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Patanjali

Business Strategy and Competitive Advantage || Preliminary Report


Group 4

Bhargav Aryasomayajula(18pgdm077)
Brenta James(18pgdm078)
Budhaditya Biswas(18pgdm)
Deepanshi Garg(18pgdm080)
Patanjali

Introduction: Patanjali was founded in 2006 by Acharya Balkrishna and yoga guru Ramdev, and since then it is
the fastest growing FMCG company in the country. The manufacturing units are located in Haridwar (India) and
Nepal. The primary objective of Patanjali is to produce and sell healthy food products to all.

4 p’s

The product range includes

· Foods that’s includes noodles, oats, jams, biscuits, pulses and many other lines of food products.

· Healthcare & Medicines

· Cleaning agents

· Beverages

· Personal care products

The ingredients and domestic and natural, thus the pricing is low, and Patanjali’s pricing strategy is penetration
pricing strategy.

The price of its products are lesser than its competitors HUL, P&G, and it is 20-30% lesser than foreign brands.

There are more than 1000 stores, selling exclusive Patanjali products, and this will grow further. It has plans to
expand internationally.

The brand ambassador of Patanjali, is one of the major reasons of its success. And its slogan “Prakriti ka
Ashirwad” creates a major impact on consumers purchasing decision.
Swot:

Strength: Weakness:

Penetration Pricing Low number of manufacturing unit

Ayurvedic Product Over dependence on Ramdev

Impact of Baba Ramdev Low margin to distributors

Strong distribution channel Penetration pricing is not long term

Word of mouth

Opportunity: Threats:

Organic sector boom Increasing competition

Rural expansion Negative word of mouth

Global expansion Competition in FMCG sector


Basic Structure of Patanjali

PATANJALI AYURVED Ltd. is a company which functions like all other companies that fall
under the regulations of the company law affairs, yet it is constantly striving for nation building
more than the profit accumulation. According to the Edelweiss Research, Patanjali operates
mainly in three broad business segments –
FMCG (cosmetics, soaps, shampoo, food supplements, digestives, etc)
Home care (detergents,scrubber, powder, etc)
Ayurvedic products (healthcare products for blood pressure, joint pain, skin diseases,)

Following are the three structure which they focus upon:

● Superior Quality and Fair Price

It is one of the main objectives of Patanjali which is to provide better quality food at
affordable prices. They emphasise on saying that profit and turnover have not been their
goal which is they claim to be the attribute for their success. They believe in ploughing
back the revenues into the business for the betterment of the consumers. And they
believe in solving the problems of the society. For the same reason, they have
strengthened their portfolio in natural/ayurvedic space with products which are 25-30 per
cent cheaper than the major competitors in the market

● A Holistic Approach

They have a holistic approach to improve the quality of life of all beings in the
world over. For example, Patanjali has taken steps in avoiding the food wastages
in India by introducing more food processing units. India currently processes 7
crore tonnes food, and out of it, Patanjali processes around 20 lakh tonnes.
Patanjali has set a target of processing one crore tonnes of food by 2020. Also
as a part of their CSR initiative, they have a training programme for cultivation
and seed banks are being established to help the farmers better with their
produce.

● Fertilizers

Patanjali Bio-Research Institute ( Pvt.) Ltd has been introduced to help millions of
rural farmers. They focus on economically processing Biofertilizers products into
daily farming consumables ranging from Organic supplements, Biopesticide and
various growth stimulant for Healthy growth of the Plant.
Their goal is to achieve most eatables that are cultivated in organic and natural
manures and pest repellents in providing a healthier life.
Strategies

Product Positioning Strategy

As Natural/Ayurvedic

The brand slogan of Patanjali, which is “Prakriti ka Aashirwaad” means Blessings of


Nature. Patanjali has thus positioned as “Natural Products available at affordable
prices”. They claim to be providing unadulterated products as there is no third party
involvement from production to procurement to selling; which gives them a superior
name among the competitors as non of its competitors does so.

As Made in India

The 2nd positioning is that of “Swadeshi Make” (Made in Bharat). They mention it as
made in Bharat to instil a sense of belonging among the consumers as India was a
name given by the britishers. So this becomes their MSP so that the customers get
attracted seeing Bharat instead of India.

