AND ITS EFFECT ON FMCG SECTOR

PATANJALI BUSINESS MODEL

i

EGBT
GROUP 7
SUSHIL KUMAR NOHWAR
ASHISH TYAGI
JATIN
PRINCE MANCHANDA
COMPANY HISTORY
 TIMELINE
1997
1 PAL started as a small pharmacy in Haridwar

2006 2
Established as a Pvt. Ltd. company

3 2010
The world’s largest food park opened

2012
Hit revenues of Rs. 450 cr, 450 stores 4
In 1997, Patanjali Ayurved Limited (PAL) started
as a small pharmacy in Haridwar, by P.P. Swami
Ramdev Ji Maharaj
Acharya Balkrishna established Patanjali Ayurved
Limited as a formal private company on 13th
January 2006 along with Baba Ramdev .
 TIMELINE 2015
5 Hit revenues of Rs. 2,000 Cr., has 4000
stores

2015
Deals signed with Future Group and DRDO 6
PRESENT

Baba Ramdev does not own any percentage of

equity in the company

On 5 January 2010, the world’s largest food park opened 20km from the holy city of Haridwar,
Uttarakhand, India. The INR 500 cr Patanjali Food and Herbal Park is spread across ~95 acres
in first phase; and has generated direct employment for 7,000 people. The construction started in
February 2009 and was completed in a record time of less than a year
CURRENT SCENARIO
 Aug 2015: CLSA came out with a report titled
4 “Wish you were listed, Patanjali Ayurved” and
FACTS summarized the threat it presented to listed
counterparts

Food park is now spread over 150 acres

Patanjali's revenue > Dabur, Emami, Marico,
1 5
and Godrej Consumer. Ghee is the biggest
~85% of products are manufactured by PAL money spinner for Patanjali, contributing 30-
in-house and only few products outsourced. 35% to its revenue, followed by healthcare
(20%), and toothpaste Dant Kanti (8 %)
Current Product Portfolio: edible oils,
biscuits, and noodles to toothpaste, hair and PAL has provided more than 2.00 Lac
2 skin care products, and groceries 6 indirect employment

Expansion: cosmetic products, baby care

products, animal feed and dairy products.

The rise of PAL has been so staggering and

3 well entrenched in consumer psyche that
large Indian and Foreign Research houses are
considering this pretty much a Disruption
IDEA
Factor in the overall consumer sector.
COMPANY ANALYSIS
 SWOT ANALYSIS
• 100% natural products with
little side effects
• Brand image of the trust
• Considered socially
responsible for health of the
society
• Established distribution
network in urban areas
• Political Interference
• Removal of import
restrictions
• Controversies
IDEA
• Low export levels
S W • Strong competitors and
availability of substitute
products
Strengths Weakness • Less expenditure on
marketing and promotional
activities
• No distribution network in
rural areas
• Changing lifestyle and rising
Threats Opportunities income levels
• Change in trend of
becoming more health
T O conscious and using more
organic products
• Large domestic market
• Rural market to be tapped
 MARKETING MIX MODEL SEGMENTATION
Demographic basis – Age groups from 15-64
Psychographic basis – Personality, lifestyle
and class
PRICE PLACE
Value Based Pricing Franchise Stores,
Alignment of cost, Super/Hyper markets
customers & & Online marketplace TARGETING
competitors.
75% of the world’s population uses herbal care
02 03 products
65% of India’s rural population uses Ayurveda
remedies
PRODUCT
PROMOTION Trend shift towards natural herbal products
All Existing Yoga Shivir,
Products and Youtube,
herbal products 01 04 Social media
for Free media POSITIONING
different diseases promotions Ayurvedic products are positioned as products
. who can treat diseases with zero side
effects
Juices and food products are portrayed as a
healthy way of life
ANSOFF MATRIX

EXISTING NEW
PRODUCTS PRODUCTS

Market
Penetration Product
development
MARKETS

- Yoga Shows
EXISTIN

- Research in
- Spiritual Ayurveda and
lessons in herbal medicines
ashram
G

PRODUCT LIFE CYCLE

NEW MARKETS

Market Diversification
Development
- Cosmetics
- Targeting youth
and newly
- FMCG  Products like Patanjali Shampoo and health
health conscious products drinks are in growth stage of the life cycle
customers - Health Drinks  New diversified products like fertilizers and
clothing are in introductory stage
BUSINESS STRATEGY
 MARKETING AND
BRAND BUILDING
03 ONLINE & OFFLINE SHOPPING EXPERIENCE
 Authentic and trained sales consultants
 Customers problems solved on 1:1
interaction
 Easy to navigate website UI with full details
 HD resolution photos and videos of products
02 YOGA SHOWS
 Pan India Yoga Shows
 Broadcasted in 170 countries
 3 books and 2 video CDs
01 PERSONAL BRANDING
 Cult personality and charisma of Baba
Ramdev
 535 branches of Patanjali Yog Ashram
04 ADVERTISEMENTS
 Commercials on Star TV and
ZEE TV
 Simple ads to disseminate
info – INFOMERICALS
 No false promises
 Spending is only 1 – 1.5
% of revenues turnover
05 SOCIAL MEDIA
 500k followers on twitter
 6 million Facebook page likes
 50k subscribers for YouTube
channel
 11 million views on YouTube
channel
 Language – Hindi and English
 Regular updates and replies
 PRODUCT
DEVELOPMENT – 3 PILLARS
Patanjali vs Competitors Price Comparison
1. COMPETITIVE PRICING
40
Why such low pricing?
 Business Philosophy – “Upkar and Not Vyapar” 35
 Make in-roads in lower and lower middle class of society
30

How is it possible? 25
 Low input costs of production

Discount %
 Procurement of RM directly from farmers avoiding 20

middlemen
15
 Very Low administrative expenses-
Patanjali – 2% , Industry – 10 % 10
Impact?
5
 Profit Margin – 11.3%
 Revenue – 2000 crores in FY 15 0
 Revenue expected in FY 16 is 5000 crore Product
Chyawanprash Juice Ghee honey
2. NATURAL RAW MATERIAL Facewash Shampoo Toothpaste Bathing Soap
Cornflakes Detergent

3. INNOVATION e.g. Amla candies

 DISTRIBUTION AND
SUPPLY CHAIN

DISTRIBUTION SUPPLY CHAIN

Super • Collect RM from rural households

Distributors (72) • Some money given to villages for building roads,
Supplier schools etc.

