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Emerald Emerging Markets Case Studies

Patanjali: an Indian FMCG on growth path
Sonia Mehrotra, Uday Salunkhe, Ishani Chakraborty,
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Patanjali: an Indian FMCG
Downloaded by Prin. L. N. Welingkar Institute of Management Development & Research - Bengaluru Campus, Ms ISHANI CHAKRABORTY At 04:47 08 September 2017 (PT)
on growth path
Sonia Mehrotra, Uday Salunkhe and Ishani Chakraborty
Patanjali Ayurved Ltd. has, in a short span of less than a decade, recorded a turnover higher Sonia Mehrotra is Associate
than what several companies have managed to achieve over several decades. There is no Professor at Center of
doubt that Patanjali is a disruptive force in the FMCG space and is a credible threat for the Excellence for Case
incumbents (The Hindu, 2016a) (India Infoline Limited (IIFL), February 16, 2016). Development, Prin. L.N.
Welingkar Institute of
On 20 May 2016, the Management team of Patanjali Ayurved Limited (PAL) had assembled Management Development
in their Haridwar office, India, to discuss their future growth plans. The team was in a and Research, Bangalore,
celebratory mood, as their internal reports suggested the annual revenue forecasts for the India. Uday Salunkhe is
year 2016-2017 to be INR 10bn, an increase of 100 per cent as compared to the previous Group Director at
Prin. L.N. Welingkar Institute
fiscal year 2015-2016 that recorded annual revenues of INR 5bn (The Times Group, 2016).
of Management
PAL – a company incorporated and co-founded by Acharya[1] Balkrishna (hereafter
Development and
referred as Balkrishna) in 2006, operated in four business segments of foods (foods,
Research, Mumbai, India.
supplements, digestives, dairy, juices, etc.), personal care (cosmetics, shampoo, soaps, Ishani Chakraborty is
facewash), home care (detergent cakes, powder, liquid, etc.) and Ayurved products Research Associate at the
(healthcare products for blood pressure, skin diseases, joint pain, etc.). The products were Center of Excellence for
marketed under the brand name of Patanjali. Swami[2] Ramdev (hereafter referred as Case Development, Prin.
Ramdev), a popular yoga[3] practitioner and preacher amongst the Indian masses, was L.N. Welingkar Institute of
PAL’s co-founder and their chief brand ambassador. Ramdev used his yoga sessions and Management Development
television talk shows to promote the brand “Patanjali”. The company’s brand and Research, Bangalore,
communications strategy focused on health and wellness lifestyle, emphasized on the India.
benefits of the natural products and capitalized on the nationalist pride by branding their
products as Swadeshi (made in India) and indigenously manufactured. PAL’s fast-paced
growth in less than a decade had generated a disruption in the Indian FMCG sector,
resulting in a negative impact on the sales of established multinational corporations (MNCs)
such as Colgate-Palmolive, Hindustan Unilever Limited (HUL), ITC Limited (ITC), besides
domestic players such as Dabur India Ltd. and Emami Ltd. This had led their FMCG
competitors to launch plans to strengthen their product portfolios so as to provide a tough
competition to PAL. The management team at PAL, although confident of achieving their
This case study is published
annual revenue targets, were apprehensive of this new competition from the big players of in partnership with Prin. L.N.
the FMCG sector. Were they capable of continuing their success story? Going forward, Welingkar Institute of
Management Development
what strategic steps would ensure them a sustainable growth and a market leader position? and Research, India
The mood turned reflective as the team pondered on some of these questions. (www.welingkar.org).
Disclaimer. This case is written

PAL – genesis solely for educational
purposes and is not intended
The origin of PAL can be traced back to the late 1990s when Ramdev and Balkrishna had to represent successful or
unsuccessful managerial
associated to start Divya pharmacy to make Ayurveda and herbal medicines. Divya decision-making. The authors
pharmacy – registered under the trust Divya Yog Mandir, was set up in association with may have disguised names;
financial and other
Ramdev’s guru (teacher) Swami Shankar Dev’s ashram. For the first three years, till 1998, recognizable information to
they distributed medicines free of cost. By 2001, their medicines made from herbal protect confidentiality.
DOI 10.1108/EEMCS-07-2016-0159 VOL. 7 NO. 2 2017, pp. 1-35, © Emerald Publishing Limited, ISSN 2045-0621 EMERALD EMERGING MARKETS CASE STUDIES PAGE 1
ingredients had become popular among the local population and were in great demand.
The popularity of their medicines led them to the idea of expanding this as a business.
Because Divya pharmacy was registered under a trust, a for-profit off-shoot entity from the
pharmacy was not an option. At the same time Ramdev was also gaining popularity as a
“yoga-guru” and was often seen on various Indian television channels such as Sanskar,
Aastha etc., promoting Indian yoga. Ramdev’s rising popularity and recognition of his field
of work both by non-resident Indians and Indians further contributed to the demand of
Divya pharmacy medicines. This led Balkrishna to conceive the idea of incorporating a
for-profit company that could manufacture and market Ayurveda products. The bank loans
provided for the initial seed capital and thus was incorporated Patanjali Ayurved Limited
(PAL) in 2006 (Business Today, 2016a). Balkrishna and Ramdev were the co-founders of
PAL, but 93 per cent of company shares were held by Balkrishna and the rest by an NRI
couple Poddars and others (refer Exhibit 1). The manufacturing unit of PAL was located
near Haridwar, Uttarakhand, in Northern India.
Pal – growth years

