Patanjali

A Business analysis on Patanjali drastically flowed from domestic

country to international level
Vemula Hyndavi
Executive Summary
Patanjali, founded in 2007 by Baba Ramdev and his aide Swami Acharya Balakrishnan has
grown into a 5000-crore company in 2015. It has disrupted the entire FMCG market with its
unconventional growth story. The credit goes to Baba Ramdev who has very meticulously
decided the timeline for each action and delivered unprecedented success. Patanjali’s vision
is to provide herbal/ayurvedic/natural solutions to all the problems and in this pursuit, it is
also elevating the livelihoods of local farmers. It has leveraged the emotional route by
bringing in the ‘Swadeshi’ angle to market its products. The drivers for Patanjali purchase
are lower price points which induces sampling and when they find no noticeable difference
with the pricey brands, they tend to stick to Patanjali. The key differentiators for Patanjali
are its herbal or ayurvedic offerings and the free consultation it provides to the customers at
Arogya Kendras/ Chikitsalayas through its certified Ayurvedic doctors. Besides it has also
increased its distribution channels through franchise stores, retail chains and kirana stores.
However, the supply is not proportional to demand and a lot of customers are not able to
find the desired products. To solve this, they have invested in food parks and have
outsourced manufacturing to other SMEs while conducting stringent checks to ensure
consistent quality.
The strategy followed by Patanjali is unconventional in that they have not made any
significant investment in marketing and promotion and have relied on word of mouth
publicity. Baba Ramdev has done minimal promotion by endorsing the brand in his yoga
sessions televised on national channels. The FMCG giants cannot rely on such a strategy
because they cannot sell the products at such low prices or provide free doctor
consultations and other activities on a continuous basis. Thus, it is not feasible for other
companies to follow this model.
The FMCG industry has a lot of big players with dominant market leaders in each category.
Patanjali is in direct rivalry with most of them and with time has been able to take away
market share from the best-selling brands. In retaliation, the market leaders are bringing
out newer herbal products at lower price points or putting into action other strategies.
However, Patanjali has the advantage of being the forerunner and have gained sufficient
traction that it will be difficult to displace them. The entrance of Patanjali has not just
marked its increased share of the pie but it has also managed to increase the size of the pie
itself.
Table of contents
1. Introduction
1.1 The company
1.2 Patanjali range of products
1.3 Organization structure
1.4 Patanjali growth story
1.5 Industry Analysis
2. The Porters Five Forces analysis
2.1 Bargaining power of buyer: HIGH
2.2 Threat of Substitutes: HIGH
2.3 Threat of new Entries: MEDIUM
2.4 Competitive Rivals: HIGH
3. Situation Analysis
3.1 Context
3.2 Consumer
3.3 Company
3.3.1 Strengths
3.3.2 Weaknesses
3.3.3 Threats
3.3.4 opportunities
3.4 Collaboration
3.5 Competitors
4. STP Analysis
4.1 Segmentation
4.1.1 Geographic segmentation (North India & South India)
4.1.2 Demographic Segmentation (Based on Age)
4.1.3 Psychographic Segmentation
5. Targeting
6. Positioning
7. 4-p Analysis
7.1 Product strategy and development
7.2 Product life cycle
7.2.1 Introductory Stage
7.2.2 Growth stage
7.2.3 Adoption and diffusion
7.2.4 Innovative strategy
7.2.5 Positive Review of products
7.2.6 Negative review of products
7.3 Price
7.4 Place
7.4.1 offline
7.4.2 online
7.4.3 Direct Marketing
8. Branding
9. Impact on global FMCG companies in Indian Market
10. Conclusion
11. References
 1. Introduction
1.1. The Company:
Patanjali Ayurveda was formed in January, 2006 as a private limited company by yoga guru
Ramdev and his partner Sri Acharya Balkrishnaji. In June, 2007, it was converted to a Public
Ltd. Company. It is registered under the Companies Act, 1956 and has its registered office in
Bijwasan, New Delhi and three other offices in Haridwar. The company was started with the
vision of uplifting the life of Indian farmers by locally sourcing the raw materials from them
and making their lives better while at the same time provide an opportunity to the Indian
masses to move towards healthy lifestyle by promoting Ayurveda and herbal products. Baba
Ramdev started off as a yoga trainer who featured in televised programs in Aastha and
Sanskaar channels and made Indians realize that they have forgotten Indian tradition and
art forms- one of them being yoga. He got wide acceptance and word of mouth publicity
helped him reach to a wider audience. He projected Yoga as a panacea to all the health
problems. In its first year of operations, 2008, Patanjali generated a revenue of over 60
crores.1 (ecommerce@patanjaliayurved.org, n.d.) Almost 10 years later, the homegrown
venture has grown to be a 5000-crore company and is posing a threat to the well-
established companies in the FMCG domain and the in reference to a yoga breathing
exercise, vowing sales would more than double to 200 billion rupees ($2.84 billion) in the
year to March 2018.2 (India Today, 2019)

1.2 Patanjali range of products

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 home care. The highest revenue grossing products are Patanjali
cow ghee, Dant Kanti, Kesh kanti, Patanjali Atta noodles and Patanjali Aloe Vera juice and
gel.
The customer base of Patanjali is very huge and with each passing day, it is growing bigger.
A major ramp-up came when Patanjali was relaunched by Baba Ramdev in 2014. After that
it has not looked back. The company is finding it difficult to cater to the demand of all the
customers. It has increased its distribution channels and expanded its reach multifield from
the point when it started. Production has also increased and it has now over 450 products in
its portfolio.

