Can Patanjali Overtake other FMCG Companies?

Patanjali Overtake Other Brands

Patanjali Overtake Other Brands

Patanjali Ayurved Limited

Baba Ramdev and his flagship Ayurvedic brand, Patanjali Ayurveda Ltd (PAL) have been a huge success in Indian markets over the past two years. The Haridwar based PAL has a range of over 500 products including Ayurvedic and herbal products, grocery items, cosmetics, and medicinal products. Ghee itself contributes to 30 percent of the sales. The company has some 5000 franchise stores. Back in 2014, however, PAL had only about 200 outlets. The massive expansion of sales outlets is testimony to the phenomenal growth and performance of the company.

Patanjali- DRDO Tieup

Last year, in August 2015, Patanjali once again made news by entering into a tie up with India’s premier defence research organization, DRDO. The agreement was a Transfer of Technology (ToT) understanding for the manufacture and marketing of various products developed by the DRDO. The Defence Institute of High Altitude Research (DIHAR) has developed a number of herbal products, especially for the use of military personnel in high altitudes and frontier regions. These products such as high energy juices and mosquito repellents and even sea buckthorn dietary supplements and herbal tea could benefit the civilian masses, the DRDO believes. It seems pretty obvious from the fact that with the Minister of Defence Manohar Parrikar himself signing the deal for DRDO, Patanjali’s outreach has at least won the confidence of the government of India.

Parikkar said that Patanjali’s involvement would bring about INR 50 crore revenue to the people of Leh. Leh berries, the sea buckthorn are believed to be great sources of essential nutrients. The news was taken up in a light vein by people from across the country and became the source of many memes on social media sites. But what is certain is that this deal also made most of India take notice of Patanjali and its products. People, who had ignored Patanjali’s products till the time, were venturing out to tentatively try its products. And this includes the younger generation consumers who are unlikely to be big fans of traditional yoga or Ayurveda.

Patanjali Set To Overtake FMCG Majors

In what may be considered the biggest surprise of the decade at least for the domestic FMCG market, Patanjali Ayurved Ltd. seems to be set to give FMCG titans a run for their money. PAL may soon overtake FMCG majors such as Marico, Dabur, and Emami, latest reports reveal.

In FY 2015 alone, the company seems to have clocked a profit of about INR 308.79 crore, almost double its estimated profits for FY 2014 (INR 154.70 crore). The accurate data for FY 2016 is not yet available but in the first 10 months of FY 2016, PAL recorded a 106 percent increase in profit to INR 1,587 crore (in comparison with the same period of the previous financial year). This means PAL has an estimated sale of about INR 3,267 crore in the first 9 months of FY 2016. Dabur, India’s leading Ayurveda company, in comparison recorded a sales of INR 4233 crore during the same period. Marico, on the other hand, posted an estimated revenue of INR 3,903 crore and Godrej recorded sales worth INR 3,585 crore.

PAL’s products have two USPs – great quality and low pricing. Most of the products manufactured and marketed by Patanjali are almost 15 to 20 percent less than its rivals. It is not a great surprise that Patanjali products are flying off the shelves.

Such phenomenal success and profitability comes with its own riders. Sustaining such growth will require an increase in research and development capabilities, a sustained effort towards engaging the masses, and great quality control processes. PAL will now be facing a tougher challenge than capturing the huge market base and loyalty that it has acquired – maintaining it.

Converting Patanjali Skeptics

Ayurveda subscribers and Yoga enthusiasts of the country have traditionally been the older generation. Over the past couple of decades the domestic market for herbal and Ayurvedic products has been a very small if not negligible one. Most of the herbal products and Ayurvedic concoctions and mixes produced back home find a large number of takers in foreign countries, though.

Baba Ramdev first became popular as the New Age Guru who taught people impossible yoga postures and made tall claims on Indian television. Soon Patanjali came to be known as Baba Ramdev’s brand. Old retired couples could often be seen looking for Patanjali juices such as Neem and Amla, possibly to beat health issues developed over a lifetime of ignoring Ayurveda and Yoga. Going from there to developing a complete line of FMCG products, PAL’s success has been fueled by great quality products sold at lower prices.

Most of the people using Patanjali products as a staple today started off by tentatively reaching for one small item due to a word-of-mouth recommendation. PAL’s ghee (clarified butter), honey, and wheat flour (atta) seem to be the doorway to most of its other products. These are highly consumed products in any average Indian household. And PAL definitely knows how to rope the customers in. Wowed by the quality and the freshness of these items, the average buyer reaches out for biscuits, toothpaste, shampoo, soaps, cereals (yes, chocos), noodles, pickles, dals, and cooking oil. And before you know the household is stocked up with all PAL products. The government of India’s emphasis on yoga has also made a favorable impression on the health fetish of the younger generation who are no longer shy to ask for Ayurvedic products.

What remains to be seen is if PAL will continue to maintain high standards despite an expanding market and if FMCG ad wars will force PAL to use traditional marketing tools thus pushing up the costs.