• Demand for different item is placed at Haridwar

Chikitsalyas Distributors Arogya
• Items delivered to distribution centers through
(1500) (2000) Kendra (3500) Producer Patanjali’s own transport

• Products available at distribution centers/retail

Retailers outlets
(over 300000) Consumer • Certified doctors also available at Chikitsalyas

 Patanjali tied up with Future Group in 2015  No intermediaries at any stage

 Products to be sold in 245 Future Group stores pan  Significant cost saving on commissions
India
 Expected sales are 8 crores per month via these stores
 OTHER STRATEGIES

HIRING POLICY
 Emphasis on hiring expert people with domain knowledge
 Doesn’t hire MBAs or “Digital Ninjas”
 Preferred Degree – M.Sc. Biology or M.Sc. Pharma
COMPANY CULTURE
TIMING OF PRODUCT LAUNCH
 Started with Ayurvedic medicine – established
faith
 Next, health supplements and consumables –
cereals, wheat – “WoM publicity”
 Finally FMCG products – soaps, detergents,
cosmetics, baby care products etc.

 Very professional but not profit DESI TAG

maximization
 Purpose driven – “reinvest in  Appeal to Indianess – shun MNC
society and nation” products
 Spiritual Culture – no  “Swadeshi brand” – genuine and
smoking/drinking pure
 Dress code – white kurta  Refused foreign investment to protect
desi tag
VALUE CHAIN
ANALYSIS
ANALYSIS

PURCHASING,
FIRM INFRASTRUCTURE 01
LOGISTICS

PRODCUTION
04
DISTRIBUTION
MARGIN
MARKETING &
SALES

SERVICE
02
03

HUMAN RESOURCE
MANAGEMENT TECHNOLOGY AND PRODUCT
DEVELOPMENT
 ANALYSIS

FIRM INFRASTRUCTURE
Mega marts are being built across the country

Patanjali Food and Herbal Park Patanjali Herbal research Institute

Patanjali Yogapeeth Swami Shankardev Vanprastha Aashram

HUMAN RESOURCE MANAGEMENT

Average compensation 22,000 P. M.

High rates of hiring from other Swadeshi Model, local talent not top tier
FMCGs
Non Smokers, not alcoholics, High emphasis on training, employee
Satvik work life balance – Spiritual not corporate
IDEA
culture
 ANALYSIS

TECHNOLOGY AND PRODUCT DEVELOPMENT

Technology transfer agreement with DRDO

Development Seabuckthorn Cold arid agro animal technologies

products
Solar driers, low cost storage, high altitude farming
Weather resistant, grown in
Green houses
DRDO FICCI ATAC Cash from yoga related activities reinvested in Product Development
initiative

PURCHASING & LOGISTICS PRODUCTION

1: 3.3 Finished goods : Raw material
Providing a new lease of life to
packaging companies like Expansion to 32 processing units from 5
Essel Propak, Manjushree Technopack
and Dynaflex 5 Crore tablets per day capacity
 ANALYSIS
SALES AND MARKETING
Increase advertising spend

Agencies like McCann and Mudra

DISTRIBUTION
Direct Marketing and through the Medium of Yoga
Own retail stores, tie up with Future Group
and Sanskar Channel
Modern retail stores like Hypercity, Starbazar
MARGINS
Online Platform
20-25 per cent cost advantage
SERVICES
Non-Residential Yoga Camps 15-30 per cent cheaper than other branded competiti
Yoga Classes fill a gap in the information asymmetry where in the
Gurukul At Kishangarh Ghasera customer is unsure of the maximum benefits that
can be derived from FMCG products
Patanjali Cow-Science and Herbal Agriculture
Research Institute at Dharali, Uttarkashi
Patanjali Chikitsalaya-Patna

Indirectly run services : medical nature

FMCG IMPACT
 FMCG IMPACT
Price:

INDIAN FMCG INDUSTRY 1 • 8-77% aggressively priced over market

leaders
• Emami and Dabur share prices fell
Colgate Palmolive downgraded to Neutral
$49 Billion – Equal mix of branded and on Toothpaste losses
unbranded products
Product:

Growth has slowed down in the past 3 years

2 • Product piggybacking like PowerVita and
Atta Noodles
due to GDP, Inflation, low IIP and No SKU • Increasing the size of the Ayurveda pie –
innovation or refinement of Supply Chain Indulekha + Ayush = HUL
Sri Sri Ayurveda

Growth picking up in 2015-16 back with 7th 3 Promotion:

• Below the Line through Happening Haryana
pay commission, global oil glut and rising • Pushing Himalaya and Dabur into creative
GDP marketing
Place:

4
Top players by Market Capitalization are HUL • ‘Patanjali Destinations’ – Future Group
and ITC • INR 10 billion at Big Bazaar against INR 13
billion by HUL
THANK YOU