1.3 Organization structure:

The Board of Directors is formed of three founding people. Swami Acharya Balkrishnaji is
serving as the Managing Director of the company. Two other members Swami Muktanandji

1 https://www.patanjaliayurved.net/about

2 http://www.indiatvnews.com/business/india-ramdev-led-patanjali-registers-over-rs-5-000-crore-turnover-in-2015-16-325922
and Sri Ajay Kumar Arya are also holding positions as the Directors of the company. Swami
Ramdev do not hold any position or stake in the company but does act as the Ambassador
for the entire Patanjali brand. The operations department is headed by Ramdev’s brother
Ram Bharat. Everyone else from the finance, logistics and other teams report to him He is
the informal CEO but designations are not very formalized within Patanjali. Patanjali has
over 200,000 employees in total. They hire street-smart people and do not look for MBA
graduates only. This helps them to keep costs down while also delivering unprecedented
growth.

1.4 Patanjali growth story:

In terms of revenues and net profit, the company had nearly grown 10 times in a span of 5
years

Year Revenue ( In crore Rupees) Net Profit( In Crore Rupees)

2014-2015 2,006 316.60
2015-2016 5,000 450
2016-2017 10,526 680
2017-2018 9,500 620.50
2018-2019 8,300 590.54

Table 1 Revenue and net profit of past five years3

1.5 Industry Analysis

The FMCG market in India is worth $49 billion USD as of January, 2016 and is expected to
grow to $103.7 billion USD by 20204. It is the India’s fourth largest industry. The growing
awareness, rising disposable income of the masses and easier access are the key drivers of
demand growth. There is also an increased demand for premium products because of the
growing youth population. Besides the
penetration into rural areas is increasing and
thus newer geographies are made into
playgrounds for the myriad FMCG companies.
The FMCG industry has three main segments:
Food and beverages (18%), Health care (32%)
and Household and personal care (50%).
Fig 1 Revenue growth of Patanjali

The FMCG sector has witnessed a CAGR of 11.9% between 2016 and 2018. The urban sector
account for 65% of the revenues, while the semi-urban and rural make up the rest 35%. The
current trends in FMCG are product innovation (e.g. Honitus: non-drowsy), product

3 https://en.wikipedia.org/wiki/Patanjali_Ayurved

4 http://www.india-opportunities.es/archivos/publicaciones/FMCG-January-2016.pdf
customization/mass customization, premiumization, backward integration, outsourcing,
increasing rural penetration, outsourcing, expanding distribution networks, smaller sized
SKUs, increasing private label penetration and reducing carbon footprint.

2. The Porter’s Five Forces analysis

After literature review, we performed the Porter’s Five Forces analysis to determine the
attractiveness of the industry, the details of which are as follows:

2.1 Bargaining power of Buyers (dealers, whole sellers)/ customers: HIGH

The switching cost is very low in case of FMCG products. FMCG market is extremely
competitive and hence every company fights to get the largest shelf space at the most
strategic locations to have greater visibility. On the contrary, the products are low
involvement products and are not highly differentiated. Thus, they ask for higher margins to
stock the products. For the customer, he/she has a wide array of choices. The Indian
customer is price-sensitive as well. So, unless he/she sees value in the products or are given
discounts it would be difficult to persuade him/her to purchase. In such a setup, the dealer/
whole seller/ distributor/customer has higher bargaining power. Bargaining power of
Sellers: LOW They have typically low bargaining power, Big FMCG companies have more
power in deciding the pricing structure when they source from local farmers or fragmented
commodity supplier groups. The FMCG companies are also moving towards backward
integration with farmers so as to capture a larger part of the value chain. They provide the
expertise to these farmers and in return are able to source raw materials at cheaper prices.
Finally, the big FMCG companies are also signing MOUs with local government to source
items at fair prices from the farmers.

2.2 Threat of substitutes: HIGH

There are a lot of brands and hence an equal number of offerings from each brand. The
product differentiation is not superb and thus commoditization is not uncommon. Thus,
threat of substitutes is quite high since there is a huge number of products in the same
category. Besides the switching cost is nil. The only concern is the availability of products in
particular channels.

2.3 Threat of new entrants: MEDIUM

Barriers to entry is quite high since it requires significant capital investment in setting up
distribution networks and brand promotion.7 The existing distribution channels are already
being used by the current players. The economies of scale can be leveraged by only a few
with expertise. The established brands do a lot of marketing to build brand equity and thus
it will be difficult to beat them in their game. Unsustainable prices cannot be offered as the
newer companies do not have so much money to spare on promotion.

2.4 Competitive Rivalry: HIGH

The competitive rivalry is very high as the private label brands give heavy discounts
compared to the established brands. Thus, the weak players are ousted from the market.
There are a huge number of players as the market is highly fragmented. More MNCs are
also coming to join the competition. The established brands do a lot of branding to demand
higher prices. So it is difficult to gain market share in any category.

Verdict: Thus, the overall industry is only mildly attractive for new entrants because of the
huge investment and marketing costs. However, Porters five forces have a weakness as it
undermines the core competencies of the company which it may utilize to earn profits.

