Ramdev – the yoga guru seldom seen doing Pranayam on Aastha TV can be mistaken as any other popular guru in the country. But the truth is that he is one of the most profound business minds in the country. Ramdev – a businessman who tries hard to make people believe that he is just a Yoga guru.
This story is about how this yoga guru became FMCG Baba and created a company that has generated a revenue of Rs.10,000 crore in a decade while FMCG giants like HUL took over a century to cross the Rs 20,000 crore mark.
Swami Ramdev started Patanjali Ayurved Limited in 2006 with close compatriot Acharya Balkrishna who in 2018 held 98.6% of the company.
The rise of Patanjali is straight out of a fairy tale. Patanjali had badly disrupted the FMCG market, especially in the years 2013-17. Riding on its ‘swadeshi identity’, the Haridwar-headquartered firm had risen to become the country’s second-biggest FMCG player, behind the conglomerate Hindustan Unilever (HUL), by 2017. It also became India’s most trusted FMCG brand in 2018.
With over 2 lakh employees, Patanjali has a wide range of products with the theme of Ayurvedic/herbal being common across all categories. It has four business divisions: Food and Beverages, Cosmetics and health, Health drinks, and Homecare. The highest revenue grossing products are Patanjali cow ghee, Dant Kanti, Kesh Kanti, Patanjali Atta noodles, and Patanjali Aloe Vera juice and gel.
It has grown at almost 100 % year-on-year between 2014 and 2017. The company had also managed to push its turnover from nearly Rs 2,000 crore in 2014-15 to Rs 10,000 crore in 2016-2017.
By offering products at 15-20 % cheaper than competitors, Patanjali has not just forced the MNCs to cut prices but also strengthen their product portfolio. Along with this, Patanjali has followed a 2-stage distribution strategy.
Ø Create a strong alternative distribution system.
Ø Pivot to General Trade once a sizeable consumer base is generated.
All these while the brand ambassador of Patanjali, Ramdev, has been clear about the motive of the company to go head-on with MNCs and establish Patanjali as one true patriotic FMCG brand. "Turnover figures will force multinational companies to go for Kapalbhati," saffron-robed Ramdev declared in 2017, about a yoga breathing exercise, vowing sales would more than double to 200 billion rupees ($2.84 billion) in the year to March 2018. His compatriot was also not far behind: "Turnover and profits have never been our goal, and this has been the recipe of our success," says Balkrishna.
From the Advertisement point of view also, Patanjali was very different from the other FMCGs and this played to their advantage. Of the total 1.14 lakh ad insertions in 2016, 84% were on news channels and nearly 99% on Hindi news channels. According to AdEx India, Patanjali was the third biggest FMCG advertiser in India in 2016, behind HUL and Dettol-maker Reckitt Benckiser.
But all that glitters is not gold. As promised by FMCG Baba, the revenue did not double by March 2018, in fact, it dropped down and the competing giants like HUL, Reckitt Benckiser, Marico, and Dabur were starting to gain lost grounds and getting more prepared to win the battle whose rules Ramdev changed.
The care Rating report indicates sales of just Rs.8100 crore in 2017-18 and even less Rs.4700 crore in 2018-19. Care Ratings downgraded Patanjali’s long-term bank facilities to A- from A+ due to concerns over its financial standing in the light of the merger with Ruchi Soya.
Sales volume has further declined by 2.7 percent in urban areas for the financial year ending April 2019, while its rural sales grew 15.7 percent. In sharp contrast, the year before, the company grew 21.1 percent in urban areas and 45.2 percent in rural regions. In its 2017-2018 financial statement, Patanjali complained that demonetization "affected consumers' spending habits," while the sales tax hit "costing and pricings of inputs and products".
In 2017, Nepal's drug watchdog found that six Patanjali medical products had microorganism content above a maximum ceiling set by the regulator. In the same year, the Armed forces’ Canteen Stores Department had suspended the sale of a batch of Patanjali’s Amla juice.
According to experts, the reasons were plenty for the fall of Patanjali but can mainly be divided into two main domains: Operations and Quality Standards.
Author: Drikjit Aich
The competition was also not far behind. Faced with the threat from Patanjali, Hindustan Unilever and Colgate Palmolive India Ltd have launched ayurvedic products themselves, adding to the competition.
While Patanjali revenue fell, others FMCGs slowed down but was still growing in 2018-19:
Ø Hindustan Unilever Limited’s (HUL) volume growth in the first quarter of 2019 was 5.5 %, down from the year-ago period’s 12 %.
Ø Marico’s volume growth was 7 % in the first quarter of 2019, down from last year’s corresponding quarter’s 10.4%.
Ø Dabur India’s volume growth stood at 6%(in the first quarter of 2019), versus 21 % during the same period a year ago.
The advertisement also dipped over the next 2 years. According to AdEx India, between January and July of 2018, Patanjali had slipped to 11th place. It has further dropped to 40th rank in the same period in 2019.
Unplanned expansion, a poor supply chain, inconsistent product quality, and business practices – along with the slowdown – have come together to pull Patanjali down like no others in the sector.
Ravinder Pal Singh, owner of a mega Patanjali outlet in MGF Metropolis Mall, Gurugram, said he might shut his store soon. “Three years ago, my sales stood at around Rs 17 lakh to Rs 18 lakh annually,” he said. “Today, the sales are around Rs 3 lakh, of which we have to pay the electricity bill, real estate rental, salary of the Ayurveda doctor, salary of four other staffers among other expenses. I am running into losses.”
Recently, Ramdev came with a cure for COVID 19 and launched Corona Kit. But, the Ayush Ministry has stated that the Corona Kit can be sold as an immunity booster but not as a cure for Covid-19. Since then, Ramdev is promoting the kit as a tool for COVID management and not cure. This comes as a series of many launches that have failed or pulled off due to quality issues.
This brings us to the final question: Is this a momentary decline or beginning of the end for Patanjali? Only time will tell.