“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.

5 things about Patanjali and its product placement in Modern Retail set-up

Patanjali has been at the center of limelight for quite some time now. Many case studies have been piloted and a lot of research has been done to analyze its purchasing, operations, logistics, marketing and to some extent financing.

In this post we will look at the more simpler yet distinct steps it has taken in modern retail in terms of product placement, shelf design and location and assortment display. Here are five things which you may have missed when you passed by the Patanjali ‘mini-store’ in a modern-store.

• Patanjali, with its strong consumer-demand derived strength, has been able to command for itself exclusive mini-store like spaces in the modern retail set-ups. These are a set of shelves especially reserved for Patanjali products. More often than not, these shelves will be separated from the long racks stocked with other manufacturer’s brand-lines, which gives Patanjali a strong visbility and adds to its distinct-ness.

• Apart from the distinct-ness created due to a separate display space creating an anti-me-too impression (much needed differentiation in FMCG domain!), Patanjali is able to keep all its products at one place irrespective of product category (food products like noodles, honey and chyawanprash, and personal care products like bathing bar, face-wash and face creams) that leads to extensive cross-product selling. Customer who would have wanted to buy Patanjali toothpaste can take a long look of, feel the packaging and read the content on the face-wash that is kept just next to it.

• Interestingly, Patanjali is only one of the very few known brands at the moment, who in the modern retail set-ups, have not resorted to multi-unit packings for products such as soaps (bathing and washing bars), toothpaste etc. This means, that consumers who do not want to spend 100 Rs on buying soaps (even if it means buying 3 soap bars) can always pick Patanjali soaps for as cheap as 13 Rs. Also, none of the products offered has gone to package size beyond the nuclear-family packs, hence, none of the product’s price seems outrageous (when your brain is not in the mood to calculate per kg or per 500 gm or per ‘normal unit size’ price of the product, it just renders pricing of bhujia at 200+ Rs (for 1 Kg!), and 400+ Rs corn flakes (1.2 kg!) as outrageously expensive, and for some time putting the “unaffordable” tag on the brand itself.

• Patanjali can attribute its success (provisional revenue for 10 months in FY 16 upwards of 3200 crores Rs) to many things and there is a lot already written about it. One of many such attributes is its products’ direct or indirect link to Ayurvedic roots. Patanjali Yog Kendra and Swadeshi Kendra have been selling ayurvedic products and medicines for quite some time but there haven’t been strong inroads for these products in modern retail set-ups. However, the presence of these products right next to the fast-running ones like soaps, toothpaste and biscuits makes up for their weak revenue generation. These ayurvedic products reinforce the connection of fast running non-medicinal products to ayurveda, just by being placed next to them, and helps in maintaining and growing brand credibility

• Critics observe that one segment which has not accepted the product the way a bigger chunk has accepted it is the Muslim community due to their religious beliefs and also with lack of resonance with the star ambassador of Patanjali, Baba Ramdev. However, the company has tried to make some inroads with the segment by putting the label on their recently launched spices packs in Urdu, along with other Indian languages. While, this is just a start, we may see more such attempts to woo the community by advancing Patanjali products to their ‘consideration set’ from the current ‘evaluation set’.