The Patanjali phenomenon

How and why a low-key Ayurvedic brand is stealing a march on established FMCG firms

Indrajit Gupta

[Photograph by Alok Prasad under Creative Commons]

Of late, Devendra Chawla, Future Group’s president, says he’s been besieged with meeting requests from a clutch of chief executives of fast-moving consumer goods (FMCG) companies. And there’s only one thing they all seem to want to talk about: the phenomenon called Patanjali. Yes, it is a phenomenon. The numbers tell only half the story. Last year, Hindustan Unilever grew its $4.5 billion top line by 5%. Patanjali Ayurved, on the other hand, added almost the same quantum of revenue and in the process, is likely to more than double its revenues to Rs 5,000 crore by the end of March. It is clearly the fastest growing FMCG firm in the country, with the widest product portfolio. The Future Group, which announced its tie-up to stock Patanjali’s wide range of products last year, is furiously reworking its sales forecasts because the products are simply flying off the shelves. In less than two years, Future Group says it expects to sell nearly Rs 1,000 crore of Patanjali products. That’s the kind of traction that most former FMCG veterans like Chawla have not quite seen in their entire career.

Then there’s the anecdotal stuff. Like the dilemma that a director in a leading FMCG multinational finds himself in. His aged parents have apparently been haranguing him to jettison the toothpaste brand made by his own company and switch to Patanjali. The battle, he says, isn’t just in the marketplace, but within his own family!

For the FMCG companies though, the disruption that Patanjali has wrought is for real. Because it challenges many of the long-held assumptions in the classical FMCG world. Patanjali doesn’t employ any fancy managers with MBA degrees. Instead of selling to the retail trade through distributors, it has its own branded outlets around the country. (It signed up only recently to sell through the Future Group’s network.)

Its production units are relatively modest. The savings in distribution margins and the low overheads straightaway translate into a 20-25% cost advantage. That gives it the leverage to price its products at least 15-30% cheaper than other branded competition. However, for its growing base of users, it isn’t just about a cheaper price. They genuinely believe in the goodness of Ayurveda and the natural, chemical-free products. Patanjali spends only a tiny fraction of its revenues on mass media advertising. Instead, it lets its loyal consumers derive their confidence from the endorsements that Baba Ramdev subtly provides in the midst of his yoga asanas through the day on Sanskar channel. Experts who’ve interacted with Ramdev vouch for the fact that he knows his products well. More importantly, the brand’s source credibility is also boosted by the fact that in many cases, it has the ringing endorsement of the older generation in most Indian families—and that carries a lot more weight than the crores invested in advertising. Then there’s the seemingly dowdy packaging. Guess what? Most people see it as a signal that the product is authentic.

For an entire generation of FMCG managers who’ve grown up on a different menu, the Patanjali phenomenon is proving to be a bit hard to digest. How could a baba, sometimes ridiculed for his idiosyncrasies, take their game away? No wonder there is plenty of chatter inside FMCG boardrooms. Some believe that the Patanjali phenomenon will soon start to peter out. And they have good reasons to believe that. Patanjali has expanded its portfolio to over 400 stock keeping units (SKUs), entering categories like noodles and skin care, in the process stretching its equity far more than it perhaps should.

Much of this criticism may well be true, except that it isn’t just about Ramdev’s magic or about the power of herbal and Ayurveda alone. It is much deeper. In a recent conversation, Damodar Mall, a retail pro with an astute understanding of what consumers want, came up with an interesting hypothesis. The best way, he says, is to look at three other adjacencies. Ever wondered why Amish Tripathi’s The Shiva Trilogy became the fastest selling book series in the history of Indian publishing, with 2.5 million copies in print and over Rs 70 crore in sales? Or why Devdutt Pattanaik is such a hit on the speaking circuit? As consumers get confident, they like contemporary things that spring from their cultural identity, says Mall. A bit like how Sanjay Leela Bhansali’s movie, Bajirao Mastani, helps surface our rich Indian culture in a modern, contemporary manner, in an environment dominated largely by western sensibilities, says Chawla. Looking for indicators of social impact? Consider just how many young girls have taken to learning kathak. Or the number of women buying anarkali dresses.

The success of Amul, on the other hand, is about the timeless appeal of “in your face” value or authenticity. Ditto for a brand like Paperboat. As children, we’ve all had kokum juice. But there’s a good reason why it isn’t widely consumed today. All this while, the market for kokum juice wasn’t organised. Relatively unknown local brands sold it in large plastic containers. Paperboat brought three things to the table: standardisation, branding and safety. Suddenly, being seen drinking kokum juice in its distinctive, modern packaging on an IndiGo flight is cool. And Paperboat’s advertising does a brilliant job of evoking the memories of the childhood.

And finally, the concept of Ayush, or the appeal of all things natural and the concept of wellness. That’s evident from the growing consumer preference for chemical-free, high-end skin care products like Forest Essentials or even the traction that Himalaya’s range of herbal products have found in the marketplace. Or the growing popularity of skin care salons mushrooming across tier two and tier three towns.

So here’s the nub: Patanjali is the multiplier effect of these three appeal vectors. Most people don’t seem to get that and thereby miss out the fountainhead of success in India’s consumer market. Perhaps that’s also because they don’t teach that in business school.

[This article was first published in Business Standard.]

About the author

Indrajit Gupta
Indrajit Gupta

Co-founder and Director

Founding Fuel

Indrajit Gupta is a business journalist and editor with over two decades of experience. He was the Founding Editor of the Indian edition of Forbes magazine. Within four years of its launch, Forbes India became the most influential magazine in its space.

He is the co-founder and director at Founding Fuel.

He has served in leadership positions at many of the leading media brands in the country. Before taking up the assignment to start up the India edition of Forbes magazine, Gupta was the Resident Editor of The Economic Times in Mumbai and before that, the National Business Editor of The Times of India.

Over the years, Gupta has built a reputation for grooming talent and creating highly energised and purposeful newsrooms. He has interviewed several leading global thought-leaders and business leaders including CK Prahalad, Ram Charan, Wayne Brockbank, Sumantra Ghoshal, Carlos Ghosn and Nitin Nohria, and also led cutting-edge joint research-based projects with McKinsey & Co, The Great Place to Work Institute, Boston Consulting Group, KMPG and Coopers & Lybrand.

He won the Polestar journalism award in 2010 and was awarded the Chevening fellowship by the British Foreign office in 1999. Gupta is an alumnus of the SP Jain Institute of Management and Research, Mumbai and a B.Com (Hons) graduate from St Xavier's College, Calcutta.

Gupta teaches a course on Business Problem Solving at his alma mater. He writes a column named Strategic Intent in Business Standard’s edit page. He lives in Mumbai with his wife and two young daughters.