiya Janata Party government could help Patanjali products make inroads into large institutional markets like the armed forces and public sector canteens

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The inimitable yoga guru Baba Ramdev, clad in his orange loin cloth, is fired up with energy, eagerly awaiting the next opportunity to add something to his business empire Patanjali, one of the fastest growing FMCG companies in the country today.

Step into a Patanjali store and you’ll be amazed at the varied customers queuing up to buy natural ayurvedic products. And they are natural, for a visit to the swami’s farm and campuses will show workers busy creating the many products that have become a household name in India. Patanjali is the new home-bred icon.

The Patanjali empire is a mere eight years old. But it’s had a meteoric rise. Not content with being a producer of niche products, the CEO is full of zeal and ready to take global behemoths head on.

Perpetual Headache
Baba Ramdev’s Patanjali Ayurved is breathing down the necks of multinationals, eating into their markets. The fear is that a friendly regime at the centre could benefit the Baba’s empire even disregarding any intellectual property rights. The Bharatiya Janata Party government could help Patanjali make major inroads into large institutional markets like the armed forces' and public sector canteen, among others.

Ramdev, a big supporter of Narendra Modi, has launched many high-profile business campaigns since the friendly BJP government came to power at the Centre

Taking a dig at MNCs like Nestle, Coca Cola, and others, Ramdev says (translated from Hindi), “These multinationals have never done any charity work in the country. They are here just to earn profits. The aim of Patanjali is not to earn money but help fuel the Yoga and education revolutions.” He adds that he wants to create a situation in which multinationals are unable to sell anything in India. “We want to give them a perpetual headache,” says the incorrigible guru.

Patanjali thrives on three major factors – its functionally solid products, its wide distribution network and the price competitiveness of its products. “Patanjali is an interesting hybrid model of a multinational strategy plus network marketing,” says Professor Abraham Koshi of IIM Ahmedabad.

Patanjali shunned the conventional distribution network followed by MNCs, preferring to rely on its own channels of super distributors, or ‘chikitsalayas,’ franchise dispensaries and ‘arogya kendras’ or health centres, which sell Ayurvedic remedies.

Strong On Strategy
Turning to retail outlets in 2011, Patanjali began to rake in profits. In October this year, Patanjali tied up with the Future Group to sell its products at Big Bazaar and other Future Group stores in 245 cities and towns across the country. "Patanjali has the potential to be amongst the top three players in the FMCG space," says Kishore Biyani, Founder and CEO, Future Group. He expects to begin with Rs 80 crore worth of supplies per month from Patanjali.

The low price strategy is another contributing factor in Patanjali's success. "Our profit margins are small because unlike multinationals like Coca Cola or Nestle, our main aim is not to make profit but to benefit others," says Ramdev. He also said that the profits that the company will make out of its recently launched Atta noodle will go towards the education of under-privileged children. “We have created Patanjali by an amalgamation of divinity and dignity, modernity and spirituality, ancient wisdom and modern science. It’s ready to compete with the multinationals through service to the nation,” says Ramdev

But it is more practical aspects like logistics that have helped Patanjali scale up. Quick transportation of the produce from collection centres to the main processing centres, reduction of wastage of perishables, paying direct remunerations to farmers, low cost of processing of farm produce, and high volumes, have worked for the company.

“Their pricing and production strategy is in place that is until now working towards the company’s profit but it remains to be seen how long can they maintain it,” says Vivek Veda, Research Analyst, Emerging Markets Consumer, Société Générale.

Prime Time
Advertising experts say Ramdev embodies what Patanjali is all about. "Quasi-religious brands like Sri Sri Ravi Shankar and Osho have their own following but Ramdev has become a health ambassador for the masses,” says Prathap Suthan, Managing Partner and COO of Ad Agency Bang In The Middle.

A Cult Personality
Patanjali’s ad campaigns are running at prime time. Baba Ramdev believes the ads are unique in that they don’t lie or sell a dream while Patanjali ads are about the truth, service to others and encourage people to buy Indian, keeping revenue within the country.

Personality-led brands are not uncommon in advertising. But there is a catch. A brand being dependent on just one personality is putting itself at risk. “Ramdev is a yoga guru, a cult personality, so he has an immense credibility factor,” says Professor Koshi. “He is the protagonist of his products he endorses, this is called Shadow Branding. However, shadow branding may not augur well in the long run, because it requires constant proof of performance, and Patanjali has to be consistent with its quality and reassurance,”

Ramdev is also among the busiest FMCG brand ambassadors. He evangelizes Patanjali products constantly, including during his yoga sessions “This is a clever strategy,” says Piyush Gupta, President, Kestone, a marketing consultancy. “Ramdev first educates people about his products, gives free samples, gets customer feedback and then launches in the market. Multinationals first introduce the product in the market and then educate consumers, so the chances of success for the former is more than the latter.”