Ramdev, as the chief patron and brand ambassador, endorsed the Patanjali products both
at his television yoga-sessions and yoga shibirs[4]. The fiscal year 2008-2009, recorded
company annual revenues as INR 609m of which the food segment products such as
digestive juices (aloe vera juice), food supplements (amla candies) contributing revenues
of INR 250m (The Times of India, 2016). The company, with its vision to make this world a
“disease-free” place to live-in, grounded their product development on three important
principles of – purity of raw materials, innovation and competitive pricing. They worked
towards developing products that fulfilled the three criteria of health, quality and affordable
pricing. For example, the aloe vera – a digestive juice that was much recommended by
Ramdev in his yoga sessions for its medicinal values – at its present market pricing of INR
1,200/l was not affordable for the masses. This led the company to get into manufacturing
of this product. They directly sourced the raw material aloe vera leaves from the native
farmers of Rajasthan, thus producing the final product at an economical pricing of INR 200/l
(Business Today, 2016a) (refer Exhibit 2). In another instance, to address adulterated
ghee[5] brands as available in the market (India Today, 2016), the company started
manufacturing ghee. In yet another instance, when they found that the farmers of Uttar
Pradesh’s Saharanpur district were cutting amla trees (Indian gooseberry) as they could
not find buyers for their raw material, PAL saw a rich raw material source with a huge
medicinal value being wasted (Business Today, 2016a); they started sourcing these amlas
to produce the amla candies and the amla juices which soon became a popular category
of products among the consumers (Business Line, 2016).
In 2009, the Indian Ministry of Food Processing Industry was providing grants to food parks
in the country. PAL was successful in procuring this grant of INR 500 million and they built
the Patanjali Food and Herbal Park (PFHP) in Haridwar. The PFHP, their second
manufacturing unit, was spread across 95 acres of land comprising manufacturing and
processing plants, warehouses, multi-commodity cold storages, pre-cooling/ripening,
research and development centre, etc. It became operational in January 2010 (Food
Processing-Technology, 2016). In 2010, the company forayed into personal care segment
by launching their herbal toothpaste Dant Kanti (India Consumer, 2016) and later in other
food segments as rice, pulses, spices, biscuits, etc.
The demand for the Patanjali products gradually started increasing among the Indian
masses. PAL annual revenues of INR 4.54bn in 2011-2012 doubled by 100 per cent in
2012-2013 to reach INR 8.49bn (Business Today, 2016a). In 2014-2015, their annual
revenues touched a mark of INR 20.07bn, putting them in the league of big FMCG players
of the market such as Procter & Gamble healthcare, Jyothy Laboratories, Emami Limited,
PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

etc. (Business Today, 2016a) (refer Exhibit 3). In 2015, PAL ventured into the home care
category of products (The Economic Times, 2016a).
The 4 Ps of the Patanjali brand

All the product categories of PAL are associated with healthy lifestyle and purity and are
known for their indigenous production from natural resources. In the initial years, the
company did not engage in any big-budget promotional activities. Ramdev’s yoga
sessions resulted in product awareness as a result of “word-of-mouth” publicity done by
people attending those sessions. A Nielsen study conducted in 2014 reported
“word-of-mouth” to be the key driving source of awareness among Indian consumer.
Friends, colleagues and family members were reported to be the most important sources
of awareness among all age group of consumers (Jha, 2014). Ramdev, in his yoga
sessions and discourses, cleverly weaved in narratives that focused on various issues such
as the evils of MNC products, virtues of products made in India, cancerous effects of
fertilizers and chemicals, exploitation of our farmers, etc. A Nielsen report in 2016
suggested the importance of “local tastes” and “local relationships” in the FMCG sector. In
total, 43 per cent of Indians citied “brand origin” as the most important purchasing criteria
added to quality and functionality. Further 73 per cent of the Indians cited “Swadeshi”
phenomenon and reported buying the local brands, as they were more in tune to their local
tastes and were offered at low prices (Udasi and Dhunta, 2016). The emphasis on the
home-grown nature of the Patanjali products added a patriotic flavour to the brand. With
strengthened consumer trust, PAL went into brand extension with new product categories
such as instant noodles and energy drinks. Mayanak Shah – head of Marketing, Parle
Products Limited commented, “When Patanjali is launching multiple products today, what
it is selling is a promise or a concept – good living, closer to nature, less artificial and
Ayurved – that has been thoroughly sold for many years. Once people have bought the
concept, the company is now piggybacking on it” (Business-Standard, 2006).
The company sold its products at a 15-30 per cent lower price than its competitors
(Business-Standard, 2016a) (refer Exhibits 4 and 5). This was possible as PAL believed in
sourcing the raw materials directly from the farmers. Further, they followed the Ayurveda
principle which did not believe in profiting from the patient care; employee salaries were
modest, and the company administrative costs were kept as low as 2 per cent as compared
to most other competitor companies that had administrative costs of 10 per cent. The
company profit margins were kept low enough to cater to the operational expenses of their
manufacturing facility (Business Today, 2016a).
PAL adopted a franchisee business model to sell its products. There were two franchisee
store formats – the mega stores called Patanjali Chikitsalaya built in an area of 2,000 square
feet, limited to tier-I cities[6] that required investments of INR 6m, and Arogya Kendras, built
in an area of 350-100 square feet in tier-II cities, with investments of INR 0.6-1.2m (The
Hindu, 2016b). Further, to obtain the franchisee license for Patanjali Chikitsalaya and
Arogya Kendra, a refundable security deposit of INR 0.1m and INR 21,000, respectively,
and an initial purchase of INR 0.75m from PAL had to be made by the franchisee (India
Study Channel, 2016). The franchisee received sales commissions of 20 per cent on
medicine and food products and 10 per cent on others (Divya Yoga, 2016). A notable
aspect was the fact that PAL trained and certified medical practitioners nominated by these
stores. In return, the stores provided free consultation service to its customers by the
certified medical practitioners. This increased the likelihood of building large-scale early
adopters. As the stores stocked both the pharmaceutical and FMCG products,
cross-selling happened and the early adopters brought in additional footfalls through
strong word-of-mouth publicity (Patanjali Ayurveda, 2016). In addition to this, the company
offered online sales through their website patanjaliayurved.net. In 2015, modern retail chain
Reliance retail was the first to collaborate with PAL to sell their products. This was followed
VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

