Patanjali- The Dark Horse Or A Water Bubble?
Facts about Patanjali
- Patanjali Ayurveda was founded by Baba Ramdev and Acharya BalKrishna in the year 2006
- Acharya BalKrishna owns 94% of Patanjali Ayurveda
- Patanjali is the fastest growing FMCG company in India
- Patanjali has grown more than 10 times in revenue in last five years, an unprecedented feat in India’s FMCG industry
- In 2015, Patanjali’s sales grew by 150 per cent to Rs 5000-crore and now the company is targeting Rs 10,000-crore revenue in 2016-17
- Patanjali has 4000 distributors , 10,000 stores and 100 mega-marts . They also tied up with retail chains like Future Group and Reliance Retail
- The company is in talks to raise around Rs 1000-crore in project loans so as to set up 4 new manufacturing plants
How is Patanjali different from P&G and HUL?
Patanjali follows a Branded House strategy whereas P&G and HUL follows House of Brands strategy and that is the biggest difference why Patanjali is able to capture a huge market share in such a short span whereas it took decades for P&G or HUL to reach to this point.
Now what are these strategies, let’s have a closer look-
The Branded House- In this strategy, the company is the brand. All the products produced will be promoted under one brand. For example : Apple.!! Apple has various products like Mac, iPod, iPhone etc. Though all of them are different and perform different functionalities but they all are branded as “Apple products”. Users go crazy for their products because they want to own the company’s brand. Similarly, Patanjali is following the branded house strategy and are launching various products under one brand i.e “Patanjali Ayurveda” . Even if you look at their advertisements, they don’t promote individual products (say a toothpaste) instead promote the entire brand which helps them save marketing and advertising costs as well.
The House of Brands- In this strategy, the focus is on development of sub brands rather than one parent brand. This is primarily done to remove the dependency of the company primarily on one brand. So in case if one brand doesn’t do well, the company can still earn revenues from other brands and the failure won’t hurt the company badly. For example- P&G.!! Under P&G there are dozens of brands, including Pampers, Duracell, Gillette, and Tide just to name a few. However, P&G gets very little prominence of itself, and adds no real credibility to any of its products. You will never see P&G promoting its company in an advertisement. It rather focuses on the individual products.
Patanjali’s – Key to success !!
Increasing number of Health Conscious people
In recent times people have become more health conscious which is evident from the fact that many companies are investing money in Organic and Ayurvedic products. According to Nielsen, the health and wellness segment is worth a sizable Rs 33,000 crore, growing 6% over the last year. Patanjali, with its Ayurvedic product line is able to capitalize on this changing consumer behavior and hence capture more market share.
Patanjali products are available at an attractive discount as compared to its competition. The company sources products directly from farmers and cuts on middlemen to boost profits. Hence they are able to reduce their raw material procurement cost and are able to produce goods at a much cheaper price. Currently Patanjali is making 20% operating profit which is higher than the industry average.
Strong Distribution Channel
Patanjali products are sold through three types of medical centres. These include Patanjali Chikitsalaya which are clinics along with doctors, Patanjali Arogya Kendra which are health and wellness centres and Swadeshi Kendra, non-medicine outlets. The group has 15,000 exclusive outlets across India. They also distribute through general retail stores. Patanjali has also tied up with retail chains like Future Group and Reliance Retail. They plan to grow to 1,00,000 outlets in next few years.
Strong Brand association with health because of Baba Ramdev
Patanjali is able to create a brand perception of health and wellness among the Indian masses, primarily because of Baba Ramdev’s association with the brand who is considered to be the veteran of YOGA. Hence more people are getting attracted to Patanjali’s products and are re buying the products more frequently.
Simple packaging gives it a natural look
If you notice Patanjali sells its products with a very simple packaging. Now many would feel that it is not a right strategy but the truth is it is working for Patanjali. With a product like Patanjali, where the message is to promote Ayurveda and Health, simple packaging can be a very effective way of promotion and that is why the company is able to do miracles with its simple yet effective packaging. With a natural look (especially with leaves and herbs), Consumers get a perception of health and wellness and they are attracted to buy the product.
Promotion through Media
Baba Ramdev is considered to be the veteran guru of YOGA across the globe. He has been very corporative with press and media and maintained good relationships with them. Also he is known to have good connections with many politicians. So he used both the facts to publicize his company free of cost. Take for instance when Baba Ramdev approached Lalu Prasad Yadav and gave him a head massage with the Patanjali oil and it was covered by media. Or the Maggi scandal when Baba Ramdev came forward and gave a statement that he will launch a safer and good quality noodles.
Word of mouth Promotion
Consumer companies typically spend 12-20% of revenue on advertising and promotions. When a new company gets into the business, this spending is significantly higher. During the introduction stage, Patanjali followed a unique word of mouth publicity model and the entire revenue was without any advertising. It was because of brand loyalty of its customers that the word of mouth promotion proved so successful for the company.
Strengthen the Distribution Channel
The key to the success in FMCG industry is the distribution channel. Patanjali should ensure its products are available everywhere and at anytime. Like Future Group, it should tie up with other key retail chains/stores and make its presence felt. If the company is able to widen its distribution channel, there is no way it can’t be on the top of the FMCG list.
Avoid falling into Icarus Paradox
For those who don’t know Icarus Paradox- “It refers to the phenomenon of businesses failing abruptly after a period of apparent success, where this failure is brought about by the very elements that led to their initial success”. Patanjali should ensure to innovate its products with time. It shouldn’t just stick to the traditional way of marketing and promotional strategies. It should be aware of the fact that with time changes the consumer behavior and the company should also evolve with its customers to fulfill their needs and demands.
Focus on Quality
Quality is of prime importance when it comes to FMCG products. In an interview, Baba Ramdev promised that they maintain the utmost level of quality in their manufacturing plants. So in order to succeed, Patanjali should ensure to maintain (if not improve) the same level of quality in future as well. Patanjali products are well known for its quality and there shouldn’t be a tradeoff between sales and quality whatsoever may be the reason.
Patanjali has given headache to many marketers with its unconventional ways of marketing. It has disrupted the whole FMCG sector and bought a revolution in the industry in a very short span of time.
A point to note is that many people are buying Patanjali products due to the hedonic value attached to the products. Hence Patanjali (unlike its competitors) is attracting brand loyal customers and not price sensitive customers.
Will Patanjali continue to grow at the same pace and prove to be a dark horse in the race? Or will it prove to be a water bubble, with this being a temporary success phase for Patanjali and strong players would eventually come up with strategies to recapture the lost market share? Only time will tell.