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The Rise of Patanjali : A Case Study of Patanjali

Patanjali’s success in FMCG is certainly an outcome of combination of low prices, ‘natural and pure’ proposition, ‘swadeshi’ positioning and path-breaking sales and distribution strategy.

Patanjali Ayurved, started in 2006 by the famous Yoga Guru Baba Ramdev, has seen a meteoric rise in the past few years with revenues of ₹10,000 crore in FY17 from ₹450 crore in FY12. Let us try to analyze this growth in a comprehensive and structured manner.

  1. Baba Ramdev emerging as a role model among various households by creating yoga and pranayama awareness.

Let us start by retrospecting this aspect. Baba Ramdev demonstrated the world the health benefits of the mighty yoga and pranayama by organizing thousands of yoga camps across various regions of the India and abroad as well. People started believing in this unique thing (i.e. yoga and pranayama) when they noticed recovery in most of their diseases. This went a long way building goodwill and consensus for Baba and Patanjali Yogapeeth.

2. Declaring War On Foreign Brands and appealing people to use swadeshi

‘Swadeshi’ FMCG brand Patanjali owned by yoga guru Baba Ramdev made an entered the market riding on the wave of ‘Swadeshi’ and nationalism. Patanjali was quick to dethrone the likes of Hindustan Unilever, P&G in the FMCG market. His attacks on Pepsico’s beverages through his speeches in yoga camps and press conferences hugely waned the sale and market share of espacially Coca Cola and Pepsi.

3. A uniform clustered sales and distribution method helps it to keep its cost low

A critical role is played by Patanjali’s path-breaking sales and distribution strategy in driving this exceptional growth trajectory. Patanjali has followed a two-stage distribution strategy in general trade (GT):

Stage 1: Create a strong alternative distribution system for demand creation and building word-of-mouth advocates

Stage 2: Pivot to GT once a sizeable consumer base is generated from Stage 1

Patanjali can offer low prices to consumers due to very low selling, administrative and general costs at 2.5 per cent of revenues. Advertising spend in FY 16 at 6 per cent is also well below the peer set. Critically, it has kept retail margins at half or lower levels as compared to competition.

Additionally it provided Patanjali brand and training and certifications to various local Ayurveda Doctors practitioners in tire 2 and tier 3 cities. This increased the patient inflow in their clinics and promoted cross selling of products. i.e. FMCGs along with medicines. What a mind blowing business sense, isn’t it?

4. A highly dedicated core committee members with highly creative, inquisitive mind facilitating quick and data driven decisions and periodic reviews of the same

Patanjali’s unpaid MD and CEO Acharya Balkrishna is the man behind this mind blowing success of the brand. During one of his interviews to a group of TV reporters he astonished all of them through his exceptional data driven, to-the-point and patient answers to all questions which also exhibited his perseverance and strong sense of oneness with the company. Patanjali has a unique way to test potential employees on their skill sets and swadeshi infusion. At a time when the instant noodles controversy was at its peak, Ramdev announced that he’d be launching his own brand of noodles – Patanjali Atta Noodle pretty soon. This is the best example of capturing the market by making right decisions at right opportunity.

5. Last but not the least, alternative distribution system of Patanjali

In a new market, Patanjali first drives trials and consumption using dedicated stores. These stores are essentially Ayurveda clinics, run by entrepreneurs entirely with their own investment. They are of three types – Arogya Kendra, Chikitsalaya and Swadeshi Kendras.

Patanjali extends support in two ways: It trains and certifies medical practitioners nominated by these stores in Ayurveda, and provides usage of the Patanjali brand name. This automatically bestows trust and credibility due to the rub-off effect of Baba Ramdev’s credentials on Yoga and Ayurveda.

These stores also serve another function – product introductions are done extremely efficiently and decisions to continue tweaking or scaling up the product and communication mix can happen in a short time frame.

Currently, 10,000 dedicated stores (Chikitsalaya, Arogya Kendra, and Swadeshi Kendras) contribute to 60 per cent of the company’s revenues. In Delhi NCR, one of the older markets for Patanjali, there are over 400 of these stores whereas in a newer market such as Mumbai, there are approximately 270 stores.

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