by another collaboration with the Future Group[7]. Future Group planned to sell Patanjali
products through most of their retail outlets such as Big Bazaar, KB’s Fairprice, Aadhaar
and Nilgiris (Business-Standard, 2016b). Further, Future Group planned to set up an office
in Haridwar, near PAL’s manufacturing unit, for easy access of the products. Harish Bijoor,
a renowned Indian brand strategist commented, “It is a win-win situation for both Patanjali
and Future Group. Patanjali gets a modern trade-face, which it possibly did not have
before. The Future Group will give Patanjali fresh customers from a market which might not
have opened up to it as quickly otherwise” (Business Today, 2016a). PAL’s future plans
included the launch of a mobile app to facilitate online sales and to help customers locate
their nearest outlet (The Economic Times, 2016b).
Human resources
PAL employees are dedicated and take pride in their work. The top management and many
key employees did not take any salary. Abneesh Roy, the Associate Director at Edelweiss
Securities[8], mentioned that most of the employees at PAL consider their work as social
service and hence the company’s expense towards employees’ was quite low (Outlook
India, 2016). They willingly put in extra working hours. and the company exhaled an
atmosphere of spirituality and purpose. In the recent past, many executives from different
established FMCG sector companies joined PAL. Most professionals found the idea to work
and develop a “brand with a purpose” exciting. For example, Sharad Bharadwaj – the
Western zone manager at Patanjali – was an ex-P&G executive who liked a few things about
PAL such as the “Swadeshi” model of the company, the possibility of growth with the
growth of the brand and the fact that they treated the middle-level and junior-level
employees with respect. Similar sentiments were echoed by another professional Pratima
Kumari – the marketing manager at PAL who was a previous DDB Madura employee.
Rajesh Sharma, their senior manager in sales and marketing, was yet another example with
14 years of previous work experience in companies such as Revlon and JL Morrison
(Outlook India, 2016). The employees dressed in either white shirt and trousers or white
kurta-pyjama (Indian attire). The visitors that met Balkrishna received a saffron-wrapped
bouquet consisting of Patanjali products, Ayurveda books and Patanjali product catalogue
that detailed products’ benefits and treatment of common ailments (Business Today,
2016b).
Although the present employee compensation is less as compared to other FMCG majors,
the employees are satisfied, as they believed they are contributing to a purpose in society.
PAL plans to further recruit professionals at various levels in the organization (Business
Today, 2016b).
Indian FMCG sector and the Ayurved industry landscape

The Global rating Agency Fitch Ratings, reported India’s GDP to rise to 8 per cent by FY
2019 (The Economic Times, 2016d). The Indian FMCG sector being the fourth largest
sector (India Infoline, 2016) in the Indian economy had grown considerably over the past
decade. Based on data released by Statista, India’s FMCG market had grown from
US$11.6bn in 2003 to an estimated US$33.4bn in 2015 (refer Exhibit 6). Nielsen reports
suggested the FMCG sector to grow to US$49bn in 2016 (Bhalla and Vasu, 2014). Also,
based on the category-wise penetration by the players in Indian’s FMCG space, there
existed opportunities for growth in several categories with low penetration levels (refer
Exhibit 7). The future success of companies was a function of their ability to exploit digital
communication and e-commerce platforms. The Boston Consulting Group – CII report
“Re-Imagining FMCG in India” forecasted 150 million consumers to be digitally influenced
in FMCG by 2020, and these digital consumers to alone spend US$40bn on FMCG
categories (Singhi et al., 2015). The sector included the products that were generally used
by the consumers on a regular basis and sold quickly – such as personal care products,

