“What Got You Here Won’t Get You There” - Is Patanjali listening?

“Patanjali Clocks Whopping Rs 10,000 Cr Revenue, Becomes 3rd Largest FMCG Player; Will Soon Open ‘Nutritious Restaurants’”

“Patanjali eyes 2-fold rise in revenue to Rs 20,000 cr in FY18; to be biggest swadeshi brand in 2 yrs”

These and similar headlines with unsubtle exuberance were making its headway about an year back. Interestingly, both the headlines are picked up from the news in the month of May in 2017.  Patanjali had a meteoric rise from when it started in 1997 as a small pharmacy to an FMCG force to reckon with. With revenue figures of 10,561 crores Rs in FY 2017, it was rubbing shoulders with the big boys of FMCG in India.

Patanjali's Year on year Revenue in Cr Rs

While the target to close the FY 2018 at 20,000 cr Rs, set by the company for itself, at the start of the year was always ambitious, the result that is going to come out for FY 2018 is expected to be oonly marginal better than last year. So much so, that the company is expected to close the year with revenue a little higher than the FY 2017, reflecting a near flat growth.

Where did the company misfire? What led to the sudden speed-braking of the supercharged company? Well, the answer lies in what made it an overnight success. The company got too focused on sales targets and in the process became myopic.

This was exacerbated by the compulsive expansion, which strayed the company from serving the consumers with the best. Let’s look at some more specific reasons that have been attributed to the bad year of the company.

• Product and Price Issues
• Quality: There has been an increasing clamor around the quality of Patanjali products. It is not uncommon to read negative reviews about some of the Patanjali products on internet. This has significantly affected the loyalty towards the products and repeat purchase.
• Not so much value for money: While Patanjali started with the economic value for money products, there has been a shift towards premiumization. Quite a few Patanjali products have now been moved towards the premium segment and the prices are pretty similar to he other competitors in the market.

• Channel and Supply Issues
• Channel Conflict: As Patanjali, in its mission towards making the product available to customer everywhere, started selling out products to various channel partners, a conflict has risen between them on margin, supply and pricing.
• Supply Issues: With the expanded demand for the product, the logistical push has not happened and the very frugal distribution model has not come under the fire. Issues like intermittent supply, preferential supplies and holding up of orders for having minimum supply volume in the area has led to retail vying for fast running items. This has not only irked the retailers, but also the modern trade set pus which have very high real estate cost.

• CAPEX and Acquisition
• The falling profit margin, as per the company has also been because of the heavy investing that the company claims has been making in the food processing and production capabilities
• Patanjali has emerged as the highest bidder for the Ruchi Soya, which is famous for selling Nutrela soya chunks. This added expense is also going to hit the operational capabilities of the company.

• Macro Issues
• Lingering effects of the demonetization has also been blamed for the flat growth this year, though the issue along with the GST challenges is a generic phenomenon that affected the whole industry and not just Patanjali.
• While touted as a great help in long term to the economy, in the short terms this has been a major issue in the country owing to lack of awareness to handle the new systems and dependency on each supplier for the filing to right GST.

• Related and Unrelated Diversification
• A very critical reason for the flat growth of the company has been its overly enthusiastic demeanor towards expansion in the new categories. It currently sells 1,000 products spanning home care, personal care and packaged foods, and will soon launch apparel. Some of the other recently launched as well as planned diversifications that the company has are as below –
• Media and broadcasting through three broadcasting channels for southern part of India
• Solar power by acquiring Advance Navigation and Solar Technologies
• Patanjali has already launched a Sim with BSNL as a co-branded product
• Patanjali launched a communication app akin to WhatsApp, Kimho
• Besides, the company is also planning to foray into dairy products
• The company has already chalked about plans to enter into apparel, clothing and garments segment this year

• Changing Competitive Scenario
• Unlike the initial years when Patanjali caught the other FMCG giants off-guard with no herbal or Ayurvedic offerings in their stable, situation has changed a lot now. All the FMCG companies are having brands in this space and hence it is not any more Patanjali’s exclusive territory. For example, HUL, the country’s largest FMCG firms bought Indulekha, the Ayurveda hair-care brand in 2015 and relaunched Ayush in 2016.

Patanjali hit the nail right when it built its USP on ayurvedic offerings at a time when people had started looking for natural and herbal options for the personal care products. Unpreparedness of the other companies in his space and a strong brand ambassador in Baba Ramdev catapulted the company to top-5 FMCG companies in the country in terms of revenue.

However, they cannot rest on their past laurels and as Marshall Goldsmith said in his book “What Got You Here Won’t Get You There”, the first step to change is wanting to change. Patanjali need to take a deep hard look at their business model and ensure that they adopt strategies that are apt for a company their size. In the timeless book on Marketing by Al Ries and Jack Trout, Marketing Warfare, authors suggest that a company needs to adopt strategies based on what they are – leader, challenger, flanker or Guerrilla, depending upon the size, market share and available resources. Patanjali has to accept the fact they are no more a Guerrilla in the market but a credible Challenger, and hence their marketing strategies need an overhaul before they get trapped in their own web.

Will Ayush be able to challenge the Patanjali juggernaut?

