9/14/2016

A retail shocker from Haridwar: the Patanjali story

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A retail shocker from Haridwar: the

Patanjali story

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ATHIRA A NAIR, 25 MARCH 2016

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In a time when yoga has flexed its influence across the globe, and all things Indian whether it
is our cuisine, culture, or commodities market, are finding an increasing global audience, it
should come as no surprise that sadhus are taking over as businessmen. The most
prominent of them is Baba Ramdev, a Haridwar-based yoga guru who has rarely strayed far
from the spotlight since the Jan Lokpal drama of 2011. He later went on to declare support
for Narendra Modi during the 2014 Lok Sabha elections.

Having gained a substantial fan following through his televised yoga camps, Ramdev
relaunched his Ayurveda firm Patanjali Ayurved, which he began in 2006. Nobody saw it
coming but Patanjali is now headed towards a billion dollar sales turnover.

New feathers in the basket

From its early days as a maker of products with medicinal benefits, since 2014, Patanjali has

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manufactured everything from instant noodles to detergents and personal care products. In
addition to its own online platform and 5,000 franchise stores, Patanjali now has tie ups with
Future Group and Big Bazaar. They also sell through online grocery players like Big Basket.

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This IIT pr

Raghuram

However, only three or four categories including ghee, honey and toothpaste have made

for tribals

a mark so far; the rest is yet to see success in terms of numbers. According to Arvind

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A retail shocker from Haridwar: the Patanjali story

Singhal, chairman of consulting firm Technopak, an efficient supply chain and local sourcing
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are Patanjalis strengths. Unlike the MNCs, Patanjalis marketing spend is minimal, and
distribution is through traditional FMCG channels.

Patanjali C

is now offi

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As per a report by CLSA Research in August 2015, Patanjali, which has seen its revenues
quadruple in the last four years, made more than Rs 2,500 crore in revenue during the last

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fiscal. It is expected to double its revenue, reaching Rs 5,000 crore by the end of this fiscal.
Recent reports suggest that they have hit Rs 4,500 crore already. Claims of hitting Rs 7,000

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crore by FY 2016-17 may not be so far-fetched, after all.

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The surprise winner

business c

their inspi

Surely, the competition is rising. But Patanjalis edge over the MNCs is forcing them to
device a new plan for India. Even if they try to compete with the natural products, it is

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impossible to come up with a formula for India overnight. They will have to tweak it for the

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Indian ecosystem, says Arvind.

Besides giving a shock to MNCs like Nestle, Colgate, ITC, and Indian brands such as Dabur

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and Godrej, Patanjalis business growth shows a lot of similarities with the new generation

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business models. Like Uber and Ola, which have tied up with numerous state governments
for various programmes, Patanjali is tying up with the Maharashtra government to buy the
excessive products derived from materials available in forests.

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Ratan Tata

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Ramdev has said that they have plans to establish five food parks in the country one in
Madhya Pradesh and another in Maharashtra have been confirmed. Curiously, their raw
material is also taken from their own farmlands, and the middleman has been eliminated

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What busi

between the company and farmers, boosting operating profit by 20 per cent. Prices are 30

from Muke

per cent cheaper than other major brands such as Dabur. Retailers get a 10-20 per cent
profit margin and for distributors it is 4-5 per cent.
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A retail shocker from Haridwar: the Patanjali story

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A retail shocker from Haridwar: the Patanjali story

No big shots

While most FMCG companies spend crores on HR, Patanjali has a low-cost management
team with no high-profile names but talented youngsters who believe in making a social
impact through Ayurveda and charity. While Ramdev claims to have no stake in the
company, his co-founder Acharya Balkrishna an expert in yoga and Ayurveda is the
Managing Director of the firm. Former CEO SK Patra, an IIT-IIMA alumnus, left the company
in 2014 due to alleged differences in the way the company was functioning.

Having an MBA degree may not be the be-all and end-all in this business. Bill Gates and
Mark Zuckerberg were college dropouts. Street-smart seems to be the way to go. Patanjalis
scale of growth [in a couple of years] seems unprecedented an exception would be Garden
Vareli sarees of 1980s.

Great expectations

While one may assume that Ramdevs fame and fan following was a contributor to this
growth, it is not the only one. He is not a guru for the rich, yet the rich are buying his
products too. But now expectations are high they cant afford a Maggi-like fiasco, says
Arvind.