In Good Health
Ramdev pegs his range of Patanjali products on health and purity. This helped in the face of Nestle’s fiasco with Maggi Noodles which was barred from the market because of alleged excessive lead and MSG in the product. Patanjali launched its Atta noodle that as ‘healthier’ and cheaper than its competitors. “The credibility of ‘health’ is greater with Ramdev today than with any multinational or an Indian company, and noodles is not even a prescriptive product,” says Harish Bijoor, marketing guru and CEO of Harish Bijoor Consults Inc.

In its FMCG sector alone, Patanjali has 398 products if you include all the variants, says Acharya Balkrishna, 43-year-old confidante of Baba Ramdev and architect of the Rs 2,007 crore Patanjali FMCG business. The company is entering every category, from premium beauty or Soundarya’ products to baby care products and Yoga wear. The aim is to touch the Rs 5,000 crore mark in 2015-16 fiscal, almost a 250 per cent jump that seems unrealistic. Ramdev is brazenly confident about getting there. Patanjali Ayurved has achieved revenues of Rs. 2,007 in 2014-15, according to P/L account filed in the Registrar of Companies (RoC) which puts it on par with some of the top players in the fast FMCG sector such as Procter & Gamble with Rs. 2,409 crore, Jyothi Laboratories with Rs.1,504 crore and Emami with Rs. 2,220 crore in the same year. This was almost double the revenue of Rs. 1,195 crore in 2013-14. Near 100 per cent growth was also witnessed two years earlier - revenue rising from Rs. 454 crore in 2011-12 to Rs. 849 crore in 2012-13 as per ROC figures. It is growing at 65 per cent CAGR.

Smart Baba
MNCs are now wary of the competition with the ‘Smart Baba’, as they call him in their annual general meetings according to an analyst who attends these. Companies like HUL, P&G, ITC, and Dabur India are gearing up to counter Patanjali. While HUL and P&G are giants with revenues worth Rs. 30,170 crore and Rs. 10,347.7 crore respectively, Ayush, an ayurvedic personal care range, re-ignited by HUL hopes to grab some revenues in a market that Patanjali is on the verge of occupying. P&G launched Colgate’s herbal variant Colgate Charcoal, to counter Patanjali’s toothpaste. Dabur recently launched a beverage named Yoodley to cater to the growing traditional beverage market created by indigenous company Hector Beverages.

Challenges Mount
Despite the tide being in Patanjali’s favour, there are challenges ahead, including some that put the company’s reputation at stake. Despite claims that the new Atta Noodles were healthy, the company was slapped by FSSAI with a legal notice for not procuring permission before launching the product. Ramdev denied flouting any FSSAI norms and maintains that permission has been granted. “We do not anything that’s against the law and nor will we ever,” says Ramdev, who is yet to respond to the FSSAI notice.

The Indian Medical Association (IMA) has charged the yoga guru for violating the law and has asked the government to put him behind bars. Ramdev is under the scanner and drew criticism from the IMA demanding a ban on his products for claiming that he can cure cancer and AIDS and has developed a medicine that will guarantee the birth of a son. Dr KK Agarwal, Secretary General of IMA says, “Under the Drugs and Magical Remedies Act 1954, one cannot claim or advertise to cure fatal diseases like cancer and AIDS. Ramdev has clearly violated the law, he can practice treating these diseases but he cannot claim to have cured them.”

Ramdev seemed unperturbed with these allegations. “I have proof that I have cured cancer— let them say whatever they want,” says Ramdev with a chuckle. The Uttarakhand Government has registered 81 cases against the Patanjali Yog Peeth and its sister concerns in Haridwar for violation of the Zamindari Abolition and Land Reforms Act and the Indian Stamps Act.

Patanjali might be growing exponentially but the cases filed against Ramdev and his kin has caused a dent in reputation. Industry analysts maintain this will not impact sales for the company or affect its brand image because there is no action taken against him by authorities yet. “Everybody understands the politics but until a man is given a judgement, he is free of crime. Tomorrow if he is convicted and punished, people will rethink,” says Bijoor.