packaged food, pharmaceuticals, etc. The Indian FMCG was no longer only urban-centric
as it used to be a decade ago. While the tier-I cities had been driving the consumption for
the past decade, the smaller towns and the tier-II and -III cities were expected to drive the
sector growth over the next decade. The three key drivers of the FMCG industry were
bucketed in demand-, market- and environment-related drivers (refer Exhibit 8).
A diverse supplier base limited the bargaining power of suppliers to this industry, and the
major FMCG companies were able to dictate the prices through local sourcing from a
backward integration with key commodity suppliers or doing backward integration with the
local suppliers. Also, long-term relationships with the suppliers helped them negotiate
better prices. The buyers were the kings of this industry, with numerous organized and
unorganized players operating. The companies had to continually think of new strategies to
entice/retain the consumers. The sector was full of substitutes available for the buyers to
choose from. There were no regulations of the industry to control the entry of new players,
although to survive in the industry, the new entrants had to face stiff competition from the
established players of the industry. In general, the rivalry in the industry was high. The
Indian FMCG companies had evolved both in terms of technology adoption and efficient
processes benchmarked to international standards. They used innovative technology
marketing services and created digital presence for their brands using various platforms
and ROI-driven digital campaigns (IT Roadmap, 2016).
Ayur denoted life and Veda denoted knowledge. Ayurveda evolved in ancient India from
the deep understanding of the fundamentals of life and creation. The great saints of ancient
India practiced and preached meditation and spirituality to take care of both physical and
emotional well-being of the human race. The system of Ayurveda put emphasis on the
interconnectedness between self, personality and nature (Traditional and Indigenous
Healing Systems, 2016). With time, different traditional systems of healing originated across
the globe and some of them such as Unani (Greek) and Homoeopathy (Europe) made
inroads to India. The traditional systems of healing followed in India included naturopathy,
Unani, siddha and homoeopathy besides Ayurveda and yoga (refer Exhibit 9). In 1995, the
Indian government set up a Department of Indian Systems of Medicine and Homeopathy;
later in 2003, it was renamed as AYUSH (Ayurveda, Yoga, Unani, Siddha, Homoeopathy)
(Roy, 2015). In 2014, the ruling Government of India (GOI) led by Prime Minister Narendra
Modi showed renewed interest in AYUSH and extended administrative and financial
support of INR 12m in the annual budget (The Hindu, 2016c). Further the GOI had plans to
set up All India Institute of Ayurveda similar to the six All India Institute of Medical Sciences
(AIIMS)[9] as established in the major cities of the country. The plan was to open AYUSH
departments in the existing AIIMS and open independent AYUSH facilities across the
country (Nature, 2016). Further, the GOI was focused on development of transportation and
infrastructure and provide direct support to the agriculture sector (DNA India, 2016; IBEF,
2016).
In general, there was a global shift in the consumer adopting more natural and herbal
remedies for their ailments. There was a general belief that herbal supplements and
remedies have no side effects as compared to the allopathic medicines and thus are more
beneficial. Global Industry Analysts, a US-based market research firm, suggested the
herbal and natural products market to reach a worth of US$115bn by 2020 (Global Industry
Analysts, 2016). While Europe was the largest market for such products (Nutraceuticals
World, 2016), the Asia-Pacific markets were also growing at a reasonable pace with
countries such as India and China presenting larger opportunities owing to cultural affinity
towards such products. In India, the Ayurveda personal-product sales increased at an
annual rate of 12-13 per cent against 7.5-8 per cent industry average during 2000-2015
(The Wall Street Journal, 2016). PAL, with its brand of Patanjali products, was launched just
at the right time to take advantage of this positive shift among the consumer preferences.

PAL advantage and influence on competition
PAL’s success was based on two prime aspects of being the disruptor of the FMCG
industry offering the quality at reasonable pricing and being a specialist of Ayurveda
products (Exchange4Media, 2016). Santosh Desai, the CEO of Future Group, opined that
PAL had a robust business model, offering a counterpoint to the MNCs in the FMCG sector
(The Economic Times, 2016e). Further, Devendra Chawla, the President of Future Group’s
Food and FMCG division, stated that he found both the mass and the affluent “upper class”
buying PAL products, as they were considered as supplements to a healthy lifestyle (The
Economic Times, 2016f). Once a consumer was convinced of Patanjali product’s health
benefits, they simultaneously bought most other products from across their categories. This
was unique to PAL, unlike its competitors of FMCG market, where the companies usually
competed against each other based on a particular product category.
The success of Patanjali was becoming a threat for some of the known market brands, and
they engaged in various initiatives to enhance their brand values. For example, HUL
acquired Indulekha and Vayodha – the premium Ayurveda hair oil brands from the Mosons
Enterprise[10] for INR 3.3bn in December 2015 (The Economic Times, 2016fg) Further, the
company revived its herbal brand Ayush[11] comprising hair, skin care products and pain
balms by launching new products in early 2016. Sanjiv Mehta, the Managing Director and
COO of HUL said, “What we find is that consumers’ interest in natural/Ayurveda products
is growing. It is one of the emerging trends now. As a consumer goods company, we
responded to this, which is why Ayush, which existed in our portfolio, has now staged a
comeback” (Business-Standard, 2016c).
Another skin and healthcare company Emami Limited launched new products like
sugar-free honey under its “Zandu” brand besides rejuvenating the brand in January 2016.
Harsh Agarwal, the Director of Emami, had plans of inorganic growth[12] and by way of
acquisitions in future. He believed in the expansion potential of herbal and Ayurveda
product market which could benefit all the major players of this industry.
Lalit Malik, the CFO of Dabur India, opined that entry of more players in the herbal and
Ayurveda market segment would result in greater awareness about this ancient science
and actually speed up the growth, making the market pie bigger for all players of this
segment (Business-Standard, 2016d). The company has plans that focus on new products
in the women’s healthcare and baby-care segment (Brand Equity, 2016). Himalaya Drug
Company was also part of this race and was aggressively promoting its products to retain
its position in the market.
PAL challenges and way forward

The Trust Research Advisory report 2015 declared Patanjali to be the seventh most trusted
brand in India. Ramdev was the only spiritual leader to be featured as one among the top
21 influential personalities in India (Business-Standard, 2016e). The credit of this largely
went to Ramdev who had been indirectly promoting Patanjali brand in his yoga sessions.
It was more of the public trust and confidence in Ramdev and his teachings that had
resonated with their (public) faith in the quality of Patanjali products. Ramdev embodied the
brand Patanjali; there was no gap between what he espoused and what Patanjali wanted
to communicate to its consumers. In short, Patanjali was a single personality-driven brand
whose credibility was largely governed by Ramdev’s credibility.
Ramdev in controversies
Ramdev was never devoid of controversies. In 2012, there were indications of his affinity
towards politics (The Economic Times, 2016h). Further, in 2013, Uttarakhand Government
filed 81 cases against his Patanjali Yog Peeth – a 20-acre facility started by him in
Uttrakhand for serving ailing patients and to facilitate Ayurveda research work. The

allegations included false monetary transactions, land grabbing and tax evasion. Though
they were acquitted in 2-3 cases, most of the cases were still pending in the Indian courts
(The Economic Times, 2016e). Industry experts feared that such incidents which were
capable of tarnishing Ramdev’s image will have its negative impact on the Patanjali brand.
Quality challenges and quality audit

