In which product categories will Patanjali Ayurved have a natural advantage? Which existing companies in these segments will Patanjali threaten?
Without investing in traditional advertising channels for years, yoga guru-turned-marketer Ramkrishna Yadav (aka Baba Ramdev) made Patanjali Ayurved a force to reckon with in the Indian FMCG and food segments. Now, with crores ear-marked for advertising across mass media channels, one can only imagine the potential scale. Patanjali Ayurved claims to have more than quadrupled its revenue in the past three years, from Rs 450 crore in 2011-12 to Rs 2,000 crore in 2014-15, and is eyeing Rs 6,000 crore this year.
Patanjali Ayurved began as a small pharmacy in Haridwar in 1997. Today, it manufactures around 800 different products across categories including nutrition, grocery, healthcare, medicine, home and personal care. Categories ready to come include baby care, chocolate/confectionery (Patanjali Energy Bar) and health drinks (Power Vita).
Patanjali's products are available at standalone stores as well as at modern retail format stores such as Big Bazaar, Reliance Retail, Spencer's Retail, HyperCITY and SRS Retail. They're also available at Patanjali's Swadeshi Kendras, Arogya Kendras and its online store.
It also has a powerful partner in the Future Group.Says Kishore Biyani, Group CEO, Future Group "I am confident that Patanjali will be among the top 3 Indian FMCG companies soon. After ignoring this segment for long, and now witnessing Patanjali's success, almost all multinational FMCG companies are trying to bring in Ayurvedic products. Along with Patanjali we will create a strong 'Swadeshi' alternative to all daily-use goods in India."
According to a recent report titled 'Patanjali - Injurious To Listed FMCG Health', released by financial services company IIFL Capital, Patanjali is expected to clock sales worth Rs 20,000 crore in 2019-20.
Patanjali made it to the 2015 Brand Trust Report, a study conducted by brand intelligence and data insights firm Trust Research Advisory. It was featured among the seven most trusted Ayurvedic brands in India. Patanjali is working with DDB Mudra North to promote its noodles, ghee (endorsed by wrestler Sushil Kumar Solanki) and toothpaste, Dant Kanti.
As per data from Broadcast Audience Research Council (BARC), Patanjali's TVCs were telecast 12,969 times during November 21-27, 2015, making it the third most advertised brand on TV after Cadbury and HUL's Fair & Lovely, during that period. Besides communication, the next leg of Patanjali's success will have everything to do with another crucial cog, distribution. Experts present their points of view.
Operating Partner, India Equity Partners, (ex-Dabur, ex-Unilever)
Besides his loyal followers, who tend to be slightly older, middle-class consumers from the Hindi-speaking belt, Ramdev has found resonance with people who want advice on the kind of life they should be living. He has tapped into this consumer need brilliantly.
While Ramdev brought about Patanjali's initial success, the future will depend on how the brand builds itself, here on. There are so many examples of brands that have out-lived their founders, because of continuous product refreshment and creativity in engagement with consumers. It's time for Patanjali to clearly define its strategy, which is as much about deciding what not to do as it is about deciding what to do. Some of the products, such as noodles, are misaligned with its philosophy. Such decisions could lead to brand dilution over time.
In any category, around 15-20 per cent of the business lies with brands that claim a natural and herbal heritage. If Patanjali can put its act together, it can be a formidable competitor to the likes of Dabur and Ayush, which HUL is trying to revive.
CEO, Trust Research Agency and author of The Brand Trust Report, India Study (2011-2015)
It is no surprise that Patanjali featured in The Brand Trust Report (2015) alongside many heritage brands. The brand is at an inflection point, poised for ten-fold growth. Had Patanjali been listed, it would have been the most vied-for company.
Now, the game is about quality and about formalising the trust. Outside of Ramdev's loyalists, many people are buying Patanjali just for a 'different' product experience. This set of consumers desires quality, is not married to any particular brand, is rooted and balanced, and is swayed neither by spirituality nor by politics.
Patanjali needs to work swiftly on the distribution front. Why should its products be available only at Patanjali's stores? Why not at the chemist? Consumers should be picking up a Giloy Amla or a Dant Kanti at their local kirana stores, just as they would a Colgate or a Close-Up. Being able to meet the consumer where she/he is will drive impulse purchase.
Baba Ramdev is positioned as an underdog, someone everybody loves to see win. He is about 'Swadeshi pride'. Unfortunately, in India, people still suffer from the 'white-skin syndrome'. Hopefully, Patanjali will give the word 'desi' a positive connotation.
Independent Marketing Consultant (ex-KPMG)
The success of Patanjali should be looked at in the context of its target segment - health and quality-conscious middle-class consumers, mainly in tier II and III cities. It has a fairly strong customer franchise in these regions.
One cannot attribute the brand's success to Baba Ramdev alone. The personality cult did bring in initial trials, but subsequent purchases are not happening because of him. The company will now 'professionalise' quickly, and Ramdev and Patanjali will operate independent of each other. This must happen; without that scale is doubtful.
In the mass market, Patanjali may have a direct impact on Indian companies like Dabur and Hamdard because of the overlap in the healthcare and food and beverage segments. It will clash with Marico and P&G in the personal care category. Lever's Dalda could also take a hit. One of the reasons for this is the fact that there has been very little innovation in these categories by existing players. Also, Patanjali has the advantage of bringing in a novelty factor.
