Patanjali case study: The rise of Swadeshi Titan

With this piece, we take a look at the Patanjali case study. The company has built an empire against global giants like HUL, ITC and Dabur. Their core message of being ‘swadeshi‘, has made them one of the fastest-growing FMCG companies in India. With this piece, we explore their history, acquisitions, business model, marketing strategies. We then end with our note on what we believe is next for the giant. Let’s jump right in!

To give you a context on who we’re talking about here. Patanjali was valued at ₹3,000 crores (equivalent to ₹35 billion) in 2019 and aims to become a ₹35,000 – ₹40,000 crore company in 2020-21.

Patanjali group has 3 segments under its umbrella:

  • Patanjali Ayurvedic Ltd (PAL), which deals with FMCG products
  • Divya Pharmacy deals with Ayurvedic medicines and yoga camps across the country
  • Patanjali Gram Udyog Nyas., deals with the promotion of social, economic and moral status of rural India

Each of these have a different market share and compete with different players.

Swift history:

Patanjali as a brand was started in 2006 when Acharya Balkrishna and Baba Ramdev set up Patanjali Ayurvedic Ltd. in Haridwar, Uttarakhand. Acharya Balkrishna is currently the CEO and director of the company, he was also featured in Forbes richest list of 2020. Baba Ramdev, on the other hand, is the face of the brand and is the reason for customers to keep their belief in Patanjali products.

Their journey started when they inaugurated the World’s largest herbal and food park in Haridwar in 2010. They invested INR 500 crore in an area spread across 95 acres. Also during this time, Baba Ramdev had become a Global Yoga icon, known for his strides in Yoga and Ayurveda while Acharya Balakrishna had garnered immense knowledge on Ayurvedic medicines. To them, it seemed the right time they could combine their knowledge to enter the less-fragmented “Ayurved-FMCG” segment.

Patanjali Herbal and Food park

Baba Ramdev led people to pursue a healthier life through his yoga camps; encouraging them to maintain their health through close attention to their work-life balance, right thinking, diet, lifestyle and use of herbs. The popularity of these methods took steam after a few of his followers saw improvement in their health. Trust component improved with his treatments and eventually leading to improved trust in the products he endorsed.

The company registered a phenomenal Y-O-Y growth till FY 2016-17. However, other FMCG giants have started catching up with their ‘natural and pure’ products and hence FY17-18 of PAL saw a drop in their revenues. HUL relaunched its brand Ayush and acquired ayurvedic hair oil brand Indulekha. Colgate-Palmolive, on the other hand, launched its own herbal toothpaste.

Related: Take a look at the rise of organic skin care category in India 
Source: Reuters India
Recent Ventures and Acquisitions by Patanjali:

Initially, the company started with their branded herbal treatments and Ayurvedic Products. However, with time, the brand ventured into various other segments like Footwear, Apparels (where the products stores are priced 3-4 times lesser than their competitors), Information Technology, even the Simcards, yeah, you name it.

They also acquired soya food brand Nutrela-maker Ruchi Soya for INR 4,350 crore through an insolvency process, a large player in the commoditised industry of solvent extraction or edible oils. This is one of their most notable acquisitions. It will help the brand acquire edible oil plants/soyabean oil brands such as Mahakosh and Ruchi Gold. Also, this was one of the “first” big acquisitions made by Patanjali, and also the World’s second-biggest insolvency case.

Essar steel case acquisition was the world’s first acquisition through an insolvency process.

Marketing Strategies / Secret behind the rise

“We don’t know markets or marketing… but, what we know is serving the people by providing them high-quality products at attractive prices.” ~Acharya Balkrishna, MD, Patanjali Ayurved Ltd

Only a few years back, the marketeers would have simply ignored this quote and probably pulled out a chuckle. However, the joke’s on them. The spectacular growth of the company has caught the eyes of not just marketeers but everyone in the country.

Let’s take a look at a few factors summing up the quote we read above, in addition to that let’s also look at the advantage and otherwise of these marketing and distribution strategies.

Perceived as “Unified” Branding: While there are sub-segments as we discussed above, all the products of the company have the tag of ‘Patanjali’. For example: when you go to a shop you directly ask for Patanjali soaps or Patanjali Aata or Patanjali face wash etc. but you don’t necessarily ask for HUL soap or P&G soap. Further, their positioning of “assured quality” and “swadeshi” lightens the essence of the product.

The major disadvantage with this is: If any of the customers drops negative feedback about any of the Patanjali products, the entire brand name would probably face a backlash.

Distribution Channels: Patanjali operates on a Franchise business model. It uses multiple distribution channels which reach 0.2 million outlets. It also has a tie-up with modern retail giants like Reliance and Future Group, and hence a very strong backbone to their distribution system. It also has tie-ups with Star Bazaar (Tata Group), Spencer Retail, More (Aditya Birla Group), Apollo Pharmacy, D-Mart etc. equating in a larger reach for their products. It also has an online marketplace – their own website and other E-commerce websites.

To further strengthen their distribution network, Patanjali is planning to spend US$743.72 million in various food parks in Maharashtra, Assam, Madhya Pradesh, Uttar Pradesh and Andhra Pradesh.

Related: Take a look at the case study of Reliance: A story of unnatural diversification.

Cost Leadership: India is a price-sensitive country. Which means, not only do Indian consumers look for products that are good in quality but they also expect the products to be of lesser price. The brand understood this psychology and offered the products with a little lesser price than its competitors and ‘swadeshi’ bit of promotion gave an added advantage. Their products are on average 15-20% per cent cheaper than the competition. Almost all the products of Patanjali follow market penetration pricing strategy except for Patanjali Cow Ghee, which is sold at a premium.

Personalised Networking: Multiple medical clinics called Arogya Kendra were set-up across the nation under the name of Divya Chikitsalaya, that provided free diagnosis to people. They recommended medicines to people, which are then bought from Patanjali stores.

Opportunist attitude: Acharya Balkrishnan and Baba Ramdev understood that they have created a captive market of consumers who are health conscious and want affordable and swadeshi products. And when the market was full of foreign players, they started their drive of being ‘natural’ and ‘swadeshi’. And their captive market instantly developed loyalty towards the brand. Another example of opportunist attitude was seen when Patanjali launched its Atta noodles just when the leading brand in the noodle market, Maggi, was banned. Also, the Coronil fad? In an attempt to beat the market, Baba Ramdev launched their own COVID treatment drug. Which was then put on hold, obviously. But you get what we’re trying to say here.

Related: Take a look at Maggi case study: 2015 Maggi crisis

Promotion: The brand has a very strong brand ambassador, Baba Ramdev, endorsing its products through his Yoga shivirs. Secondly, Word of Mouth has always helped the brand in increasing the number of loyalists. Very recently, they have also started spending heavily on digital Marketing and Advertising, which is creating more awareness of the brand.

Related: Take a look at the Marketing funnel
Conclusion:

To sum up, with a valuation of INR 300 Billion in 2018, Ayurveda Market in India is estimated to reach a value of INR 710.87 Billion by 2024 with a CAGR of 16.06%. It is evident that there’s a growing appeal of Ayurvedic products in the market. But with Patanjali expanding their products in every other category and obviously struggling to manage… while other players slowly catching up, it will be interesting to see the turn of events in the industry.

Author:

The author of this piece is Geeta Belani, if the piece adds value, head on to LinkedIn, and drop a thank you. You can also share the piece with your best friend on WhatsApp for good karma.

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Patanjali case study