Patanjali competitors had started highlighting their quality shortcomings. For example, in
May 2016, Dabur Ltd. launched an advertisement for its honey which categorically
mentioned their Honey product to be approved by Food Safety and Standards Authority of
India (FSSAI) that ensures safety, whereas Patanjali ‘s honey does not have this FSSAI
approval (Live Mint, 2016).
New norms were being implemented by the Indian Government that required new
Ayurveda drugs to go through rigorous clinical trials before being sold in the market. This
prompted the Ayush Department, the regulatory authority for Ayurveda products in the
country, to enforce a stricter regime by mandating pre-clinical and clinical trials as per the
Good Clinical Practices (GCP) guideline for every new Ayurveda drug (The Economic
Times, 2016i). There was difficulty in practically adopting such norms which mandated
huge infrastructure that required investments of approximately INR 50m for such trials
alone. The rippling effect of this would be the increase in price of Ayurveda drugs
(Business-Standard, 2016f). PAL’s Ayurveda products formed a large part of their revenue
portfolio and investment on quality norms was sure to impact their overall revenue base.
Apart from the Ayurveda drugs, for their other product portfolios, they had planned huge
production targets for 2016-2017 to achieve INR 100bn, thus it was important for them to
implement and invest in proper quality mechanisms to avoid any market set-backs.
New competition
PAL’s market success riding on Ramdev’s popularity had inspired other spiritual sect
heads to join the bandwagon and engage in such market activities. For example, Sri Sri
Ravi Shankar of “Art of Living” fame that sold Ayurved and herbal products from its Sri Sri
Ayurveda Trust had ramped up its market activities. Their intent was to increase their
franchisee stores from 600 to 2,500 in 2016. They were also in talks with companies such
as Future Group for a tie-up to sell their products (Business-Standard, 2016g). Other
spiritual leaders such as Sadhguru Jaggi Vasudev of “Isha Arogya”, Baba Ram Rahim
Singh of Dera Sacha Suada with its “MSG” brand, etc. were all focusing on growing their
product portfolios and compete in the market. This was new competition for Patanjali from
domestic camps other than the MNCs.
Distribution woes
Balkrishna himself admitted that there was a huge gap between Patanjali distribution
muscle (The Economic Times, 2016j). Vijay Udasi, Senior VP of Nielsen India, said,
“traditional trade as in the universe of Kirana stores (local grocery store) still constitutes 90
per cent of Indian FMCG business the supply and demand”. PAL was way behind their
competitors, as far as penetration in the Indian traditional mode of trade was concerned
(refer Exhibit 10). The Nielsen report (Udasi et al., 2015) suggested “availability of the
products is the single largest driver of FMCG sales and its shopper research suggests that
consumers shift preference if their favourite brand is not available at the store”. The kirana
stores were not very keen to stock the Patanjali products, as the margins provided by the
company to the retailers was only 5-6 per cent as compared to higher margins provided by
some of the established FMCG players such as HUL, Nestle, Dabur etc. Gaurav Kanodia,
a distributor of Patanjali, stated that the demand of the products is high but there is
shortage of products; “I get queries from retailers but if I start supplying and then stop

midway because of paucity of stock on my end, I will lose goodwill in the market” (The
Economic Times, 2016k). A Pharma store owner that stocked Patanjali products said:
I started stocking the Patanjali products only since last 4 months primarily because of the
customer demand for these products. Though our cumulative margins on Patanjali products is
as low as 10 per cent with some of the product margins being only 1 per cent; unlike other brand
distributors, Patanjali distributors do not even pass on any kind of retail discounts on cash
payments. In-spite of these aspects stocking Patanjali product, provides our store the
necessary customer traction. The other brand products such as HUL, Dabur do fetch us high
retail margins between 20-25 per cent; but it is the Patanjali products that has a high customer
demand. Also, we have observed that the customer in case of stock out of the product is ready
to wait for the product to come and does not easily buy another brand product (Kushal
Choudhary, owner Good Health Pharma, Doddathogur, Bangalore, India).
Thus, PAL had to work towards making their distribution network stronger to sustain and
fulfil the market demand.
Way forward
In February 2016, PAL manufactured 444 products, of which 45 were cosmetic and 30 were
food product categories (India TV News, 2016). The company’s reach to its urban and rural
markets was by way of its franchisee network comprising 3,044 Patanjali Arogya Kendras
and 1,266 Patanjali Chikitsalayas (Divya Yoga, 2015a, 2015b) besides selling products
through retail chains such as Future Group and Reliance Retail. In addition to this, PAL had
also started exporting to overseas markets such as USA, UK, Canada and Mauritius (The
Hindu, 2016d). Supporting this phenomenal growth, the company was planning to launch
two more food parks in the states of Madhya Pradesh (The Economic Times, 2016l) and
Punjab (The Economic Times, 2016m).
Over years, they engaged in big-ticket promotional activities as well. The Broadcast
Audience Research Council (BARC) India[13] report of November 2015 showed Patanjali
to be the third most advertised (12,969 times) brand on television. Reports suggested
company setting aside INR 3bn as their advertisement budgets. Some industry experts
were positive of PAL growth trajectory, whilst there were others who were sceptical of their
growth sustainability in future. Madhukar Kamath, Chief Executive and Managing Director
of Mudra said, “They have a great product, a modern manufacturing process, a wide
distribution network and a large number of loyal followers, who are also users of the brand.
What more would you want from an FMCG company?” (Business-Standard, 2016e). Harish
Bijoor said, “PAL has all the components or right branding and communication strategy to
become the ‘MNC killer’ in future” (The Economic Times, 2016n). Deeraj Sinha, Chief
Strategy Officer, Leo Burnett, said, “Baba Ramdev and his Patanjali brand has had a
fantastic launch platform, but in India, having a good launch doesn’t ensure a profitable
and long run. I would be wary of quality monitoring and there has to be a plan for how you
will differentiate the product” (BBC, 2016). On the other hand, Vibhav Dhawan, Managing
Partner at Positive Moves Consulting opined that PAL was devoid of top-grade talents from
premier institutions who looked for sustainable career growth (The Economic Times,
2016o). Whether PAL would face paucity of effective leadership was a concern for the
future.
Keywords:
Competitive strategy, The industry experts may have their individual different opinions; but, it was for PAL
Strategy, Management to be prudent in strategizing PAL’s next steps to capture a market leader
Product differentiation position in time to come.
Notes
1. The term Acharya is used to denote an influential mentor. Acharya Balkrishna is an ardent follower
and aide of Swami Ramdev.
2. In India, “Swami” is a revered title and connotes a saint or religious leader.

