Yoga guru turned marketing wizard Baba Ramdev has managed to build his brand equity single-handedly, setting up a Rs 2,000 crore empire of FMCG goods, shaking up the market and making the MNC biggies as well as Indian companies sit up and take notice.
Baba Ramdev kissed his first controversy when he compared carbonated drinks to toilet cleaners at one of his yoga sessions. That was perhaps his first war cry against the MNCs, which ultimately took shape in the form of his ‘swadeshi’ brand Patanjali.
“Within a short time-frame of eight years since inception, Patanjali Ayurved Limited (PAL) has created a splash in the Indian consumer market as it has reportedly crossed Rs 2,000 crore in annual revenues in FY15, making it bigger than the likes of Jyothy Labs and Emami,” says a CLSA report.
Surge in sales
From ghee, oil, biscuits, honey, chyawanprash, juices, instant noodles and shampoo, staples to nutrition, cosmetics and personal care products, PAL sells all, packaged with a promise of good health.
Aditya Pittie, CEO of the Pittie Group, exclusive distributors of Patanjali products across India, explains that phenomenon well: “A lot of people thought price disruption created the demand for Patanjali. But, will the consumer continue to buy products that are cheap if they are not of good quality? Patanjali managed to find a gap in the sea of MNCs, fulfilled the need for an Indian brand of high quality and good pricing, propelled by Baba Ramdev’s mission of good health.”
PAL caught people’s attention at the time of the Nestle controversy, hard-selling the idea of its Patanjali noodles, a healthier alternative to Maggi, after the latter was temporarily banned. When ‘Patanjali Atta noodles’ finally hit the market, its tagline ‘Jhatpat banao, befikar khao’ printed in bold on the packets, and a lower price point than Maggi, was not lost on the consumer.
But days after the launch of Patanjali noodles, it was shrouded in controversy. In November 2015, the Food Safety and Standards Authority of India (FSSAI) issued a notice to PAL for allegedly violating provisions of the Food Safety and Standards Act, and manufacturing, re-labelling and marketing the product without valid approval.
In fact, marketers feel controversies may have worked to PAL’s advantage. Says Sandip Tarkas, President, Customer Strategy, Future Group, “Patanjali is at such a stage right now that controversies may actually be helping it grow. It is creating more awareness for the brand. On the other hand, when a brand becomes mature, these controversies do a lot of harm, as we saw in the case of Pepsi, Coke, Cadbury’s, Maggi, etc.”
The price war
Though PAL products have entered the market at a lower price point and have mass appeal, some of its competitors are unfazed. Varun Berry, MD, Britannia Industries, is confident that Patanjali’s entry is not affecting the company’s business in the biscuits category: “Patanjali is a good company. We are tracking them and we will certainly watch out for their next steps. However, they haven’t made as much inroads into the biscuit market as they have in some of their traditional products.”
Be it the branded market or the unbranded one, PAL is clearly creating dents in the FMCG space. According to India Infoline Finance Limited (IIFL), the company may grow to Rs 20,000 crore in annual sales by 2020. The bulk of it would come at the expense of current market leaders, with Colgate slated to be the biggest loser if the brokerage firm’s prediction comes true.
FMCG majors are already well into counter-Patanjali strategizing, interestingly bowing down to Ayurveda, and launching more and more herbal products. A recent report by IMRB states that PAL has not just registered an impressive growth (of around 64% in sales to Rs 731 crore in the six months ended December 31, 2015) but managed to boost the sales of other Indian herbal product companies as well.
According to IIFL, at least 13 listed companies will be hit by PAL. But is this making the top FMCG giants nervous? Brushing away that thought, VL Rajesh, CEO, ITC Foods says, “No. This is a huge market. While the media story is about the threat perception, the real story is that most of the food in this country is unorganized and unbranded. The organized industry is just 12- 15% of it, which is just the tip of the iceberg. It is a huge space, so the more the merrier.”
At present, PAL products are sold at kirana stores, medical stores, and standalone Patanjali stores and sit on the shelves of major supermarkets such as Big Bazaar, Reliance Retail, Spencer's Retail, HyperCITY and SRS Retail. Very recently, the company also started selling its products online through Amazon and app-based delivery services Grofers and Pluss, besides its own online store.
Manoj Jain, Vice President of Marketing, Loyalty & Visual Merchandising, HyperCITY Retail India Limited, which was amongst the first few retail chains to dedicate standalone shelves to Patanjali products, says, “Patanjali has somehow cannibalized on other international brands’ share in certain segments like dental care. Because of Dant Kanti, Colgate is suffering; Dabur honey and Zandu honey are getting affected by Patanjali honey. In a slow FMCG category, Patanjali is growing at a double-digit rate.”
Currently, PAL operates through 15,000 franchise stores, a network of 3,000 health centres, 5,000 retail outlets and 700 distributors in addition to several independent grocery stores. Outside India, Patanjali products are to be found on the shelves of supermarkets in Indian-dominated pockets such as Southall near London.
Growing the category
Patanjali has brought new consumers into the branded products category and created a bigger market for Ayurvedic goods. According to IMRB data, the Ayurvedic products segment grew 23% to Rs 3700 crore in 2015, faster than the overall FMCG market that grew by 6%. A large part of the credit for this clearly goes to Baba Ramdev.
N Chandramouli, CEO of TRA that recently released the Brand Trust Report, in which Patanjali emerged as one of the biggest gainers, says, “Patanjali was built on a very personal scale by Baba Ramdev. It reminds me of another Indian brand Nirma, which took on the big MNCs during its launch a couple of decades ago. If door to door sales of products worked for Nirma, yoga sessions worked for Patanjali. Once the brand manages to enter your consciousness, the acceptability for a range of its products becomes high.”
Meanwhile, HUL, the only brand that Baba Ramdev considers a tough competitor, has not let down its guard. Samir Singh, Global Executive Vice President, Skin Cleansing, Unilever says, “Whenever there is new competition either from an MNC or from within India, we look at them with a lot of respect. But at the same time, we are very confident of our brands and the portfolio.”
In fact, the success of Patanjali has even prompted other spiritual leaders to look at marketing their products. Be it Sadhguru Jaggi Vasudev’s Isha Arogya, Sri Sri Ravi Shankar’s Sri Sri Ayurveda, Baba Ram Rahim Singh’s MSG brand - each one is now vying for a pie in the country’s revamped FMCG market, thanks to the success of Baba Ramdev’s Patanjali experiment.