3. Situation analysis
For the situation analysis, we look at the 5Cs of marketing.

3.1 Context
The entire world is disillusioned with the harmful side effects of all packaged products be it
food or personal care products. Everyone wants to return to nature and live a healthier
lifestyle. This provided Baba Ramdev an opportunity to give back to society. He started
Patanjali Ayurved, a company that would bring the goodness of nature with each of its
products, which would be natural and would make everyone healthier. He shot to fame
because of the yoga lessons he gave to the masses through television channels and other
workshops all across India. And people adopted Yoga, they found it useful and easy. Thus,
he had a huge mass following. So, when he started the company, a lot of people
immediately sought after his products. He branded all of the products as natural and
containing the secrets of Ayurveda. Thus Patanjali, which is fully aligned with the trend of
healthy lifestyle was conceived as merely an extension from healthy exercise to healthy
natural products.

3.2 Customer
The huge number of followers of Ramdev’s yoga constitute the main customer base of
Patanjali. Besides this, people in the age group of 35 years and above, people living in urban
cities who are health conscious are the customers of Patanjali products. These people are
worried about the chemicals in all the modern day so called healthy packaged food and
other personal care products. The lower price points of Patanjali products have promoted
sampling and once they use it and like it, they continue using the product. Customer base is
also expanding because of the positive word of mouth marketing by friends, colleagues and
family members. People from other segments have also started using the products.

3.3 Company
3.3.1 ♦Strengths
Patanjali sources most of the raw materials from local farmers and thus can offer products
at lower prices. All the products have some ayurvedic touch to it. This appeals to the
masses. Besides there are no chemicals used for manufacture of the products. Having Baba
Ramdev as the brand ambassador leads to a transfer of credibility from Ramdev to the
brand itself. Thus, it does not have to work hard to build trust among its customers. Finally,
Patanjali has a very good distribution channel. It has 1200 Patanjali Chikitsalayas, 2500
Arogya Kendras, 7000 open stores in villages and 5600 marketing vehicles 5 apart from tie-
5 http://economictimes.indiatimes.com/magazines/brand-equity/could-distribution-be-patanjalis-achilles-
heel/articleshow/52306425.cms
ups with hypermarkets like Big bazaar, Reliance retail, Hyper city, Star Bazaar (Tata), D-mart,
Spencer retail, More (ABG retail). It has also recently tied up with Apollo pharmacy and thus
had license to use its 2200 6stores in India for distribution of its products. Baba Ramdev has
strong political affiliations which he can utilize to get benefits from the government. He has
already helped Patanjali secure loans at lower interest rates and is also being offered
subsidized land as food parks. These are the strengths of Baba Ramdev but it is not
sustainable if he deserts the company.

3.3.2 ♦Weaknesses
The sourcing of the raw materials is done from local farmers and is therefore dependent on
the produce of these farmers. Thus, the supply is not steady and therefore they are not able
to cater to the demand of the customers. It does not have any definite strategy on scaling
and thus might leave a trail of unsatisfied customers behind since it would not be able to
cater to their demand. Secondly, the positioning is done to attract people above age group
of 35 years of age and it does not appeal to younger generations. This can seriously impact
growth of the company after a certain point if it cannot reposition its appeal towards the
younger generations. Thirdly, the packaging is not good or up to the standard of the current
big players. This might impact adoption of the products. They have been trying to
manufacture products in a lot of categories but only a select few have been successful. They
should try to build those into bigger brands rather than investing their resources in a lot of
products so as to gain market share. They are not focused as of now. Despite having a wide
distribution network, Patanjali does not sell their products through kirana stores as
extensively as other FMCG giants. This is crucial as one of the insights regarding consumers’
purchase of FMCG products is that they purchase almost 90% of the time through kirana
stores. Besides since they price their products very low, therefore they are not able to give
higher margins to sellers which might lead to strained relations.

3.3.3 ♦Threats
The differentiation that Patanjali has created is in terms of ayurvedic knowledge and use of
herbal and natural ingredients in the products. Secondly, Patanjali products are generally
available at lower price points compared to other branded products. However, the
competitors can easily make their foray into the herbal space and they can spend big bucks
on marketing their products as well. Besides they have stronger distribution channels.
Secondly the bigger companies can always create newer brands to start a price war with
Patanjali (e.g. Colgate created Cibaca Vedshakti and is selling at lower price than Patanjali) 7.
This might drain Patanjali’s resources in the long run compared to the bigger companies
who can burn more cash. Another strong point of Patanjali is the backward integration with
local farmers to source their products. However other FMCG companies are also doing that
to some extent. If they begin to extend their backward integration, then it might create
sourcing problems for Patanjali.

3.3.4 ♦Opportunities

6 http://www.business-standard.com/article/companies/apollo-pharmacy-to-sell-patanjali-products-
116043000332_1.html
7 http://economictimes.indiatimes.com/industry/cons-products/fmcg/colgate-to-battle-patanjalis-dant-kanti-with-herbal-
toothpastevedshakti/articleshow/53482249.cms
 The targeting can be changed to appeal to younger generations as it is yet to capture that
segment. For this they need to build a good brand which they can do by working on
advertising and packaging that appeals to broader segments. They are trying to acquire
more food parks in India so as to solve the problem of sourcing. This will create stability in
the availability of products and they can cater to the increased demand. They can scale up
even more through franchise model or tie-ups with more supermarkets/hypermarket
chains. Finally, it can price its products a bit higher, especially the best-selling ones as
people have become loyal and are willing to pay a premium. This benefit can be passed on
to the sellers in the form of higher margins which would lead to better sales.

