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Patanjali Ayurved's bitter pill for MNC's

Patanjali Ayurved's bitter pill for MNC's

Author | Madhuwanti Saha | Tuesday, Feb 09,2016 8:38 AM

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Patanjali Ayurved's bitter pill for MNC's

Patanjali Ayurved Ltd seems to be competing with major players like Cadbury, Parle and Pond’s in the recently released BARC TVC ratings as its products played more than 17,000 times between January 23 and January 29, 2016, making it the biggest FMCG advertiser for that week.

Stirring up the FMCG sector

It is even competing with companies that focus on natural products like Emami (which brings out ayurveda products under Zandu) and Dabur, with its wide array of products from spices, toothpaste, shampoo, tea, corn flakes, instant noodles and beauty products. 

Patanjali Ayurved Ltd’s revenue has grown from Rs 450 crore in 2011-12 to over Rs 2,000 crore by the end of 2014-15, as per a report by research firm CLSA, which also said that it could be the fastest growing consumer goods firm in India. On the other hand, skin and healthcare company Emami clocked net revenues of Rs 2,217 crore in the fiscal year 2015, placing the two companies in the same league.

As a result MNCs are keeping a keen eye on the Ayurveda segment and are reshaping their strategy to make their foray into this sector. For instance, FMCG giant Hindustan Unilever (HUL) revived its old Ayurveda brand Ayush, and acquired new ones like Kerala-based hair oil brand Indulekha last December for Rs 330 crore, as part of this strategy. Dabur is in the process of modernizing its Ayurveda portfolio and introducing new products at the same time.

Success formula

According to HSBC analysts, who visited the company's headquarter in Haridwar, Patanjali owes its success to two categories of products -- one, in which it is a "disruptor" because of quality and cost advantage, and second, in ayurveda-focused products, where it has "specialist" know-how.

Patanjali has managed to keep costs low because it directly sources from farmers without any middlemen in the picture and pays modest salaries to its employees. To give a rough idea, all the products are 10-40% cheaper than most MNC brands in the market.

According to leading domestic brokerage firm IIFL, its aggressive pricing and growing awareness on the benefits of natural and ayurvedic products will help Patanjali achieve sales of Rs 20,000 crore by FY20. It also mentioned that multinationals might lose 3-8% of their sales to Patanjali.

Expanding its territory

The company has been robust in its expansion plans. Last November, Patanjali Ayurved announced that it will invest Rs 1,000 crore this year on expansion, e-commerce and exports. In October, 2015, Patanjali partnered with the Future Group’s Big Bazaar outlets and other retail players like KB’s Aadhaar and Nilgiris retail outlets, spreading across 245 cities and towns. Last month it was in talks with the world’s largest retailer-- Walmart India, to sell its products across 20 wholesale cash-and-carry stores in nine states.

Patanjali has already started exporting its products to Canada, the USA, Mauritius and UK, among other countries.

Upping its marketing game

When it comes to marketing, it needs to be mentioned that Baba Ramdev reportedly doesn’t own any stake in the company. But the brand rides on his popularity, gaining visibility as it is marketed in the numerous yoga camps that he holds across the country. Its managing director Acharya Balkrishnan owns 93 per cent stake in the company (the remaining stake is owned by Sarwan and Sunita Poddar, an NRI couple) and has even reportedly admitted that they never had a business plan for Patanjali Ayurveda.

 Till mid-2015, Patanjali spent minimally on its marketing and advertising, relying largely on the word-of-mouth method via its yoga classes (1 lakh free yoga classes every day across the country) and camps. 

Founded in 2006, Baba Ramdev, in his talks, has focused more on the evils of MNCs, the virtues of products made in India, the exploitation of farmers, the cancerous effects of fertilisers and chemicals and just about everything that surrounded his products. Almost till 2012 there was no direct marketing of its products, thus leaving the consumers intrigued to explore the products on their own. The ayurvedic products were launched in the open market on March 1, 2012.

Around 2013, it started appearing on election-based programmes, such as ‘Raj Tilakon’ on Aaj Tak as new sponsor tag. This was part of Patanjali’s new communication strategy, which Baba Ramdev claimed to be an information campaign, adding that Rs 1 crore would be spent on this every month. The campaign ran on five Hindi news channel including Zee News, India TV and ABP News apart from religious channels-- Aastha and Sanskar.

Last year Patanjali Ayurved roped in DDB Mudra and McCann Erickson to help connect with the masses. Acclaimed Indian Olympic freestyle wrestler Sushil Kumar promoted Patanjali Ghee in a TVC conceptualized by DDB Mudra – North. Even for its noodle ad, it took this ad agency’s help to roll out a TVC, when around the same time Maggi cleared its test.  Later it was announced the company will be investing over Rs 300 crore on ad spends whose results can be seen in the recent BARC ratings.

From a nonexistent advertising budget to the biggest FMCG advertiser, Patanjali Ayurved’s steady growth has managed to make multi-national giants take notice and be wary of its presence at the same time.
 

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