Patanjali as Blue Ocean Strategic Firm competing with MNCs in India

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Introduction What is Patanjali Ayurved: This is a company formed by Baba Ramdev in 1997. He collaborated

with Acharya Balkrishna, a scholar of Ayurveda, Sanskrit and Vedas in 1990s to manufacture ayurvedic medicines. Ramdev focused on Yoga while Balkrishna assumed responsibility of spreading Ayurveda medicine. 

Revenue: Patanjali Ayurved is perhaps the fastest growing fast-moving-consumer-goods firm in India with annual revenues reportedly at more than Rs 2,000 crore. Ramdev expects to take the revenue to Rs 10000 crore.  

Discount and profits: Credit Lyonnais obersves that most of Patanjali products are available at an attractive discount to competition. The company sources products directly from farmers and cuts on middlemen to boost profits. It makes 20% operating profit. This is the difference between total income and expenditure. 

  Ownership: Baba Ramdev does not hold any stake in Patanjali Ayurveda Ltd. Balakrishna is believed to own 92%. The balance 8% stake is held by Sarwan and Sunita Poddar, a Scotland-based non-resident Indian couple. The two are associated with the UK Trust of Patanjali and have donated land in UK. 

FMCG competition: The company is privately held and profitable. The revenue for 2014-15 of Patanjali Ayurved is bigger than Jyothi Laboratories, the maker of Ujaala and Emami. These brands have been in business for decades.

Food park: Patanjali Food and Herbal Park was established in 2009 under the food park scheme of the Indian government. The company reportedly commissioned one of the largest food parks in the world at a total investment of Rs 500 crore. The food park is spread across 100 acres and provides employment to over 6,500 people. 

Distribution: Patanjali products are sold through three types of medical centres. These include Patanjali Chikitsalaya which are clinics along with doctors, Patanjali Arogya Kendra which are health and wellness centres and Swadeshi Kendra, non-medicine outlets. A typical Patanjali centre is 500 to 1,500 square feet in size. The group has 15,000 exclusive outlets across India. They plan to grow to 1,00,000 outlets in next few years. They also distribute through general retail stores. 

Store profits: Patanjali has 5,000 franchisee stores. Retailers told CLSA that their average gross turnover is Rs 25,000 every day. Profit margins for retailers are 10-20% across product categories. 

Word of mouth publicity: Consumer companies typically spend 12-20% of revenue on advertising and promotions. When a new company gets into the business, this spending is significantly higher. Patanjali has followed a unique word of mouth publicity model and the entire revenue is without any advertising. 

Advertising agency appointed: Things are changing though. Patanjali has hired two top advertising agencies McCann and Mudra to prepare the business for the next phase of growth.

Vision of PAL

1) To Strengthen Indian economy by replacing foreign products with Swadeshi products.

2) To build the largest retail chain all over India both rural and urban market

3) To provide reasonable prices to farmers 4) To fulfil the demand of customers across India seeking reasonable

prices. 5) To Support Indian industries by creating demand for Swadeshi

products. 6) To generate employment for youth, skilled/unskilled and

professionals. 7) To establish Ayurveda and create a market chain for herbal products.

Product Catalogue

Income and Profit Trends

Revenue Figures- Indian FMCG

BUSINESS MODEL As such no business plan

“We never had a business plan. We also don't know markets or marketing," says Acharya Balkrishna, managing director of Patanjali Ayurved, which began operations two decades ago. "But what we know is serving the people by providing them attract high –quality products at prices.

Partnership with future group to promote Patanjali products

Market Analysis Patanjali Ayurved is now India’s fastest-

growing consumer products brand. rocketing sales of its wide range of staples,

nutrition, cosmetics and personal care products.

estimated supply shortfall of 30-40% Analysts are saying that its 20 billion-rupee

revenues this year could pose a threat to established, age-old Indian consumer brands such as Dabur, Emami and Marico.

Patanjali diversified from yoga and ayurveda into juices, when amla farmers were distressed as they found no market for their produce

Patanjali Amla juice is the top selling product in the market now

nearly 6,000 litres of juice is produced here every hour.

Priced at Rs 200 against Rs 1300 MNC price

Patanjali Vs MNCs

Large FMCG companies, more notably multinationals, are worried at Patanjali's rise

Privately, they fear that with a friendly regime at the Centre, it could infringe upon their intellectual property

Also, the Bharatiya Janata Party-led government could help it make inroads into the large institutional markets like the armed forces' canteen stores

Instead of outsourcing like established, listed FMCG firms, Patanjali has flourished on a backward integration model, using large tracts of land to cultivate and run its factories.

Another issue worrying the MNCs is the low costs of Patanjali products with only 15 per cent profit margin.

Officials there state it is because Patanjali's administrative cost is only up to 2.5 per cent of revenue, as against 10 to 15 per cent in large companies.

Experts concede that Patanjali has created reasonable brand equity, which would have been impossible with loose quality controls.

Patanjali broke into TRA's annual Brand Trust Report for the first time this year, featuring among the seven most trusted ayurveda brands in the country

Other drivers include: Global consumers moving away from

chemical based products Fast growth in this segment

complimented by high demand Regulations in ayurvedic FMCG Global norms on animal testing

Patanjali Vs MNCs… Future-Patanjali tie up

Future group will retail Patanjali's more than 500 products: biscuits, juices, honey, supplements, toiletries and instant noodles

Now they will be available in Big Bazaar and Food Bazaar supermarket chains in addition to the Patanjali's stores and some multi-brand grocery stores that they are currently sold in.

Patanjali sells cornflakes and muesli ->led by Kellogg’s, almond health drink in a segment dominated by Mondelez International’s

Bournvita anti-wrinkle cream that could compete with P&G’s anti-ageing product, Olay. One of its top sellers is a toothpaste called Dant Kanti which is a potential rival

to Unilever’s Pepsodent. Listed FMCG firms are currently trading at an average earnings multiple of

46. With revenues of close to Rs 2,500 crore and an estimated after-tax profit of Rs 300 crore, a similar earnings multiple would give Patanjali a valuation of Rs 14,000 crore.

FUTURE GROWTH Patanjali Products are becoming more popular in Indian market

due to lower cost with best quality. In addition to this the swadesh motto of Patanjali is creating huge

impact on Indian customers specially in rural areas. Hence as per quick market research it is observed that Patanjali is leaving many brands behind in different segments and will soon become the number one brand in India.

Future Group expects sales from Patanjali, from new noodles launch , to the tune of Rs 1,000 crore in next 20 months

At a time when most fast-moving consumer goods (FMCG) companies are still skeptical about a pick-up in consumption resulting in improvement in revenues and profitability, Baba Ramdev-promoted Patanjali Ayurved is eyeing 250% revenue growth in FY16, according to a recent Edelweiss Research report

According to Edelweiss Research, Patanjali Ayurved that operates in three broad business segments – foods,cosmetics ,home care ,and ayurvedic products clocked a turnover of Rs 2,030 crore in FY15 with an EBITDA around 20%.