The rise of Patanjali: An Indian yogi’s challenge to MNC giants

The rise of Patanjali: An Indian yogi’s challenge to MNC giants
The rise of Patanjali: An Indian yogi’s challenge to MNC giants

New Delhi

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]A[/dropcap]s the country celebrates the 67th Republic Day, the rise of Yoga guru Baba Ramdeo’s Patanjali Ayurved empire is a powerful message to multi-national Image result for meaning of Fast-moving consumer goods(FMCG) giants that the spirit of ‘Desi’ entrepreneurship is all set to overcome the lure of the foreign brands.

The message was drive home powerfully in the second week of this month when international brokerage firm Credit Suisse downgraded Colgate Palmolive to `neutral’ and reduced its target price to Rs.1000 ($14.8) per share on concerns that Baba Ramdev-promoted Patanjali posed a potential threat to Colgate’s growth.

“Colgate’s volume growth has seen a significant drop in FY16, which is divergent from peers who are seeing steady volume growth. The key reason in our view is the strong traction that Patanjali has gained in the category,” the CLSA said in a report that also trimmed the Colgate’s FY17-18 earnings estimates by 3-7 percent.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]his came in the wake of Patanjali Ayurved announcing its partnership with Kishore Biyani-controlled Future Group to reach its products to a wider consumer base across the country. This is seen as a win-win deal as the Future Group also hopes to sell its own products to consumers who would jump for the discounted Patanjali’s products.

The Patanjali products are cheaper by 15-30 percent in comparison to the same items sold by FMCG companies. Patanjali sources products directly from farmers, so it does not have pay the middlemen. This allows it to make 20 percent operating profit and still leave aside 10-15 per cent margins for its retailers. Patanjali now has a wide product range which includes herbal medicines, fruit juice, pulses, rice, atta(wheat), honey, biscuits, tooth paste, shaving creams, cosmetics, eye drops, cough syrups, etc.

The phenomenal rise of Patanjali from a low-key Ayurvedic company in 1997 to a Rs 2500 cr ($370 million) FMCG empire is giving nightmare to other well-established companies like Emami and HUL. By keeping the price relatively low and opening its branches in remote parts of the country, dense localities, and super markets, Ramdev has successfully taken his products to the masses. The group has 15,000 exclusive outlets, which Ramdev wants to increase to about 1,00,000 in the next few years. In addition, Patanjali has 5,000 franchisee stores.

Ramdev has also hired two top advertising agencies McCann and Mudra to gear up his empire for the next phase of growth.

In addition to price benefit, somehow his products also carry the message of ‘purity’. In conveying this message Ramdev’s overall personality as “yogi” and his yoga camps have played a big role. Millions of his supporters and well-wishers, cutting across ideology and party affiliations, are his committed consumers. None of the MNCs or even Indian brands can claim such fanatic brand loyalty. It will not be long before Ramdev emerges as India topmost corporate. In doing so, he will present a perfect example of how the world of business and spiritual pursuit can go hand in hand.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]H[/dropcap]is competitions are keenly watching his rise, and rating and brokerage agencies are busy in forecasting his expected growth course. A report put out by Edelweiss Research (co-authored by Abneesh Roy, Pooja Lath and Tanmay Sharma) products that Patanjali Ayurved sees 250% revenue growth in FY16. The report will be an eye opener to several FMCG giants who are struggling to retain their top and bottom lines and protect their consumer base.

According to Edelweiss Research, Patanjali clocked a turnover of Rs.2,030 crore ($300 million) in FY15 with an EBITDA (earnings before interest, taxation, depreciation and amortization) of around 20%.

“The company targets to achieve revenue of Rs 5,000 – 6,000 crore ($888 million) in FY16 itself. Growth is being driven by the company’s largest-selling product, cow’s ghee (expected to be Rs 1,200 crore ($178 million) in FY16) followed by Dant Kanti and Kesh Kanti. Patanjali also has a robust pipeline of new products, which will help achieve its target. Besides Patanjali Noodles, the new launches pipeline includes Dant Kanti Advance, Sugar free Chyawanprash, PowerVita, Seabuck thorn dietary supplement and powdered hair dye,” the Edelweiss report says.

“Over FY12-15, Patanjali registered revenue CAGR (compounded annual growth rate) of 64.7%. In FY15, of the total sales of Rs 2,030 crore, food and cosmetics contributed Rs 800 crore each, while healthcare products comprised the balance,” it adds.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]E[/dropcap]arlier in August 2015, global brokerage and research house Credit Lyonnais Securities Asia (CLSA) said that Patanjali Ayurved was the most diversified FMCG player in India, bigger than listed players like Jyothy Labs and Emami.

“PAL perhaps lacks most ingredients for building a large-scale consumer goods business, be its negligible A&P (advertising & promotion) spends or distribution network. Yet, the brand power of a yoga guru has brought PAL into the top league with a topline reportedly in excess of Jyothy Labs and Emami,” the report ‘Indian Consumer: Taste of India‘ by CLSA’s Vivek Maheshwari and Bhavesh Pravin Shah has said.

The reports added: “The plans are even more interesting as the company is now looking at ‘traditional’ ways to expand and targets to more than double the top line in coming years. While competition must be keeping its fingers crossed, all we can say is – ‘Wish you were listed’.”

Interestingly, Baba Ramdev does not hold any stake in Patanjali Ayurveda Ltd. His close associate, Balakrishna reportedly holds 92 percent stakes and the balance 8 percent stake are held by Scotland-based non-resident Indian couple, who are devout followers of the Yoga guru.


Note:
1. The conversion rate used in this article is 1 USD = 67.54 Rupees.

Navin Upadhyay

Navin is a senior journalist with years of experience in covering India’s Capital city. His keen observations and ability to create the big picture from disparate pieces of information is invaluable.
Navin Upadhyay

2 COMMENTS

LEAVE A REPLY

Please enter your comment!
Please enter your name here