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The Patanjali Juggernaut Rolls On
In just a few years, Baba Ramdev has blown to smithereens the complacency of global giants. How far can he go?
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It grew 150 per cent in 2015-16 and crossed Rs 5,000 crore in revenues. This year, Baba Ramdev seems confident of revenue crossing Rs 10,000 crore. It has taken ITC two decades to reach that milestone; P&G has taken all of 25 years. No wonder, managers at global FMCG giants are worried about the “smart baba” as they describe him in private!
Delhi-headquartered Patanjali Ayurved has four business divisions: home care, cosmetics and health, food and beverages and health drinks. The company is venturing into khadi products and animal feed this year, Ramdev tells BW Businessworld in an exclusive interview. Patanjali Ayurved, founded in 2007, has grown its revenues more than ten-fold in five years, an unprecedented feat in India’s fast-moving consumer goods industry.
“This is just the beginning. Nestle, Hindustan Unilever and Colgate-Palmolive will be left clueless eventually,” says Ramdev. The company’s Dant Kanti toothpaste posted sales of Rs 450 crore in 2015-16 while Kesh Kanti shampoo and hair oil notched up Rs 350 crore in sales in less than a year. Patanjali Ayurved plans to increase its distribution network in 2016-17.
The company has 4,000 distributors, 10,000 stores and 100 mega-marts. Last year, Patanjali tied up with retail chains Future Group and Reliance Retail. To meet increasing demand, Patanjali will set up at least four new manufacturing units in the current year at a cost of Rs 1,000 crore. “We will set up six processing units in various parts of the country. Apart from this, we will invest Rs 150 crore in research and development,” says Ramdev. The company is set to export its products to at least 10 countries.
Patanjali 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-led government could help Patanjali make major inroads into large institutional markets like the armed forces and public sector canteens, among others.
Taking a dig at MNCs like Nestle, Coca Cola, and others, Ramdev says, “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 yoga guru.
Patanjali thrives on three factors — its functionally solid products, a wide distribution network and the price competitiveness of its products. “Patanjali is an interesting hybrid model of a multinational strategy plus network marketing,” says Abraham Koshi, a professor at IIM Ahmedabad. Patanjali shunned the conventional distribution network of 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.
In October 2015, Patanjali tied up with 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 start 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. According to him, profits from the company’s 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.
In truth, 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.
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, Bang In The Middle, an advertising agency.
Personality-led brands are not uncommon in advertising. But there is a catch. A brand 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 Koshi. “He is the protagonist of the 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 evangelises Patanjali products constantly, even 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 them in the market. MNCs first introduce the products in the market and then educate consumers. Chances of success for the former is more than the latter.”
After losing share to Patanjali’s Dant Kanti, the American oral care giant Colgate seems to have found its feet. It has been pushing aggressively in the market its Colgate Neem Active Salt, which contains traditional Indian teeth cleansers neem and salt, to take on Dant Kanti. The results have been encouraging. The toothpaste, which Colgate launched a year ago, now has a market share of 1.1 per cent. Of course, it is way behind Dant Kanti’s share of nearly 7 per cent of the Rs 7,000-crore toothpaste market.
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 banned due to alleged high content of lead and MSG. Patanjali launched its atta noodle as ‘healthier’ and cheaper than its competitors. “The credibility of ‘health’ is greater with Ramdev today than with any multinational or Indian company, and noodles is not even a prescriptive product,” says Harish Bijoor, marketing guru and CEO of Harish Bijoor Consults.
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 meetings. 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.
Such dizzy success comes with its share of controversies. Recently, advertising watchdog ASCI again pulled up the company for running “misleading” ad campaigns disparaging competitors’ products. The Consumer Complaints Council (CCC) found Patanjali’s claim about rival makers selling mustard oil “adulterated with oil made by solvent extraction process with neurotoxin hexane” to be “grossly misleading”.
But Ramdev is unfazed and the Patanjali juggernaut continues to roll on.