3.4 Collaborators
Patanjali Ayurved does not have the capacity to produce everything they sell as it is difficult
to source such huge quantities of different items. So, they outsource the manufacturing to
other manufacturers and then pack them using the Patanjali tag. This is done across most of
the items starting from biscuits to rice and other personal care products. So, they outsource
and have a lot of dealings with manufacturers. Other than that, for the distribution, they
have their own Arogya Kendras and Chikitsalayas but those are not enough. So they have
many franchises all over India to widen their reach. Apart from that, Patanjali has also
signed up with a lot of big retail chains like Future group’s Big Bazaar, Reliance among
others. This makes it available even to the upscale people who go for shopping at these
chains’ contrary to the lower middle-class people who generally go to Kirana stores. It has
also made its products available in about 2 lakh kirana stores all over India.

3.5 Competitors
Patanjali had made a string of enemies amongst the FMCG giants. With its aggressive
stance, it is giving each of its competitors a tough time. Some of the notable mentions are
Colgate, Dabur and HUL. Colgate had lost around 5% of market share to Patanjali since it
launched its Dant Kanti. Dabur also lost a significant market share in Chawanprash and
honey. The bigger FMCG companies like HUL, P&G, ITC, etc. are not affected to a great
extent but Patanjali has competing products in a lot of health and personal care, beauty
products and food and beverage products. It would not be long before they recognize
Patanjali as a threat and take counter measures. A few companies have already taken steps.
Colgate has launched a new herbal toothpaste at a lower price point than Patanjali. HUL is
creating a new arm to produce herbal products and include them in their product portfolio.
They have also acquired ‘Ayush’8 recently to increase their expertise in ayurvedic offerings.

Table 2 Competing prices with competitors

4. STP Analysis
4.1 Segmentation
From the product line up of Patanjali Ayurved, it can be safely assumed that it does not
segment the customer base as such, making the whole population its potential customer. As
per Ramdev’s vision of bringing welfare and manufacturing good and unadulterated natural
Ayurveda products easily available to the common masses, this stance of not segmenting
the market as such seems aligned. However, on analysis, a broad segmentation can be
observed.

4.1.1 Geographic Segmentation (North India & South India)

8 http://articles.economictimes.indiatimes.com/2015-09-12/news/66465713_1_lever-ayush-e-commerce-premium-brand
It is observed that Patanjali products are a huge hit in the North Indian market but not that
much in South India. One reason might be that Ramdev being from the Hindi belt and
Aastha channel airing in Hindi language, its prominence is not that much down in south. The
same reason holds true for its packaging, which uses either English or Hindi. To be noted
that Patanjali owes its huge success to Ramdev’s active image association with it.
Behavioural Segmentation (based on lifestyle and types of products consumed or used) The
consumers can be segmented based on their lifestyle & health preference and by the type
of product they use. The main users of Patanjali products are the people who are health
conscious and want to use pure unadulterated natural Ayurveda products.

4.1.2 Demographic segmentation (based on age)

A clear segmentation can be done based on age. The young generation, i.e. typically
children to young adult below the age of 35 years is a clear segment, while the rest of the
population aged more than 35 years are the other segment. This segmentation based on
age makes sense since young adults & children enjoy life and often is not serious about
health or life, which makes them not a user of these products. On the other hand, once
people turn a little old with the onset of middle age, they start thinking about health & the
future. These are the people who generally make the purchase of Patanjali products.

4.1.3 Psychographic Segmentation

Based on the psychology and mindset of the people, this segmentation is taken into
account. There is huge overlap between the people who attend Ramdev’s Yoga camps or
follow him on Aastha. They perceive him as an ascetic and hence his products too shall be
good which makes them purchase these Ayurveda products of Patanjali. Also to be noted is
that Ramdev wanted to create a Swadeshi sentiment among the customers and
Thus, pitched against FMCGs who are mainly MNCs or use raw materials/ procedure of
foreign origin.

5. Targeting
Currently Patanjali is competing in all FMCG categories catering to the whole population,
which is otherwise called Total Market Coverage Targeting Strategy. They have diversified
into almost all categories like oral care, hair care, skin care, groceries, health drinks &
supplementary, packaged food etc. Also, since they have no differential products within the
same product portfolio, this substantiates the fact that they are not targeting any particular
segment, rather serving the whole population with their offering. To reach to the maximum
number of potential customers, it has to target specifically though. The house wives and the
elderly of the house are the influencers and decision makers in the purchase process of
Ayurveda products. By just producing packages with South Indian languages, the south
market can be targeted.
At present Patanjali is contending in all FMCG categories obliging the entire
populace, which is generally called Total Market Coverage Targeting Strategy. They have
expanded into all categories like oral care, hair care, healthy skin, basic needs, health drinks
and packaged beverages and so on. Additionally, since they have no differential items inside
the same item portfolio, this substantiates the fact that they are not focusing on a specific
section, rather serving the entire populace with their advertising. To reach to the greatest
number of potential customers, it needs to be more specific in its targeting though. The
housewives and the elderly of the house are the influencers and chiefs in the buy procedure
of Ayurveda items. By simply producing packaging with South Indian dialects, the market in
the south can be focused on.

6. Positioning
The positioning statement of Patanjali is derived to come to the following:
“For the mass Indian consumers, Patanjali Ayurveda offers the complete range of
unadulterated natural/herbal/ organic products which are a healthier alternative to the
other FMCG products at a significantly lower price.” 9
Ramdev wants to associate Patanjali holistically with Arogyam eco-system, which means
disease free long life. This is actually tying up of yoga, pranayama and Ayurveda to create
such a possibility, something which Ramdev banks on.
He also links the idea of indigenous (Swadeshi) to the company’s products and does
cause marketing for the company by saying that they are helping the farmers to earn more.
He projects Patanjali as a not-for-profit company and that it is there to serve the masses. He
mentions that they do not keep margins on most of the products and hence the mouth-
watering prices.