In fact, there have been comparisons with Art of Living teacher Sri Sri Ravi Shankars similar
business. The ten-year-old company Sri Sri Ayurveda Products sells cereals, health drinks,
and personal care items in 600 franchise stores as well as through their online platform. But
whether anyone can break Patanjalis record is yet to be seen. If Patanjali is to be compared
with any player at all, it could be the e-commerce marketplace Unicorn Flipkart, which
started a year after Patanjali was incorporated, and hit $1 billion in gross merchandise value
(GMV) two years ago.

Now, the billion-dollar question is, will Ramdev be a case study for MBA students soon for
having built a billion-dollar business from a town better known for its spiritual wealth?

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ABOUT THE AUTHOR

Athira A Nair

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Nothing makes Athira happier than writing stories and being appreciated for it. An ardent lover of
coffee, books, and pen, she believes that intellect is sexy and kindness is sexier. Athira can be reached
at athira.nair@yourstory.com. She tweets as @aiharla

16 Comments

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Shivanand Mangalore Govt.Higher Secondary School Kodambakkam

True, am using patanjali products since long, and its very effective and cost is also less.
Like Reply

2 Mar 25, 2016 3:43pm

Meenakshi G Pai Retired from vijaya bank at Vijaya Bank

I am so glad as how Patanjali products are giving tough competition to other age old FMCG brands, I do use
Patanjali Ghee & can surely say it is indeed very good.
Nice Read and very interesting.
Like Reply

8 Mar 25, 2016 6:12pm

Amit Kumar Maulana azad college of engg & tech,Patna

in the table wrong inf is given abt patanjali
starting of operation 2006 not 2014
Like Reply Mar 25, 2016 7:02pm

Bhushan Patkar Founder and CEO at Arkbel Innovations

My mom, aunt ..everyone buys pantajali products now.. They care about it being natural and Ayurvedic plus
some sort of religious attachment.. That's the recipe of baba Ramdevs success.. He has made customers their
sales reps in a way.. That's why they don't need to spend on HR and all..
Anyway it does not attract me in any way but if it's good why not give it a try?
Like Reply

3 Mar 25, 2016 7:51pm

Prabhat Kumar Production Executive at G.D Foods Manufacturing India Pvt Ltd ( Brand Name TOPS )
towards economic independence.
Like Reply

2 Mar 26, 2016 1:52pm

Sanchayan Sarkar
I have used pattanjali juice and it's fantastic . In fact I used to be a regular tropicana guy , but pattanjali seems
to be almost similar and cheaper . I would suggest them for going for better packaging . Pattanjali's tetrapacks
are not anywhere close to tropicana's tetra packs. Other than that , its fantastic . In fact I am thinking of going
half pattanjali , half tropicana . FOR detergents , I need some condence . I don't want my clothes getting
damaged .
Like Reply

1 Mar 27, 2016 5:05pm

Vishal Krishna Writer at TheHog&ThePrince

What is the revenue of their retail venture. This is a hybrid FMCG/retail model like Future Group. But at its core
this is a manufacturing company. Look forward to knowing what retail arm's Revenues are because i could not
nd that. Thanks !
Like Reply Mar 29, 2016 10:31am

Aditya Verma
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i don't think his products are on a par with any of the organic brands.
Like Reply Apr 7, 2016 3:14pm

Pradipta Mandal Jadavpur University - Department of Electrical Engineering

Ramdev himself a big brand and here he leverages that brand value and he took years to make that brand and
trust among the people, so it may be patanjali launches recently but the whole story is decades long. Anyway
thanks for such informative article.
http://www.favcounter.com
Like Reply

1 Apr 7, 2016 5:24pm

Ravish Kamal
patanjali products are the best replacements for harmfull chemical products, edible products are in craze.
Like Reply

1 Apr 24, 2016 1:53am

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What next for e-commerce as DIPP says

marketplaces flout FDI rules

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ATHIRA A NAIR, 7 JANUARY 2016

E-commerce companies received a blow with the Department of Industrial Policy and
Promotion (DIPP) stating that online marketplaces are not recognised in the countrys FDI
policy. This comes just days before Prime Minister Narendra Modis unveiling of his
Governments Startup Action Plan.

