How a yoga guru created a ₹2,500 crore FMCG business | Baba Ramdev’s Patanjali Case Study

Baba Ramdev's Patanjali Case Study

When reports came out that Patanjali Ayurved Ltd (PAL), promoted by yoga guru Baba Ramdev, had recorded gross revenues of ₹2,500 crore (around $380 million USD) in fiscal 2015, business strategists and journalists went into a tizzy.

How had this new kid on the corporate block outdone its more street-smart business rivals?

The answer holds key lessons for not only business analysts, but also entrepreneurs and MBA students who trying to do a SWOT analysis on Patanjali and evaluate its core competencies.

A quick search of the Internet would tell you that PAL, along with the yoga institution, Patanjali Yogpeeth, was founded by Ramdev along with his associate, Acharya Balkrishna, an Ayurveda practitioner, in 2006.

While Ramdev focused on yoga, Balkrishna developed Ayurveda medicines. Gradually, PAL started manufacturing food items and cosmetics, and today, has its headquarters and manufacturing unit at the 100-acre Patanjali Food and Herbal Park at Haridwar, Uttarakhand, employing 6,500 people.

The gross revenue figures for FY15, ₹2,500, were no flash in the pan. PAL had registered turnovers of ₹1,200 crore in FY 14, ₹850 crore in FY13, and ₹450 crore in FY12, according to figures from the Registrar of Companies quoted by websites. The 2015 figure compares with Emami’s ₹2,217 crore and Jyothy Laboratories’ ₹1,481 crore (much older companies, founded in 1974 and 1983, respectively).

In a report, Credit Lyonnais Securities, a foreign stockbroking company, expressed amazement over PAL’s success: “Wish you were listed.”

But Acharya Balkrishna doesn’t delve too much into PAL’s growth, and says it was achieved without a business plan: “We don’t know markets or marketing . . . but what we know is serving the people by providing them high-quality products at attractive prices.”

Ramdev would agree: “We haven’t done this for business but for welfare. I am not doing this to amass personal wealth. Neither do I own a single share of Patanjali Ayurved nor do I take a single penny to promote it.”

They probably know “business plan” by some other term, because PAL certainly has a clear holding pattern, a well-developed supply chain, and a sagacious product-development process. But yes, true to his words, Ramdev has no stake, and Balkrishna holds 92 percent of the company, with the rest in the hands of a Scotland-based NRI couple Sarwan and Sunita Poddar.

PAL has a three-tier distribution system consisting of clinics, wellness centres, and non-medicine outlets to retail 800 products. The company also runs an ecommerce portal that sells a wide range of products from hair cleansers to “hing peda.”

It has distribution agreements with Reliance and the Future Group and a product development arrangement with the Defence Research Development Organisation (DRDO) for food and health supplements. PAL even has an HR policy that aims at hiring executives from rivals.
 

The magic screen

How did Ramdev and PAL climb such heady heights? The first big break that came Ramdev’s way was probably Sanskar TV’s decision in 2002 to broadcast his yoga sessions. Aastha TV followed the next year.

Ramdev’s telegenic appearance and expertise as a trainer made yoga on TV a runaway success. Soon, millions began to squeeze the programme into their busy morning schedules in search of better health and fitness.

The mix of spiritualism and traditional Indian therapy proved a resounding success. When “Baba” launched PAL, it already had a credible brand ambassador — Ramdev himself. The one lakh free yoga classes conducted by the Yogpeeth convinced people that he was not in it for the money.

PAL also had a nearly captive market—as many as 20 crore Indians, or one-sixth of the country’s population were said to have attended yoga sessions conducted by Ramdev and had faith in their teacher’s healing power.

PAL also benefited from a huge, readymade advertisement campaign—word-of-mouth publicity at camps by yoga students and trainers.

“Once customer trust is earned [through yoga], reaching them [customers] through your products becomes easier,” says Ashita Aggarwal Sharma, professor of marketing at SP Jain Institute of Management and Research.

Besides, the “swadeshi” tag and the price advantage (products are reportedly priced 10-40 percent below their rivals) endeared the Patanjali brand name to Ramdev’s admirers.

The products themselves have an aura of purity about them for the Indian consumer as they are claimed to be “100 percent natural.” The suggestion of medicinal content also helps promote them.
 

Business and more

Ramdev has not confined himself to the business of spirituality, and has made forays into politics, often declaring that he would launch his own political party.

But because of his political associations and controversial statements, he has remained co-branded with right-wing groups. Nevertheless, his tirades against corruption have won him supporters from outside his core constituency of yoga enthusiasts, spirituality seekers, and born-again patriots.

However, the dependence on Ramdev’s popularity does pose risks for PAL—if his image takes a hit, the company’s bottom line will suffer. Ramdev has drawn the ire of liberals for his statements on mental illness, infertility, and homosexuality.

More seriously for Ramdev, the Uttarakhand government has registered cases related to alleged land-grabbing, “benami” transactions, and tax evasions against Ramdev.

There is a perception that Ramdev and Patanjali products lack acceptance among the youth.

Evidently, he takes this problem seriously: PAL has reportedly engaged top advertising agencies such as Mudra to promote it among the youth, given that 50 percent of the population is under 25 and 65 percent under 35. It has cooked up products that appeal to youth, such as instant noodles.

However, the new noodles hit a roadblock within weeks of its launch, when the Food Safety and Standards Authority of India pointed out that PAL had no licence for the product. Later, a consumer reportedly complained of bugs in the noodles.

Ramdev is exasperated with all the bad press. “The media talks about my controversies but people talk about my contributions to society. Why are they [media] after me?” But he looks ahead. In an interview, he reportedly declared that PAL would notch up ₹10,000 crore soon. Now, for a yogi, this may not be a difficult asana to perform.
 
Sources: 1, 2, 3, 4, 5, 6 | Image: Source


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4 Comments

  1. Oracle says:

    In all these mambo-jumbo, Author of this article forgot the real strategy used by PAL: QUALITY.

    Acharya Balkrishna himself confirmed this.

    Acharya Balkrishna doesn’t delve too much into PAL’s growth, and says it was achieved without a business plan: “We don’t know markets or marketing . . . but what we know is serving the people by providing them high-quality products at attractive prices.”

    That’s the only strategy PAL used to reap success. But–as usual–the author tried to gauge PAL group’s success with his “regular” scale, in parameters generally taught in academic settings. Author should have spent some time in verifying the quality of Patanjali products and tried to measure strategy and success differently.

  2. Oracle says:

    Acharya Balkrishna continues:

    “People thought swadeshi meant poor-quality products. Many companies tried to compete with the MNCs but were not successful because of deception. We believe God has given us this mission,”

    More at:

    http://www.hindustantimes.com/business/piggybacking-on-ramdev-patanjali-has-become-a-threat-to-mncs/story-LT7DpoZEuyixXmyEWe7fvM.html

  3. Arun Prakash says:

    A vague analysis! Point of acceptance came only when I read “If Baba Ramdev’s image takes a hit, the company’s bottom line will suffer”. Yes Pathanjali is not a brand. But Baba Ramdev certainly is!

  4. Amogh S says:

    The success of PAL, at least in the initial years depends solely on Ramdev’s public image. I’ve seen people (including my family members) buy Patanjali products because baba Ramdev endorses them. There’s no rational thinking involved here. Also, they don’t seem to realize that the whole swadeshi thing is just a marketing scheme. Patanjali products are good quality, but so are products from other brands. PAL’s marketing guys are good at what they do, and have done a great job of studying the psyche of their target customers. It will be interesting to see what strategies they use to appeal to young people and non Hindus, and how well are they received overseas.

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