7. 4-P Analysis
Product Starting at 2007 with a humble range of products, Patanjali had quickly diversified
into a vast range of offerings: around 800 10products including 250 medicinal products, 45
cosmetic products and 30 food products11.14 Broadly, the product category of Patanjali can
be classified as follows: Ayurveda Medicinal products, Organic natural juices, Groceries,
Oral/ dental care, Hair care, Skin care.
It is interesting to analyse how Patanjali has rolled out its product portfolio and
where it is heading towards in the near future. It started its products with chawanprash,
honey, organic natural juice and Ayurveda medicinal products, which directly resonates with
what Ayurveda stands for. But slowly it started to copy the product portfolio of everything
that a typical FMCG company should have. With the launch of toothpaste, shampoo, beauty
products, noodles etc., it surely is expanding to become one of the FMCG power houses
with a differential offering of Ayurvedic range by the sheer number of products in each of
the categories.

7.1 Product Strategy & Development

Unlike most of the typical FMCG company practices, Patanjali has never been
into any formal market research to find out what product should they come up with or what
market they should enter. Rather they believe in the strategy of making the products first
and then taking it to the market. Many a times, there has been instances where they
entered into a new product category which some other company has been doing it for
years. Low price, purity and innovation are the three main drivers of the product
development strategy of Patanjali. A good example of this can be of the Patanjali Amla

9 http://www.patanjaliayurved.org/about.html
10 Mail Today Bureau.2012. Ramdev's ayurvedic products to foray into open market. Business Today. March 2
11 Sinha, Shishir. 2015. We plan to open Patanjali outlets at railway stations, airports: Ramdev. Thehindubusinessline.21 may
Candy. Before it was launched, there were numerous amla products in the market, hence
the market can be said to be existing. But this particular amla product in the form of candy
was unheard of before, which is a truly innovative move from the company. As for the low
price and purity aspects, this product qualifies them too. The amla farmers were facing loss
at a point of time since the market was very small, though amla has many health benefits.
Ramdev took a risk and started promoting the health benefits of amla leveraging his huge
following. This promotion was shortly followed by the product launch of amla juice and amla
candy, which was a hit product in the market. Another example where Patanjali delivered in
the lines of purity can be the Desi Ghee. There has been always an inherent concern among
the consumers about the availability of pure ghee. This need of the customers did not
require an extensive market research to develop a product based on this line since Patanjali
always worked form the base of the pyramid and had a connect with the consumers and
hence came up with this product which became their best-selling product and accounted for
a 37% of their sales in 2015 which amounted to Rs 442 crore of sales revenue. Hence, it is
clear that Patanjali is using Product Development strategy i.e. developing new products
(here in this case, making Ayurveda variants of products) in an existing market. Their yoga
sessions & camps is an existing service in an existing market, but since it is vital for Patanjali,
they will be looking for Market Penetration by this. By targeting the youth, they want to
enter into a new market with their existing products & service. This strategy can be a part of
their Market Development plan. Finally, they are Diversifying by bringing in new products in
new market like cosmetics, health drinks etc.
Product.

7.2 Product Life Cycle

Patanjali has now a huge product portfolio under its brand. But scrutinizing deeply, not all
products were launched at the same time. Rather, they started with few products and since
then has been constantly innovating to come up regularly with new products. Also, in
comparison with other FMCGs, Patanjali is a fairly young company dating back to 2007.
Hence all of its products will be either in introductory or in the growth phase and has still a
long way to go before it reaches maturity.

7.2.1 Introductory Stage

Ayurveda means life-knowledge, which was a system of medicine practiced in India since
ages. Ramdev was the one who materialized and commoditized that knowledge and broke
the barrier of using Ayurveda not only in medicine but in consumable products too. With
this vision, Patanjali was started in 2007. Few products which are in the introductory stage
are fertilizers and floor cleaners. Clearly, the innovators and early adopters are those who
are followers of Ramdev and middle age to old people who are health conscious and
believes in the Ayurveda.

7.2.2 Growth Stage

The meteoric rise of Patanjali started from 2012. From 2012 to 2015, it posted CAGR of
64.7% of revenue growth and sales worth Rs. 2000 crore. Patanjali is already past the gap
between early adopter & early majority. Many of its best-selling products like ghee and Dant
Kanti have reached the growth stage.

7.2.3 Adoption & Diffusion

Adoption is when an individual makes the full use of an innovation as the best option
available. In the case of Patanjali, this adoption is done by the innovators and early adopters
who are the earnest followers of Ramdev, follows his yoga sessions regularly, either in-
person or over media, middle to old age and believes in the purity & health benefits of
Ayurveda products.
On the other hand, diffusion is when the innovation is communicated through channels to
mass members of the social system over time and is accepted. In the case of Patanjali, this is
done by a strong and positive word of mouth communication from the early users to the
early majority. Other media channels also play a significant role in this process.

7.2.4 Innovation Strategy

A product or service can be innovative, but whether it will be successfully adopted by the
consumers depends on the degree of product change and the degree of behavioural change
that the innovation brings. From market visits and interviews, it has been found out that
Patanjali products are low in the degree of product change and also low in the degree of
behavioural change should the consumers start using it. This makes the products of Patanjali
an Easy Sell. For example, let us take Dant Kanti, which is an Ayurveda tooth paste. By
keeping it in paste form like the existing Colgate and not powder form, it is ensuring that
there is minimal behavioural change. Also, by adding a few key Ayurveda ingredients, they
are making a minimal change in the product. This innovation strategy contributes to the
easy adoption and hence easy sell of these products.