Patanjali's prospects will depend on the kind of categories it enters. It should play in fewer categories, but play well in these. Distribution and reach will be important too.
Co-founder, Chlorophyll, A Brand Marketing Consultancy
Patanjali, because of its association with Baba Ramdev, comes with enormous credibility. He has high media presence and has leveraged political sentiment to define what he stands for - pride in nationalism, traditional values and scientific wisdom. The lesson for brands is - it's important to have a set of loyal, even obsessed, fans. Then it doesn't matter if there are others who hate you.
Today, people are not uncomfortable with product extensions. Earlier, a hair care brand could sell hair oil and shampoo, but not skin creams. Today, Dabur has a toothpaste, hair oil and honey. Patanjali will enjoy the same advantage because Ayurveda will allow the brand to enter practically any category... even noodles!
Success will depend on which categories it focuses on. Companies selling rice/atta (say, ITC) and detergents (HUL) can easily achieve growth and scale, compared to those in the personal care and healthcare, which are limited by the size of the categories. So, while Patanjali could overtake a P&G, it can't trump HUL. With Ramdev, Patanjali has already won 50 per cent of the battle. Whether it will gain enough credibility and momentum to outlive its founders, will depend on how appealing the brand makes its proposition to the next generation of buyers - those who don't know them.
Chief Strategy Officer, South and South East Asia, Grey Group and author of 'India Reloaded' and 'Consumer India'
For decades, FMCG companies have been trying to cook up benefits such as 'iron shakti', but Baba Ramdev is winning the market with 'yog shakti'. This is a new model where native intelligence wins over technical thinking. People are buying into Patanjali for its relevance and familiarity. They have been seeing Baba Ramdev promote Yoga on television for over a decade now. The pricing is the sweetener.
Companies that market Ayurvedic/natural products, such as Dabur and Emami, will not be impacted much. Except chyawanprash and honey they're not in any of the categories that Patanjali is present in. I, for one, don't know of an anti-dandruff Ayurvedic shampoo. So chances are Patanjali's anti-dandruff shampoo will grab share from a known brand that belongs to a MNC.
In categories such as cornflakes and noodles, while Patanjali will get share from Kellogg's, Nestlé Maggi or ITC's Yippee, it will also help expand the market, given its mass appeal. Of the noodle pie, some of the market share that would have been restored by Maggi will now go to Patanjali.
Patanjali has got an excellent launch platform. Scalability and future success depends on continuous innovation and quality.
Chief Strategist, Wolfzhowl Strategic Instigations (Ex-Leo Burnett, Ex-TBWA)
India is seeing a contrasting trend when it comes to packaged food. At the bottom of the pyramid, packaged goods represent safety and hygiene, whereas at the middle and the top, there is an undercurrent of distrust. Brand controversies, such as those around colas, chocolates and noodles, and the rise of lifestyle diseases, are augmenting these fears.
Patanjali's credibility was beamed into consumers' hearts and minds via TV sets; Baba Ramdev garnered great equity for spiritual and physical well-being. One would assume the core TG for Patanjali comprises the less Westernised middle and lower middle classes, but the brand has loyalists across SECs, including LSMs (Living Standard Measurement) 11 and 12, that comprise the premium Dove/L'Oreal and Gucci/Prada consumer who are buying the healthcare products.
Mid-level LSMs 4 and 5 (Unilever's bastion) include households that are adopting personal care and food and beverage products. From ghee to shampoo to chyawanprash, LSM 4/5/6 households might just become the new 'Patanjali households'. Even Nestlé's Maggi needs to expand to and below this LSM, which will definitely be open to Patanjali noodles.
A Note From the Editor
A few fortnights back, we ran a Cover Story that raised the question – Post controversy, will Maggi bounce back? This time around, we're shining the spotlight on a brand that, incidentally, markets instant noodles, along with several other food and FMCG products, and are asking a converse question – Can Patanjali Ayurved sustain its unprecedented success?
The story attempts to answer two more questions – In which product categories will Patanjali have a natural – no pun intended – advantage? Which existing companies in these segments will Patanjali threaten? Colgate and Dabur are expected to be impacted the most, say experts. HUL's acquisition of herbal hair oil brand Indulekha and Emami's acquisition of Ayurvedic hair care brand Kesh King are deemed reactive moves. All around, companies are ramping up their natural/herbal/Ayurvedic product portfolios.
What's truly fascinating is the amount of anecdotal evidence around the popularity of Patanjali. Just try asking your colleagues and friends; odds are, one in every three either uses/consumes these products, or knows someone who does. Of course, the numbers are there too.
The brand's 2014-15 revenue crossed Rs 2,000 crore. Whether it's word of mouth publicity, price under-cutting or the sheer pull of yoga guru and brand ambassador Baba Ramdev that got the brand this far, the absence of a mass media presence, until recently, is truly remarkable.
Now, with this relatively new, deadly weapon in his arsenal, 2016 sure looks bright for Baba Ramdev, who, interestingly enough, has no stake in Patanjali. According to research and brokerage firm Credit Lyonnais Securities Asia, while over 90 per cent of the stake is held by Acharya Balkrishna, chairman of the company, the rest is held by a Scotland-based NRI couple, Sarwan and Sunita Podar.
As news reports about venture capital and private equity firms' growing interest in the brand do the rounds, Patanjali is busy focusing on its prime time television presence, through ad spots and show sponsorships.