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Targeting more than 250% revenue growth in FY16
Patanjali clocked revenue of ~INR20.3bn in FY15 with EBITDA margin of ~20%. The company targets to achieve revenue of INR50‐60bn in FY16 itself. Growth is being driven by the company’s largest selling product, cow’s ghee (expected to be INR12bn in FY16) followed by Dant Kanti and Kesh Kanti. Patanajali also has a robust pipeline of new products, which will help achieve its target. Patanjali operates via 3 business segments, viz., foods (foods, supplements, digestives, dairy, juices, etc), FMCG (cosmetics (shampoo, soaps, facewash), home care (detergent cakes, powder, liquid), etc) and ayurvedic products (healthcare products for blood pressure, skin diseases, joint pain, etc). In FY15, of the total sales of INR20.3bn, food and cosmetics contributed INR8bn each, while healthcare products comprised the balance. The company has adequate capacity to achieve its revenue target of INR50‐60bn in FY16.
Aspires to be part of every SKU in kitchen
Patanjali is working on a kitchen concept, as part of which it will launch products that will touch all categories of the SKUs used in an Indian kitchen. For instance, the company already has products that are used in the Indian kitchen such as dishwash bar, ghee, rice (has 3 variants of rice), pulses, spices, mustard oil, flour and madhuram (replacement for sugar made out of jaggery) under the Patanjali brand name .
Products at R&D phase
Butter milk in powder form.
Oats with masala.
Chicory coffee (caffeine free).
Weight gain and loss products.
Madhuram – ginger and rose flavor.
Online platform to spruce up distribution network
Many people complain that due to Patanjali’s weak distribution network its products are not easily available everywhere and they are unable to buy them. To address this concern, the company has chalked out an aggressive plan to improve its presence on the online platform. Currently, it is already selling its products through its web‐site, www.patanjaliayurved.net, from where consumers can order the products and get free delivery of the same if the order value exceeds INR499. Other companies like bigbasket.com, etc., that also sell Patanjali products online have been barred from doing so. The company is also implementing ERP for better mapping of inventory (SAP has already been implemented). Patanjali will also be launching its mobile app, which will allow consumers to locate nearby outlets that are selling Patanjali products and also facilitate online ordering of products. Patanjali also sells its products through the Patanjali Chikitsalayas (where free medical consultancy is given by medical practioners), Patanjali Arogya Kendras (health and wellness centre) and Swadeshi Kendras (regular outlet). As for reach, the company has close to 0.2mn outlets and 10,000 franchisee model of Chikitshalyas and Arogya Kendras. Distribution‐ wise, the company operates through 100 super distributors (this will be bolstered going forward) who in turn supply to the wholesalers and retailers (who operate through a 500‐600 strong sales team). As of now, the company has no plans to have direct reach.
Attractive pricing, natural positioning ensure competitiveness
Patanjali’s key strength, apart from its superior product quality, lies in pricing. The company’s
products are priced at ~15‐30% discount to competition, which makes it an attractive
proposition for consumers. It is able to offer such discounts primarily because of having
negligible A&P spend versus other consumer companies which have A&P spends ranging
from 12‐18%, as a % of sales. Another reason for the discounts is the consumer‐centric
ideology of the organisation and selling best quality products at attractive price points. There
may even be some products in the company’s portfolio which are making losses or fetch low
margins, but it continues to sell these products to meet consumer needs.
Lower and effective advertising aids lower pricing
Patanjali Ayurved has limited advertising expenses, which gives it enough leeway to pass on
the savings from lower ad spends by way of lower prices. The company advertises in a limited
way – news tickers, regional newspapers, some digital advertising, etc., though going ahead it
might start other forms of advertising too. Patanjali has adopted the unique information‐
based advertising. For instance, the company highlights the positives of cow’s ghee, which
automatically helps sale of Patanjali Ghee. In the recent past, the company’s print
advertising has seen a marked increase.
For the consumers, Baba Ramdev remains the face of Patanjali and its products. Baba
Ramdev, during his yoga sessions, showcases the Patanjali products. After the session, he
makes the attendees aware of the benefits of using Patanjali products.** Till date, close to**
70mn people have come in contact with Baba Ramdev through his yoga camps and it is
believed that this can increase to 200mn going ahead. This highlights the potential reach
that the Patanjali brands can have without much mainstream advertising. Also, being
associated with Baba Ramdev helps in creating a better perception among consumers that
being ayurvedic offerings, the Patanjali products are healthy
Patanjali Food and Herbal Park: One of the biggest world class facility
Patanjali Food and Herbal Park is one of the largest food park in the world spread over 150 acres. Construction of the park was completed in record time of 10 months and the park has been in operation for over 5 years now (park construction started in Feb 2009 and it started operations in January 2010). Patanjali has 3 manufacturing units in Haridwar (we visited the largest one, Unit 3). Production at unit 3 is divided into 3 parts: (1) food, (2) cosmetics; and (3) digestives and RTS. Ghee and ayurvedic medicines are manufactured at the other 2 manufacturing units. It is a world class plant equipped with the best machinery installed by companies like Tetra Pack, Alfa Laval etc. As far as manufacturing is concerned, Patanjali does 90% manufacturing in‐house. However, going ahead to meet demand and therefore enhance capacity it is open to even third‐party manufacturing or opening new plants. The company has zero waste technology wherein whatever is left after usage of the raw material is further processed for further usage. This park employs close to 10,000 personnel (from in and around the city within a radius of 25kms).
Robust R&D ensures quality and new product development
During our plant visit we also visited Patanjali’s R&D facility, which is well equipped with all the latest machinery necessary for testing the products. The company has a separate R&D department for each of the production units where the manufactured products are tested. The company also has a high‐end central R&D facility situated at the park. This facility ensures the products meet high quality standards and is undertakes R&D for new product development.
Organisational culture:
Building blocks Though Patanjali might not be regarded as a complete corporate set up, but the company has been taking significant steps to professionalise the management and incorporating the necessary processes and technology in the work culture. Patanjali is emerging as an Employer of Choice’’ as many professionals are independently coming forward to work with the company. During our visit and interactions we found there any many professionals who are managing different units and have past work experience in companies like Dabur, Shehnaz Hussain, SGH Labs, Alkem Laboratories, etc. Patanjali is currently advertising for many positions. The company has tied up with all major hiring agencies like naukri.com, linkedin, etc., to get the best talent from industry to work for it. As for the processes, the company is moving towards a KRA‐based working system and is defining its processes and internal control systems. SAP has already been implemented which has led to automation in majority of the processes. The company is currently in the process to implementing ERP. Overall, the organisational culture is very employee friendly as the company engages in a lot of training and development programmes for its employees. It also engages in career counselling and mentoring activities.