It was in 2001 that Hindustan Unilever (HUL) launched Ayush, the Ayurveda based portfolio of wellness products. The brand was later shut down as it didn’t find much traction with the audience. The brand was ostensibly targeted at the premium customers who would embrace it for its ayurvedic core values. HUL representatives claimed that the products were ‘ahead of time’.

The Rise of Patanjali

The year 2006 welcomed another kid on the CPG (Consumer Packaged Goods) platform that touted itself as the ayurvedic alternative for all the ‘unhealthy’ and ‘westernised’ products. Clubbed with the ‘nationalist’ sentiment the brand struck a chord with a mass audience, majorly due to its brand ambassador, Yoga-guru Baba Ramdev. To add, right pricing for the right audience hit the sweet spot of the Indian consumers and the cash registers stated ringing for the brand. Patanjali soon became a household name and crossed a revenue mark of 10,000 crores in the last financial year displacing major bigwigs of the FMCG (Fast Moving Consumer Goods) industry.

Baba Ramdev, who already had won millions of followers through his Yoga practice, promoted the products in an unbashed manner. For his followers it was a marriage made in heaven between their favourite Yoga-guru and Ayurvedic products. His follower base that majorly came from tier-2 and below cities stood by Patanjali and helped it rise miraculously. Media channels like Aastha and Sanskar in the played a major role in making Baba Ramdev a houshold name in 2000s. Even he himself acknowledge the fact that media was a big factor in the rise of the brand.

India is a price sensitive market when it comes to CPGs and the right pricing almost always holds the key for the success of a product. Failure to do so can wipe the brand off the shelves of stores and minds of customers in no time. Patanjali got it right here too.

Patanjali hit the jackpot with the trinity of – Brand Ambassador, Brand Resonance and Pricing. A very difficult but extremely rewarding endeavor.

Positive Word-of-Mouth

Patanjali also succeeded in acquiring new customers and retain the old ones by creating a positive perception of the quality of products, which was subconsciously influenced by its reasonable prices. After consumer acquisition, Patanjali products were able to make good of the promise made to them hence eliciting a positive post-purchase behaviour largely driven by the Halo effect and lower financial risk due to cheaper products.

On the other hand when Ayush was launched as a premium brand in 2001, the market wasn’t gungg-ho about Ayurveda based products. Ayush could not offer anything concrete to its audience to trust (HULs house of brand strategy was not very helpful). Subsequently, the audience turned a blind eye to the products. The Brand had to be shut in the aftermath of consistent poor performance.

Brand Ambassador

Among the three aspects highlighted, Brand Ambassador was the key in the phenomenal rise of the Patanjali Brand. Baba Ramdev never shied away from marketing Patanjali brand and while his followers went by every word he said about the products and Patanjali, even those who did not follow Baba Ramdev were able to trust the credibility around the brand. His unapologetic rant against the MNCs also made him the poster-boy of nationalistic sentiment that clicked with the burgeoning middle class of the country. On the other hand, Ayush has brought in film stars Akshay Kumar and Tamanna as brand ambassadors. This was a run-of-mill approach as both the actors have no genuine link with Ayurveda and are seen in many other ads that create more confusion then clarity. The ad showing the actors also chose to claim to be the real Ayurveda based brand which may be perceived as arrogant or even petty. Due to the missing connect with the core offering of the brand, the ambassadors stand no chance against the massive appeal of Baba Ramdev and his Patanjali products.

Brand Resonance

The core offering of the Patanjali brand was no-nonsense Ayurveda based products which didn’t have fancy packaging and touched up images of good looking models. The ads also didn’t look ‘rich’ and were intentionally painted ‘simple’ to demonstrate its values. This strategy personified the brand as honest, simple and trustworthy, hence making people believe in the offering. Ayurveda based products must be able to invoke emotions like  purity and trust due to many factors like – lack of knowledge in people regarding the roots of the products, formulation and application, mushrooming of a huge number of Ayurveda based product companies and finally the perceived physical and health risks involved in using the products. Ayush has maintained its premium packaging and hasn’t been able to come up with a major differentiator vis a vis a host of other products available in the market. In absence of a strong usp, it hasn’t been able to make any specific place for itself in the segment.

Pricing

In terms of pricing, while Ayush has shed the premium tag with its re-launch a quick analysis of the products show that they are still quite expensive than Patanjali. The Ayush products taken into consideration are anything between 33% to 94% expensive than Patanjali products. Clearly, the reference point for Ayurveda based products in customers’s mind is Patanjali and a quick comparison between Patanjali and Ayush products will lead to an easy choice for her, if it is based on price only. With a more than satisfied customer base of Patanjali products, Ayush doesn’t have footing on the quality attribute either while some detractors and a small customer base who map uality on price may give Ayush a shot. But this will be a small base, far from viability for HUL. Hence, the price point becomes even more important which doesn’t seem to be helping Ayush.

In a nut-shell, Ayush’s relaunch by HUL may be more of optimism and an 'easy way out' rather than a of rational ‘Product Development’ growth strategy. Whether Ayush has more punches to pull in future, only time will tell. As of now, it doesn’t seem to be too much of a worry for Patanjali.