7.2.5 Positive review of products

The products are quite effective and good results are noticed after consumption or usage. At
least to the common man’s perception, the products are of high purity. The prices of all the
products are significantly less that even some people who does not believe in Ayurveda or is
turned off by the poor packaging, actually makes the purchase.

7.2.6 Negative review of products

The packaging is of extremely bad quality. Even the colours used and the imagery as well as
the packaging material is of low standard. (Though according to in depth consumer
interaction, this is perceived as a symbol of honesty, purity and hard work unlike the MNCs
who roll out any product with an attractive packaging)
The package size of most of the products is limited. Hence
customers do not have the option to purchase according to his/ her usage requirements.
Also, the supply of the products is irregular at times which often causes stock outs or
unavailability of the products or size.
 Fig 2 Product life cycle
7.3 Price
A significant amount sometimes as high as 20-30% of the sales goes to marketing, packaging
& advertisements in the case of typical MNC FMCG. But in the case of Patanjali, these costs
are low since they do not market or advertise their products as their competitors nor they
spend on fancy packaging. Also, they either directly source the raw materials from the
farmers or grow them in their farms. This helps them significantly to keep the costs low.
Moreover, their manufacturing plants are nearby the sourcing locations. Patanjali does not
spend on extensive market research like other FMCG companies. Also, they don’t have
neither hire high paying officials in their company. As claimed by Ramdev, he does not even
take anything home, while most of the promotions are carried out by him. This is one of the
main reasons why Patanjali can offer products at such a low price. A table comparing the
prices of Patanjali with other products across different categories is shown in appendix.
The lesser price for each product in each category has created a Cost
Advantage for Patanjali. Middle class people find it good reason to switch to these products.
Even it urges the first-time users to purchase it and give it a try.

7.4 Place
The main manufacturing unit is in Haridwar, where all the production & manufacturing
takes place. From there on, the products are rolled out in two formats: offline and online.

7.4.1Offline

•Patanjali Chikitsalaya, Arogya Kendra and Retail Stores

These are channels and outlets which are handled directly by Patanjali, from distribution to
procurement. The Patanjali Chikitsalaya offers free Ayurveda doctor consultation over &
above stocking the Patanjali products, irrespective of whether the customer makes the final
purchase or not. The Patanjali Arogya Kendra is similar to Chikitsalaya, the only difference
being that the presence of a doctor is not compulsory here. The exclusive retail stores are
minimal & simplistic, stocking only Patanjali Ayurveda products and thus giving the
customers an easy & large offering to choose from.

•Big Bazaar
As a part of tie up with Future group, Patanjali products are made available in Big Bazaar
retail outlets. The distribution is handled by Future group in this case. But even in here, the
Patanjali products generally have a separate shelf or row of their own hence breaking away
the clutter from the ‘me too’ products of FMCG companies where there is almost no
differentiation.

•Yoga Camps
Ramdev actively organizes yoga camps across India round the calendar, which lasts for at
least 1 week every place where it is organized. These 1-week period also provides an
opportunity to promote extensively and sell these Patanjali products.
•Post Office
Patanjali products are made available in various post offices all over the country. This is an
extremely break through strategy, something which is less explored and almost not done by
the other FMCG companies. Since post office is generally frequented by the pensioners and
old people, it serves at a place where they can make the purchase while standing on
queues.

7.4.2Online
•Patanjali Online Stores
Patanjali maintains 2 websites from where their products can be purchased online. They
even have an App in Google Play. Offering this online option was a good move from the
company side since it gives high convenience to the customers, who are mostly shifting
towards online shopping. Also, these websites serve as a one stop place where a customer
or potential buyer can view the entire range of products that Patanjali has to offer, which
sometimes is not possible in an offline brick & mortar store. By this, he can choose & select
which product to buy & makes the purchase from the offline store in the case he does not
buy online.

•Third party online platforms

Patanjali products are also available in various e-commerce platforms like Amazon, Flipkart,
Snapdeal and Big Basket to name a few. This is a good strategy since it is a platform which is
frequented by millennials who want convenience and choice of purchase. It also acts as a
promotional tool since Patanjali products can come up in the deals or ads section of these
sites, hence attracting the attention of the customers who might end up buying.

•Promotion
From the very beginning, the promotion strategy of Patanjali had two main objectives. One
was definitely to highlight the health benefits of using Ayurveda products & to evoke the
Swadeshi sentiment into the Indian consumer’s mind. The other objective was to make
aware of the customers about the sinister way of the profit making by the FMCG giants
which are typically MNCs: that they not only fool the customers giving stale, adulterated
products but at the same time charging high price at the cost of exploiting our farmers. All
these promotions were carried out via various channels and modes, some of which are as
follows.

7.2.3 Direct marketing

Ramdev with his popular yoga guru image and organizing Yoga camps across India round the
calendar contributes to the direct marketing of the Patanjali products where they are
promoted and advertised along with the main events.

•Word of Mouth
Most of the promotion is carried out indirectly by the followers of Ramdev and the early
adopters of Patanjali products who have found these products to be good. While
communicating with their family, friends, relatives, neighbours and colleagues, they
indirectly promote brand Patanjali by sharing their positive experience with the products.
Publicity through word of mouth form users is something that tells that that the brand sells
itself with minimal promotion.