3. Yoga is a Hindu spiritual and ascetic discipline, a part of which, including breath control, simple
meditation and the adoption of specific bodily postures, is widely practiced for health and
relaxation.
4. Huge gathering of participants to learn Yoga.
5. Clarified butter generally made from the milk of a cow or buffalo. It is used in Indian cooking and
also in traditional medicines and religious rituals.

6. The Government of India has classified cities into several categories such as tier I, tier II and tier
III, etc. based on population and government expenditure on infrastructure. The cities where
population is more than 100,000 are called tier-I cities; tier-II cities have population bandwidth of
50,000-99,999.
7. One of the retail pioneers in India with multiple retail formats such as Big Bazaar (Hypermarket
chain), Food Bazaar (Supermarket chain), eZone (electronic superstore), Home Town (home
improvement and building materials store), Aadhaar (rural retail chain), KB’s Conveniently Yours
(urban convenience store) etc.
8. The Edelweiss Group is one of India’s leading financial service providers, providing services to
corporate, institutions and individuals.
9. AIIMS is a group of autonomous public medical colleges of higher education in India. These are
the institutions of national importance as declared by the Act of Parliament.
10. Set up in 1976 by A.C. Moosa, the Mosons Enterprise manufactures skin and hair care products.
The company emphasizes on coconut-based products.
11. Ayush was launched in 2003 to combat Amway. HUL also opened Ayush Therapy Centers – a
retail spa cum treatment centre in 2004. However, the Ayush products and therapy centres did not
gain much popularity and the company thought to terminate the brand
12. Inorganic growth is growth by acquisition. For instance, Emami acquired Kesh King brand of
medicinal hair oil in 2015 (Business-Standard, 2016c).
13. A joint industry body set up in 2012 by the broadcasters, advertisers and advertising agencies to
measure television audience.
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Exhibit 1. Ownership pattern of Patanjali
Figure E1
Ownership Paern of Patanjali Ayurved Limited

3.016
3.016 0.259
Acharya Balkrishna
Sarwan Poddar
93.709 Sunita Poddar

others
Source: Recreated by authors Business Today (2016a)

Exhibit 2. Aloe Vera Juice price of Patanjali vs other brands (INR, AS OF MAY
2016)
Figure E2
Exhibit 3. Annual revenue and market capitalization data of PAL competitors
Table EI
Market capitalization as
Revenue (2014-2015) INR on October 2015 INR
Company name in billion in billion
Procter & Gamble Hygiene &

Health Care Ltd. 103.47 200.66
Emami Ltd. 22.20 256.99
Dabur India Ltd. 78.06 476.81
Colgate-Palmolive (India) Ltd. 42.11 255.43
Jyothy Laboratories Ltd. 15.05 56.86
HUL 308.06 1,703.72
Marico Ltd 57.33 254.77
Godrej Consumer Products Ltd. 85.49 476.81

Table EII Wazir advisors estimated the PAL revenues and market capitalization as on
October 2015 if it were a listed company as follows
Market capitalization as on
Company name Revenue October 20, 2015 October 2015 INR billion
Patanjali Ayurved Ltd. 20.07 400.00*

Note: *Estimated figures if PAL is listed in the market
Sources: Compiled by authors from “Baba of All Trades”, www.businesstoday.in/magazine/
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226011.html, as accessed on May 20, 2016; “How Baba Ramdev has built a Rs 2,000 crore Ayurved
FMCG empire & plans to take on multinational giants”, http://economictimes.indiatimes.com/
industry/cons-products/fmcg/how-baba-ramdev-has-built-a-rs-2000-crore-Ayurved-fmcg-empire-
plans-to-take-on-multinational-giants/articleshow/47657636.cms, as accessed on July 9, 2016;
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companies/dabur-profit-jumps-17-116042800857_1.html, as accessed on July 9, 2016; “P&G sales
decline despite focus on premium products”, http://economictimes.indiatimes.com/industry/cons-
products/fmcg/pg-sales-decline-despite-focus-on-premium-products/articleshow/49330050.cms, as
accessed on July 9, 2016; “Colgate-Palmolive (India) Limited: Annual Report 2014-15”, www.colgate.co.in/
Colgate/IN/Corp_v2/Investor/FinancialReports/annual-report-2014-15.pdf, as accessed on July 9, 2016;
“Jyoti Laboratories Limited: Annual Report 2014-15”, www.jyothylaboratories.com/admin/docs/Annual%
20Report%202015.pdf, as accessed on July 9, 2016; “Consolidated Financials”, www.godrejcp.com/
Download_2014_15.aspx?file⫽Consolidated-Financials.pdf; “Transforming Marico: Annual Report
2014-15”, http://marico.com/investorspdf/Annual-Report2014-15.pdf
Exhibit 4. Price comparison of Patanjali and its competitors
Figure E3

