BATTLING BABA RAMDEV
In the wee hours of the morning, the MMRDA grounds at the Bandra Kurla Complex bear the look of a crowded railway station at peak hour. Yoga mats in hand, men and women, middle-aged and old, make their way in, hoping to get as close to the stage as they can. They are about to witness in action the man half the country is talking about today – yoga guru turned marketing wizard Baba Ramdev, his Patanjali Ayurved Limited products reaching every doorstep, some by word of mouth, some because of advertising but mostly by virtue of his mass following. Here’s a man who has managed to build his brand equity single-handedly, putting 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. Those who believe in Baba Ramdev’s discipline, indirectly become brand ambassadors of Patanjali products, which the yoga guru tactfully endorses during sessions at his camps. From a single camp, he manages to get more followers for Patanjali than multiple re-runs of popular ads on TV can manage for any brand. BUILDING A BRAND Clad in a saffron dhoti and armed with a witty tongue, 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. The yoga guru’s open rejection of the West may have earned him many admirers, but making his products sell in every State and taking them to dizzy levels of popularity was a different ball game altogether. What has worked for a brand like Patanjali Ayurved Limited (PAL), in business only since 2007? The company zoomed well past its own estimated profit margins in 2015, its growth impressing even the likes of brokerage firm Credit Lyonnais Securities Asia (CLSA). “Within a short time-frame of eight years since inception, 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. SUDDEN 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. Bringing herbal products into the spotlight, the company has consolidated the market for these goods, even forcing competitors, who had not even acknowledged its presence, to pull up their socks. 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. Today, in modern retail, Patanjali’s sales are increasing by 70-80% per month, which earlier used to be around 30%, a time when nobody had expected it to be such a disruptive brand.” Pittie goes on to add that though Patanjali came into the mainstream by launching a large number of products recently, it has seen substantial growth for the past two-three years. In 1997, Patanjali started with selling Ayurvedic medicines, for which dedicated Patanjali chikitsalayas were set up. People who wanted an alternative to allopathy could buy medicines, after consulting a certified vaid at the chikitsalayas. Acharya Balkrishna, who owns a majority stake in PAL, slowly started setting up franchisee outlets across the country for its products and once that network was built, the company launched its FMCG products. One of its first products to enter the market, the toothpaste Dant Kanti, is now eating into the market-share of MNC giant Colgate-Palmolive, according to industry studies such as the Kotak Institutional Equities report. CONTROVERSY PAYS! 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. Soon after, it was reported that worms were found in a packet of Patanjali noodles. Baba Ramdev brushed off the allegations as a conspiracy, and promptly went on to launch products in the baby care and beauty category the same month. 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.” According to Ajay Dang, Head of Marketing - Home Care & Media, Godrej Consumer Products Limited, the business model of Patanjali products have touched upon “something that hasn’t been tapped or exploited very well”. “We have disruptors within any industry. But, nobody has tapped Ayurveda on a large scale under a mass brand, which Patanjali seems to have done very well. Whether they can sustain it for a long period of time or not, only time will tell. But this trend will continue to have an impact on a large set of consumers and in certain categories,” Dang observes. WHY PAL IS POPULAR Baba Ramdev has been weaning consumers away from MNCs, playing on the ‘Swadeshi’ sentiment, and it seems to have worked. PAL products are available at a price point at least 15- 30% lower than products of other FMCG brands, making them extremely attractive to the consumer. 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.” Pravin Kulkarni, General Manager, Parle Products voices the same opinion. “Yes, Patanjali is selling biscuits in select categories like Marie and Krackjack, however, Parle-G is a very difficult product to compete with,” says Kulkarni. “Patanjali is able to offer steep price benefits in premium category products and cosmetics; the margins are anywhere between 30-50%. They provide extreme value to the consumer by introducing the product at a very low price, compared to products from Hindustan Unilever, Colgate and Dabur. But in the categories that we are competing in, the margins are thinner, so there is not much cost difference from the consumer point of view. That’s why they are finding it difficult to compete in this category despite getting a good response for their other products.” Therefore, does PAL have the potential to start a price war, and compel top FMCG companies to reduce the price of their products? Dang feels it is too early to predict, as it still remains to be seen whether PAL draws its sales from the organized players’ market or from the unorganized one. “But one thing is clear - Patanjali has put a lot of pressure on the organized players,” Dang admits. Contesting that view, Pittie says, “Analysts and brands are confusing the conversation. At the end of the day, if somebody is buying a branded packet of masala as opposed to masala available loose, they are not doing it because it’s a Patanjali product, but because they want to buy packed masala - that’s the first step of the decision-making process. Once they decide on packed masala, they have to decide which brand of masala to buy. So it is still too early to put your finger on where the real conversion is happening.” 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. COUNTERING PATANJALI FMCG majors are already well into counter-Patanjali strategizing, interestingly bowing down to Ayurveda, and launching more and more herbal products. For example, Emami recently acquired the Kesh King brand of medicinal hair oil. HUL, which had exited the herbal hair oil category long ago, has acquired the Indulekha brand of oil and is reviving its Ayush portfolio. Meanwhile, Dabur is looking at modernizing its Ayurveda product range and is pumping up its resources in the women’s healthcare products segment. Even Godrej is planning to roll out a health and wellness range to compete in this category. 