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The lack
FDI
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saga a group of offline retailers
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had petitioned against the permit of FDI for online marketplaces. They argued that
marketplaces are essentially online multi brand retailers, making their foreign funding a
violation of law. The Delhi High Court, in November, ordered the government to investigate
21 ecommerce companies for possible violations of FDI laws. Most of them claim to follow
the marketplace model, in which they are not part of pricing or warehousing, but provide
only technology and act as commission agents. According to an ET report, the DIPP seems
to have accepted the offline retailers views.

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Voonik, which was listed among the 21 websites, claimed to be a marketplace without

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separate arms for B2B and B2C. Sujayath Ali, Co-founder of Voonik, says: Voonik is not
even a direct marketplace; it works almost like an affiliated model- we generate the sale.
Though the order is completed via our platform, others do the fulfilment. Voonik takes

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is now offi

orders from marketplaces like Fashionara and Jabong. Once we get the ordered product,

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A retail shocker from Haridwar: the Patanjali story

we give it to Jabong; they fulfill it, Sujayath said. He added that the only confusion possible
here is whether Voonik can have direct payment gateway. YourStory reached out to many

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of the big online marketplaces, including Flipkart, Snapdeal, Paytm and ShopClues. They
declined to participate in this story.

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There have been reports, on an off, of the Government investigating various online retailers.
However, no action has so far been taken against these firms. Radhika Jain, Partner at
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financial advisory firm Walker Chandiok & Co LLP, says that it would be a drastic step if the

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government was to disallow marketplace model. If that happens, it will stop all e-commerce

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in India. It is not as if these people sneaked into the country and did business in this model.
Government has known about this.
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Wake up a

Radhika adds that eventually the Government will have to put all the various retail categories

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single-brand, multi-brand and e-commerceinto one bucket. But, she said, this would
take time.
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But Arvind Singhal, Chairman of retail advisory firm Technopak, has a different view. He

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says: It is not an act of parliament, not a finance bill or a constitutional amendment if they
want to do it, they can do it tomorrow itself. Not even security issues are discussed as much
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as retail issues.

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In fact, the current NDA government was against the previous UPA-II Governments
decision to allow up to 50% FDI in multi-brand retail. But the policies have not been changed
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yet.

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Arvind added: The government seems to have no understanding of retail business. They
have come up with definitions [for retail] which are not in any other part of the world. If the
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Government was to shut down e-commerce in India, he warns of the international uproar it
will cause from investors and stakeholders across the world, as well as the huge consumer-

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base in India itself.

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Curiously, FDI is allowed in B2B businesses, which marketplaces come under. It is this
interpretation that many e-commerce marketplaces had held on to in order to justify the

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legality
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has led to companies
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arms. Even this separation might not be enough if we go by DIPPs latest statement.

K Vaitheeswaran, entrepreneur and e-commerce consultant, says that this confusion

happened because of the media attention that spiced up the industry. The industry aided
the Government in treating e-commerce as a different model of retail altogether. But
ecommerce is only a tiny part of Indias total commerce; there is no need for separate
policies, he added. He believes that although it is already late, the market is still growing,
and any policy change can still make a difference. In my personal view, they should allow
FDI in retail. We have allowed FDI even in Defence manufacturing and Railways; why not in
retail?

YourStory take

India has been reluctant in accepting FDI in retail. Even after opening up the economy in the
1990s it seemed like the country had too many bad memories of the colonial past, which
after all began with foreign traders. But how long should we be protective about our
economy? Preventing international competition in Indian market was acceptable till a

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A retail shocker from Haridwar: the Patanjali story

decade ago. But India has changed now, and so has its economy, and expectations from it.
Foreign investors and companies could bring in more efficiency and Indian companies have
shown they can take on global competition.

Of course, none of this would have been a problem if India had large domestic funds willing
to invest in relatively risky and unproven sectors like e-commerce. For startups to grow in ecommerce and get ample funding there needs to be a conducive environment for
investment to flow in.

The confusion caused by differing statements by different Government bodies harms

investor and business confidence not just in e-commerce but across other industries.

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Nothing makes Athira happier than writing stories and being appreciated for it. An ardent lover of
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at athira.nair@yourstory.com. She tweets as @aiharla

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