Exhibit 5. Pal vs local South Indian competitor on Ayurveda products
Figure E4
Exhibit 6. India’s FMCG sector – market size (US$ billion)
Figure E5

Exhibit 7. India’s FMCG sector – category-wise penetration
Figure E6
Exhibit 8
Key drivers of Indian FMCG industry
Demand-related drivers
Increasing consumer prosperity. Evolving middle class, exponential growth in GDP per
capita and urbanization consumer sector growth have a high correlation with strong
economic growth. The recent example of this in the Indian landscape was the
implementation of Seventh Pay Commission that resulted in salary hike of government
employees and pensioners by 23.55 per cent, and was executed from January 1, 2016.
Further, with the country’s strong economic prospects, both the rich and middle-class
consumer will also prosper. This is a positive sign for the FMCG industry that is likely to
benefit from the growing prosperity of the consumer.
Increasing urbanization. With rising urbanization, the FMCG companies can now look for a
consumer base beyond the metro cities, and their focus is now on tier-I and tier-II cities.
This provides the FMCG companies with a larger consumer base to target to.
Figure E7 India’s nominal per-capita income (USD)

Growing awareness. Rising purchasing power, increased access to mobile and literacy
in rural India have all contributed to the increased awareness of the Indian consumer.
This has made the rural customer selective in their buying preferences, but overall, it
has had a positive impact on the FMCG consumption patterns. Further decision-related
criteria used to assess products have moved from utility-based factors to include those
that have an impact on consumer’s health and the environment. Consumers are now
increasingly making healthy choices as evident in the product-related choices across

food, skin care, hair care, cosmetics, etc. The consequence of this is that natural,
organic herbal, Ayurveda and other traditional products performed well in the market in
2015. Euromonitor, November 2015 report, suggests the herbal market size reached
US$ 7.6bn by 2020.
Changing lifestyle. Lifestyle and premium-range products are the new target product
segment among Indian FMCG players. For example, the market acceptance of men’s
fairness creams or people opting for aloe vera juices for health benefits demonstrates an
opportunity for companies to offer new products.
Consumer Store experience. The Indian consumer had also changed in terms of buying
experiences; they wanted to shop in modern and spaciously laid out stores, with ample
parking spaces. Advice from sales associates with a deep knowledge of the product
enhanced the selling proposition of the product; consumers also valued other added
advantages of self-service check-out facilities; ability to check for stock in other stores if not
available in one; and other digitally enhanced in-store experiences.
Consumer convenience redefined. Consumer convenience is no longer easy accessibility

to physically locating the stores/products; convenience had adopted more complex
dimensions of providing the options that were relevant to a particular consumer needs and
then cognitively making it easier to figure out the best one. Convenience had added
dimensions of control and the consumer expected consistency in brand experience across
all channels.
Growing size and influence of social networks. Consumers good or bad experiences went
viral in no time, and consumers were connecting with people for feedback had becomes
very easy. This empowered the consumers to make better and informed choices and reject
the bad ones. For business, this could either propel or dispel their propositions very
quickly.
Market-related drivers
Increased competition. Realizing the potential of the consumers, the FMCG companies are
at their best to attract new customers as well retain their existing customers with all kinds
of promotional activities to win over customers. This severe competition allows the
customer a huge array of options before making a purchasing decision.
Accessibility. Most leading FMCG players, realizing the increasing purchasing power of the
rural consumer, has expanded their distribution channels in the interiors of the country. This
provides accessibility to the rural consumer as well a competitive field for the FMCG
players.
Retail expansion. The massive retail expansion in India in the past five years has
resulted in FMCG companies expanding their production base and vying for shelf
Figure E8 Market size of herbal products in India

space in all the possible retail chains. The availability of their products in the leading
retail chains provides them to be introduced in the consideration set of customer
purchase decision.
Low labour cost. The low cost of labour, almost one-sixth of that available in the USA and
UK, makes it attractive for national and international FMCG companies to have their
manufacturing base in India.
Environment-related drivers
Infrastructure development. The current Modi Government’s agenda to develop

infrastructure and smart cities will facilitate the manufacturing capabilities of the country.
Better infrastructure will help better access and more distribution network to the FMCG
companies. It will help the companies to improve their supply chain. In the fiscal year
2016-2017, the government expects to garner more than INR 2,000bn by way of private
investments in the roads sector.
Opportunity in personal care product line. India occupies 17 per cent of the world’s
population with 50 per cent of them below the age of 28 years. Compared to this statistic,
the country’ per-capita consumption in most personal care product categories like skin
care, toothpastes, hair wash, shower gels, deodorants, etc. is amongst the lowest in the
world, which provides sufficient scope for all the FMCG companies to tap this unsaturated
market.
Population growth. The rapidly increasing Indian population along with the surge in the
income levels across all strata of the society is one of the prime functions of increased
pattern of consumption in the Indian markets. This will only get better with time, thus
providing the FMCG companies a sustained market potential.
Figure E9 Category penetration in India (%) (FY15)