•Media
Aastha channel is the TV media where Patanjali is heavily promoted. It mainly started as a
means to spread health awareness & yoga sessions to the masses. But with the advent of
Patanjali, this channel along with the yoga sessions were leveraged to promote Patanjali
products & the health benefits of consuming or using it. This move was aligned since they
were promoting health products in a health-related lifestyle show. Apart from this, Patanjali
ads are sometimes observed in few other channels and print media. Recently, a new
campaign on radio has been launched by Baba Ramdev (Patanjali apnaiye, desh ko aarthik
aazadi dilaiye)12, which hovers around the idea of providing financial independence to the
nation by the use of indigenous products.

•Celebrity endorsement
Patanjali rarely did any celebrity endorsement since the popular face of Ramdev was
sufficient to carry on the promotion. His image as a yoga guru totally aligned with the
Ayurveda product offering of Patanjali. Celebrity endorsement is something which was not
previously in Patanjali’s promotion. However lately, wrestler Sushil Kumar has been seen
endorsing the Ghee brand of Patanjali. But this is also to be kept in mind that this was not in
a very large-scale promotion, nor the sports celebrity was a top shot. We are yet to see a
top shot celebrity endorsing brand Patanjali.

8.Branding
Ramdev is the face and the man behind the whole brand of Patanjali Ayurveda. The story
started even before the idea of Patanjali was conceptualized. Ramdev started as a yoga guru
offering a healthy life style choice and quickly escalated to fame by TV and live yoga
sessions, which had a huge reach and created a big impact on the Indian people. One of his
erstwhile disciple & friend, Acharya Balakrishna who also happens to be an Ayurveda expert,
used this opportunity to launch a range of Ayurveda & herbal products under brand
Patanjali. Combining these products with the yoga of Ramdev was a good move as they
were complementary to each other and helped each other as a sort of unwritten co-
branding. Patanjali products started to get promoted by Ramdev via the TV channel (Aastha)
and also in his yoga sessions. This association of Patanjali with the popular and mass
accepted yoga guru Ramdev has been a strong and favourable one. Hence salience or
awareness of the brand is high, significantly more in North India and parts of Western India
than other regions, the reason behind can be due to usage of Hindi as its prime language of
communication and promotion. The brand recall is also quite high. The imagery that
Patanjali carries is quite a positive one, which is seen as a pure, good quality indigenous
product and a healthier alternative than other FMCG products typically found in market. In
terms of performance, by our market research and interviews, the customers are satisfied
with it. Most of the consumers feel that Patanjali is a brand that can be trusted and hence
advices each other to use these products. Since it is lifestyle choice of choosing the healthier

12 http://www.livemint.com/Consumer/iPrCc09EgmwIYSA4qEAlLN/Baba-Ramdevs-Patanjali-Ayurved-splurges-on-radio-
ad-with-sw.html
alternative among the existing brands, there is a resonance among the consumers which
results in strong brand loyalty. It is observed that once a consumer starts using a particular
Patanjali product, he or she starts using other products too of the same brand since all are
aligned with Ayurveda.
From its inception, Patanjali has been following ‘Branded House’ strategy that is keeping
everything under one umbrella brand, unlike most of the other FMCG companies like HUL,
P&G etc. which uses ‘House of Brands’ strategy i.e. there is a standalone brand for each
product line offering. This gives Patanjali a significant advantage in building a unified brand
for itself, its current range of products and new products which are going to be launched
since it can leverage on the already established brand of Patanjali.

9. Impact on Global FMCG companies in the Indian Market

The Indian FMCG market is a fiercely competitive one with products of the same category
across brands has almost no differentiation per se and priced almost the same, making all of
them a ‘me too’ product. All the players in the FMCG market hence keeps tab on its
competitors. Any change in price points or a new product launch is quickly copied and
tackled by the rest of the players giving very little space to play in this market. In such a
market, Patanjali came with a whole new offering of pure, natural, herbal & indigenous
Ayurvedic products with medicinal values and health benefits that also at a price point
lower than these FMCG brands. Not only they had a differentiating factor, they got a
significant cost advantage. This disrupted the whole market as Patanjali flooded the market
with their products. The impact was huge on the other FMCG brands, particularly in those
categories where Patanjali was exceptionally strong. Colgate was hit in the tooth paste
category as Dant Kanti ate up its market share which is up to 4-5%. In the wake
of Patanjali Dant Kanti’s success, both volume growth and share of the company fell down in
FY16.13
Dabur was also affected by the impact since they also played along the herbal range. As a
counter move to Patanjali’s rise, Dabur too wants to revamp its offerings in the women’s
healthcare range. Dashmularishta and Ashokaristha, which are both traditional Ayurvedic
post-natal health tonic and menstrual pain relief tonic respectively is introduced by them.
They want to enter the baby care and health segment too soon after this. 14
HUL also is taking counter measures to prevent Patanjali eating up its share. It is focusing on
ecommerce hoping that digitalization will take over the Ayurvedic market too, and when
that happens, they become the key player by having the early mover advantage 15. In 2015, it
relaunched its Ayurveda brand Ayush as a premium brand, thus avoiding price wars with
Patanjali Ayurvedic products. Recently, it also acquired Indulekha which was Mason group’s
flagship brand and positioned differently as ‘naturals’ and ‘therapeutic’. 16