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. Dabur and Himalaya witnessed double-digit growth in Q3 of FY15-16. Thus, they have collectively managed to snatch market-share from global MNCs. Himalaya Drug Company, which has registered a CAGR of 25% across categories like face-wash, toothpaste and shampoo, seems to be one of the biggest beneficiaries. Says Rajesh Krishnamurthy, Business Head, Consumer Products, Himalaya Drug Company, “Patanjali has become a big brand and their media awareness campaigns are going to create more demand for herbal products and solutions in the herbal space. So we expect the market to grow further and the herbal segment to benefit a lot more from this trend.” But that doesn’t diminish the threat the herbal companies face from PAL, which is present in almost every category one can think of. Krishnamurthy adds, “I guess they are (a threat). All I‘d like to say is that they are competing in every category where we are present. But we don’t have the numbers yet.” 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. We didn’t exist in the food business 13 years ago. Today, we have more than a billion dollars in turnover. But the players who were there then are still around today, and yet we have made rapid gains in many industries. So the industry is vast. 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.” THE DISTRIBUTION NETWORK 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, “We started stocking Patanjali products in February 2015, after we noticed that our consumers were repeatedly asking for them. Over time, 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.” Possibly, this trend made Future Group announce a tie-up with PAL, raising many eyebrows in October, 2015. Justifying the decision to promote, distribute and market Patanjali products at that time, Kishore Biyani, Founder & CEO of Future Group, predicted that the company would do business of Rs 1,000 crore in 20 months with PAL. “Six months later, the prediction is pretty much on track,” says Tarkas. “Today, one out of every five customers at our retail stores buys a Patanjali product, which is huge. In many categories, the brand has managed to increase its penetration steadily across the past five months that they have been on the shelves here. It started with 2% and now it’s as much as 21-22%. They have stolen a couple of percentage points from Colgate and Kellogg’s, which is a great beginning.” But Tarkas points out a bottleneck – PAL’s manufacturing is not able to keep pace with the rate at which products sell, and this large gap is something they need to jointly address. “Once the fill rates become better, we will be able to achieve the targets set by us during the announcement of the tie-up,” he says. Meanwhile, PAL has devised a new way to reach out to its wide consumer base. Pittie says, “Patanjali has launched a scheme allowing people to open a franchise store – a self-service supermarket dedicated only to PAL products. They have already opened one each in Uttar Pradesh, Maharashtra and Haryana. The target is to open at least 50 such supermarkets in the next couple of years.” PAL is now considering setting up manufacturing and food processing units in Andhra Pradesh, Karnataka, Maharashtra and Madhya Pradesh to cater to the Southern market and meet the growing demand for its 800+ products. The Maharashtra government has already allotted more than 600 acres of land to Patanjali Yogpeeth to set up an orange processing plant and units for its Ayurvedic products. 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. Talking about PAL’s rapid expansion across many categories in such a short time, Tarkas says, “If you look at it from a marketer’s perspective, Patanjali has broken all the rules in marketing taught by Kotler because here the same brand that is selling you food products like honey and ghee is selling toothpaste and hair oil. The same promise of purity and heritage seems to have got extended across different product categories where such an extension was not considered possible. I can’t remember another such example.” 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.” What’s interesting is, Baba Ramdev did not simply choose to repackage what was being sold by other brands, but caught the pulse of the people who were increasingly becoming health conscious while showing a preference for Ayurveda. The acceptance he has received over the past few months, cutting across economic sections, has fuelled his confidence. He has even gone on record, to challenge top FMCG companies: “Patanjali atta noodles will soon oust Maggi as the top noodles brand in the country. Barring HUL, we will overtake all other multinational companies. These companies are taking money out of the country.” S Raghunandan, Director and CEO of Jyothy Laboratories, which plans to extend the portfolio of its heritage Ayurveda brands like Margo and Neem, says, “Anything outside the Ayurveda and natural space would be uphill for Patanjali. They have to get the quality and overall mix right. Therefore, while their chances of success are bright in Ayurveda and natural products, their cult equity won’t go beyond that.” 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.” THE TRENDSETTER BABA Undoubtedly, Baba Ramdev has set a trend in FMCG marketing. He has chosen not to tread on the oft-beaten track of first creating awareness for his products and then talking about the problems they solve. Instead, he first created awareness about various health problems through his yoga, and then went on to introduce his products as a solution. 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. BY NEETA NAIR
It takes just one visit to an exclusive Patanjali showroom in a Mumbai suburb to find out why the brand is so popular among consumers. After a few minutes of intently watching an elderly couple drop everything from soap to vegetable oil, biscuits and mango juice into their shopping bags, I decide to approach them. The gentleman introduces himself as Manohar Kamath, a former employee of Canara Bank, and says he prefers the store because everything he wants is available there and “It is cheap and pure”. Showing me the sandalwood soap he has picked up, he says, “It costs Rs 12 - no other brand will offer it for less than Rs 25. Even the toothpaste, Dant Kanti, is very cheap.” Kamath, an avid practitioner of Baba Ramdev’s yoga, adds, “Patanjali is an Indian company. Why should I help foreign companies like HUL make profit, when I can go for Swadeshi?”
Varun Berry takes the yoga guru’s comment in his stride: “I wish them luck. I do hope that they fulfil their dream. We will keep our eyes trained on the part of our portfolio which is common to them and make sure that we do all the right things to compete with them in the marketplace.”
Tags : Impact Feature