Exhibit 9. Traditional healing systems followed in India
Table EIII
AYURVEDA YOGA HOMOEOPATHY
Ayurveda with its root in the ancient Yoga denoted ‘to join’ or ‘to unite’. Originated Homoeopathy was first started in Europe
Hindu text Atharva Veda, believed in ancient India, recorded in Upanishads and in late-eighteenth century; to the work of
that all living beings comprise five yoga sutras of Patanjali (an ancient sage), it German physician Samuel Hahnemann.
elements of fire, ether, air, earth and was the practice of yoga that led to a state of Diagnosis involved detailed
water. Permutations and higher consciousness. Also known as “soul understanding of the patient dietary and
combinations of these five key therapy”, the Yoga practitioners claimed that other habits to provide for medicines
elements form three types of body it could cure diseases. A Harvard study
fluids in human body that need to (Bloomberg, 2016) indicated its positive
maintain balance between them- effects curing stress
selves. Any type of imbalance is
believed to result in a disease
UNANI SIDDHA NATUROPATHY
This was introduced in India by Siddha originated in Tamil Nadu, a Southern Naturopathy included a range of
Arabs and Persians in the 12th Indian State through the work of Siddhars or alternative treatments derived from
century. Unani shared many scientist-saints. Siddha and Ayurveda had natural products. Naturopaths believed
common principles with Ayurveda many common tenets such as belief in body that except for accidents, the cause of
such as belief in the body fluids fluid, elements and imbalance. Drugs used disease in humans is accumulation of
were herb based morbid matter inside the body. Therapies
included special diet, mud packs,
acupuncture, acupressure etc. Prayer
was an important part of the treatment
Source: Compiled by authors from “Questions over science swirl, but AYUSH stands firm”, www.thehindu.com/sunday-anchor/
medicine-wars-homeopathy-allopathy-ayurveda-unani-in-india/article7141754.ece, April 26, 2015 as accessed on May 28, 2016
Exhibit 10. Indian FMCG share of kirana store universe
Figure E10
About the authors

Sonia Mehrotra, Phd, is the Heads of the Center of Excellence for Case Development and
has numerous case publications across different publishing houses such as Richard Ivey,
Harvard, Globalens, Emerald EEMCS. She is dedicated to bringing Indian business to life
through her case studies. Her research areas of interest include emerging economies,

strategy and social entrepreneurship. Sonia Mehrotra is the corresponding author and can
be contacted at: sonia.mehrotra@welingkar.org
Uday Salunkhe, Phd, is Group Director of Prin. L. N. Welingkar Institute of Management
Development and Research. He has been involved in introducing many new industry
relevant programmes over the years at the Institute. An Eisenhower fellow, Dr Salunkhe has
numerous publications across national and international journals.
Ishani Chakraborty, Research Associate, Center of Excellence for Case Development,

Welingkars, is dedicated towards case development and has case publications in The
CaseCenter.

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Pal – growth years

PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

The 4 Ps of the Patanjali brand

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3

Indian FMCG sector and the Ayurved industry landscape

PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5

PAL challenges and way forward

PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

Quality challenges and quality audit

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7

PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

also in traditional medicines and religious rituals.

Business-Standard (2006), “Caution: diversion ahead”, available at: www.business-standard.com/

Business-Standard (2016a), “PatanjaliAyurved targets 250% revenue growth in FY16: Edelweiss”,

Business-Standard (2016d), “The Patanjali effect”, available at: www.business-standard.com/article/

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9

html (accessed 9 June 2016).

Business-Standard (2016g), “Gurunomics fuels consumer boom”, available at: www.business-standard.

Business Today (2016a), “Baba of all trades”, available at: www.businesstoday.in/magazine/

Business Today (2016b), “Baba of all trades”, available at: www.businesstoday.in/magazine/

Divya Yoga (2015a), available at: www.divyayoga.com/list-of-patanjali-arogya-kendra.html

Divya Yoga (2015b), available at: www.divyayoga.com/list-of-patanjali-chikitshalyas.html (accessed

IBEF (2016), “Infrastructure sector in India”, available at: www.ibef.org/industry/infrastructure-sector-

Jha, D. (2014), Understanding India’s FMCG Shopper, Nielsen Featured Insights.

Live Mint (2016), available at: www.livemint.com/Companies/UgUhTXwedPBnKgK0sgqIiO/Dabur-

PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

Patanjali Ayurveda (2016), available at: http://patanjaliayurveda.com/en/our-sewa-kendras/ (accessed

The Economic Times (2016d), available at: http://economictimes.indiatimes.com/news/economy/

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11

foray-into-yoga-wear/49811424 (accessed 21 June 2016).

Exhibit 1. Ownership pattern of Patanjali

Ownership Paern of Patanjali Ayurved Limited

93.709 Sunita Poddar

Source: Recreated by authors Business Today (2016a)

PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

Exhibit 3. Annual revenue and market capitalization data of PAL competitors

Procter & Gamble Hygiene &

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 13

Patanjali Ayurved Ltd. 20.07 400.00*

Exhibit 4. Price comparison of Patanjali and its competitors

PAGE 14 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

Exhibit 6. India’s FMCG sector – market size (US$ billion)

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 15

Key drivers of Indian FMCG industry

Figure E7 India’s nominal per-capita income (USD)

PAGE 16 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

increasingly making healthy choices as evident in the product-related choices across

Consumer convenience redefined. Consumer convenience is no longer easy accessibility

Figure E8 Market size of herbal products in India

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 17

Infrastructure development. The current Modi Government’s agenda to develop

Figure E9 Category penetration in India (%) (FY15)

PAGE 18 EMERALD EMERGING MARKETS CASE STUDIES VOL. 7 NO. 2 2017

Exhibit 10. Indian FMCG share of kirana store universe

About the authors

VOL. 7 NO. 2 2017 EMERALD EMERGING MARKETS CASE STUDIES PAGE 19

numerous publications across national and international journals.

Ishani Chakraborty, Research Associate, Center of Excellence for Case Development,