13 http://www.moneycontrol.com/news/buzzing-stocks/credit-suisse-downgrades-colgatepatanjalis-
toothpasterise_4950661.html
14 http://brandequity.economictimes.indiatimes.com/news/business-of-brands/fmcgs-fight-club-dabur-to-take-on-
babaramdevs-patanjali/50432707 18http://www.moneycontrol.com/news/cnbc-tv
15comments/agm-report-hul-to-takepatanjali-through-ayurveda_6960621.html
16 http://timesofindia.indiatimes.com/business/india-business/Dabur-plans-to-counter-Patanjali/articleshow/50431387.
 Table 3 Sales and growth rate for personal care products in India
10. Issues & Recommendations
10.1 Issue 1: Stock-out 17
With almost 600 products scattered in multiple FMCG categories, the product portfolio of
Patanjali is large and has become inconsistent, which is causing confusion among customers
and also shifting away from its core value proposition. For example, the noodles or biscuit
category falls neither under the Ayurveda bracket nor it is an Indian food or recipe, both of
which were core to Patanjali. Also, just by flooding the market initially with the sheer
volume of their numerous products, now it is posing challenge to the company to maintain
demand-supply, to avoid stock-out of best-selling products & clearing the less selling
products.
Recommendation - Patanjali should cut off manufacturing or marketing the products which
are not aligned with their core value of providing Ayurvedic products which has health
benefits. By this, they can retain and strengthen their position as the market leader in
Ayurveda and herbal products. Also, by this process, they will have a smaller portfolio than
present, which will enable them to divert all these resources into those products. Quality
will enhance significantly; packaging can be improved & steady demand-supply can be
maintained as a result along with many other possibilities.
10.2 Issue 2: Fill rate and sporadic supply18
The supply & distribution of Patanjali is inadequate & sporadic. Many a times, there is more
supply than required and at times, there is very low supply. According to one source, the fill
rates of Patanjali products are in the range of 40-50 per cent. On the other hand,
multinational consumer goods companies such as Nestlé and HUL have a fill rate of 85-90
per cent. The distributor margins are as low as 5% compare to 8-10% as offered by other
FMCG companies. Most of Patanjali products are hence sold on MRP owing to very low
margins.
Recommendation – Cutting down the existing SKU to a reasonable number will help
Patanjali gain traction as they can optimize on the supply demand and give a little more
margin to the distributors & retailers. In the second phase, we recommend increasing the
production capacity by increasing the number of production units. As a result, they can
17 http://economictimes.indiatimes.com/topic/Patanjali-Ayurved-Ltd

18 http://www.business-standard.com/article/companies/patanjali-struggles-to-meet-demand-for-products-
116080801487_1.html
leverage economies of scale and hence work on the adequate & timely supply as well as give
a better margin to the distributors & retailers. In the light of this, it should consider setting
up production plants in South India to enter more aggressively in this market. Overall, a
hub-and-spoke model would be beneficial for a smooth Pan-India distribution. Also, careful
selection of distributors is recommended who understand their local supply-demand well.
To increase reach, it should be available in local kirana stores too.
10.3 Issue 3: Advertising spend vs low prices
With a high ambition of directly taking on the MNCs, of lately Patanjali has started spending
a bomb on their advertising & promotion. Only in the first two quarters of the current fiscal
year, it is estimated that Patanjali has spent around Rs 360 crore, which is around 7% of
FY2015 sales revenue of Rs 5000 crore, while the operating margin was around 23%.
Naturally, this will put pressure to increase the price.
Recommendation – Since the company is in its growth phase, it is natural that it will have
ambitious plans ahead. We recommend that in the light of such plans, it should always think
in the long term and do not suddenly increase the price of its products since most of
customers are still in adoption stage and diffusion needs time. Increasing the price to bear
the cost of promotions and other activities may prove fatal to the company and the
customers may switch back to the commonly available FMCG goods.

11. Conclusion
Baba Ramdev’s Patanjali has made disruptive progress in the FMCG sector. Within a span of
less than 10 years, it has displaced ayurvedic market leaders like Emami and Himalaya.
Patanjali has become synonymous with ayurvedic products. While the total demand is not
being satisfied as of now, efforts are on to increase sourcing so as to maintain steady supply
of raw materials. The fill rate is 45-50% and can only increase from now on. They have
increased their margins for franchise stores as well as retail chains to around 10% and thus
are getting better placement on the shelves. They are focused on serving the masses and
thus cut corners in packaging and advertising. This is changing as they are spending on
advertising recently. The radio campaign is the first proof of that. Ramdev Baba’s charisma
has pushed Patanjali to grow over 10 times in a span of less than 10 years. The FMCG giants
are also taking steps to check the advancements of Patanjali. However now that it has
gained traction in the market and there is overwhelming demand for its products, it will be
difficult for them to win back their lost market shares.

12. References
• https://en.m.wikipedia.org/wiki/Patanjali_Ayurved
• https://www.indiatoday.in/india/story/baba-ramdev-patanjali-largest-fmcg-
brand-1055384-2017-09-30
• https://bstrategyhub.com/patanjali-swot-analysis-2019-swot-analysis-of-
patanjali/
•https://m.economictimes.com/industry/cons-products/fmcg/patanjali-
ayurved-posts-rs-3562-crore-revenue-for-april-
september/articleshow/72126682.cms
• https://www.ibef.org/industry/fmcg.aspx
•http://backoffice.phillipcapital.in/Backoffice/Researchfiles/Researchfilesmove
/PC_-_Patanjali_Plant_Visit_Update_-_Jul_2016_20160804144849.pdf
•https://www.ndtv.com/topic/patanjali-products
• https://www.slideshare.net/mobile/Ajaykumarsingh28/patanjali-2
• https://www.quora.com/Who-are-the-competitors-of-Patanjali

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