Patanjali Ayurved is the fastest growing FMCG company in India. It is valued at ₹3,000 crore(US$450 million) and some predict revenues of ₹5,000 crore (US$740 million) for the fiscal 2015–16.(Source wikipedia). That would make it the third largest FMCG company in India pipping Marico and Emami and behind only HUL & ITC.
Thats a mean achievement but Patanjali is a unique case that may be difficult to copy.
Patanjali started out as an Anyurveda brand which Baba Ramdev set up with Acharya Balakrishnan ( a low profile figure)
As per one estimate now they manufacture nearly 400 products in multiple categories and saw 150% growth last year.
I have followed Patanjali with interest and my analysis suggests that Patanjali products is a very fragile brand presently since its a branded house approach as opposed to a house of brand.
Patanajali is a classic case of a branded house where an impact on the Patanjali brand will adversely impact all the brands in the portfolio. e.g some issue such as cotton string in Patanjali biscuits( I saw some pictures )will hurt all of Patanjali since its Patanjali biscuit and not Kush biscuits or some other individual brand. A few brands have now been created and advertised but the advertising looks amateurish and its apparent that Patanjali will remain the main brand for years to come.
The Patanjali brand architechture holds three promises-
- These are quality products at a lower price than competitors
- There are Indian brands and the other players are foreign
- These are natural, good for health etc as symbolized by Baba Ramdev whose devotion to yoga and Ayurved is well known.
While for some brands this would be great strength , these are also the weakest points with Patanjali.
Firstly the discounted price positioning. This is a perception in the consumers mind. However pricing strategies are difficult to sustain as the price is dependent on input costs. Especially in commodities its a very difficult to defend positioning where the difference could be negligible or even contrary. e.g. if a consumer realizes Pataljali ghee is just 5 rupees on a base price of 340 rupees they would be poisoned against the entire Patanjali brand. Patanjali could have in the long term a couple of well publicized product that are discounted to drive Patanjali business( e.g. the meatballs are IKEA are supposed to make a loss but the consumer knows what meat balls cost and thus thinks all IKEA products are discounted)
Secondly, its not really well known that there is a lot of subcontracting in Patanjali. To be able to churn products at Patanjali speed needs an ability to leverage existing suppliers and sell fhe products. This would be an issue and an added complexity from a quality perspective. The bigger issue is this could negatively impact the brand by affecting the self manufactured perception.
Thirdly, the Patanjali brand is political in nature. If Baba Ramdev is impacted, it could affect the brand adversely.
Patanjali cannot stop new launches because one of their distribution strategies are Patanjali stores which are exclusive Patanjali only stores. This is one aspect where Patanjali stands out from the competition. They enjoy aisle space without any competition. This could be a real competitive strength.
What could the competition do?
It depends on the category. The key focus is to strip away some of the key brand pillars of price, quality, natural, nationalism and health from Patanjali.
If I was the rival brand manager, I would hit them on the price point if the difference is low by highlighting my own price point. I might also highlight my brand as natural and ayurvedic for points of parity and focus on points of difference. While schadenfreude may not be a positive act, I would wait until Patajali gets hit by the next quality scandal to highlight my brand.
If I was the CEO of HUL, I would be talking to ITC or someone with complimentary portfolio to create a unique branded store to rival Patanjali store. Maybe even build in discounts and loyalty packages. 🙂 Mr. Sanjiv Mehta, Mr. Y C Deveshwar and Mr. Harsh Mariwala are you listening?