By Value Discipline

The journey of Patanjali started in 1990 when they set up their trust named Divya Yoga
Pharmacy Trust. It has conducted yoga camps across the countries and have sold
ayurvedic medicines during these camps.Thus the brand of Baba Ramdev has a
universal appeal, and the customers range hail from all age groups and regions. Thus
the Brand has formed as a result of his consistent hard work and carefully and
meticulously followed strategy.

Patanjali R&D, Herbal Food Park

Patanjali research foundation was established in 2010, at Haridwar. It is a part of


Patanjali Yogpeeth.
The foundation aims at:
1. Researching on domestic and natural medicine, like yoga and Ayurveda, and
study their effects, using scientific methods.
2. Researching on the various methodologies used in ancient practices and
learning their scientific basis
3. They aim and try to decode ancient texts for contemporary reading, the
foundation uses actual research study facts.
4. Researching on home remedies by applying scientific studies, to integrate these
healing process in contemporary process

Recently in Andhra Pradesh a 634 crore Herbal park is set up , that can employ 34k
people.
Core processing facilities, cold storage, blast freezer, dry warehouses, grading packing
facilities were the state-of-the-art facilities that were created in the Herbal Park
Since the demands have increased for their products , these facility will increase
production many folds and also help in research of new product thus increasing their
product range.

Distribution Strategy
Patanjali has followed a two-stage distribution strategy in general trade (GT):

Stage 1: Create a strong alternative distribution system for demand creation and building
word-of-mouth advocates

Stage 2: Pivot to GT once a sizeable consumer base is generated from Stage 1

Another distribution system


In a new market, Patanjali first drives trials and consumption using dedicated stores. These
stores are essentially Ayurveda clinics, run by entrepreneurs entirely with their own
investment. They are of three types – Arogya Kendra, Chikitsalaya and Swadeshi Kendras.

Patanjali extends support in two ways:

It trains and certifies medical practitioners nominated by these stores in Ayurveda, and
provides usage of the Patanjali brand name. This automatically bestows trust and
credibility due to the rub-off effect of Baba Ramdev’s credentials on Yoga and Ayurveda.

In return, these stores provide various services. One is free consultation by certified
medical practitioners. This assures high footfalls and likelihood of building a large scale of
early adopters. It serves as a retail store. The entire range of around 200-260 SKUs is
stocked across both OTC, pharmaceutical and FMCG products and there is typically a
weekly replenishment cycle. There is skillful cross-selling across pharmaceutical and FMCG
products. The presence of Ayurvedic medical practitioners at the outlet is a major
determinant of sales.

A powerful network effect is seen at these stores. Early adopters bring in additional
footfalls through strong word of mouth. The fact that a trustworthy consultation is free in
an important area such as healthcare provides a strong hook for passing on
recommendations to friends and relatives.

These stores also serve another function – product introductions are done extremely
efficiently and decisions to continue tweaking or scaling up the product and
communication mix can happen in a short time frame.

Currently, 5000+ dedicated stores (Chikitsalaya, Arogya Kendra, and Swadeshi Kendras)
contribute to 45 per cent of the company’s revenues. In Delhi NCR, one of the older
markets for Patanjali, there are over 400 of these stores whereas in a newer market such
as Mumbai, there are approximately 270 stores.

The pivot to GT
Once a sizeable consumer base is built through these dedicated stores, these consumers
would expect Patanjali’s products to be available at general stores, grocers and chemists in
the vicinity of the dedicated store. These retailers are then forced to stock up on Patanjali’s
products for fear of losing out on a customer’s goodwill. This builds a platform for the next
stage of growth.
Various towns are at different stages of evolution. For instance, the company’s biggest
market, Delhi NCR, is in Stage 2 and is responsible for revenue of ₹1,500 crore.

In 2013, dedicated stores contributed to 80 per cent of total FMCG sales across GT and the
dedicated store network. As consumer awareness and pull were created, GT started
stocking Patanjali’s top products (oral care and honey) despite uncompetitive margins. This
pivot to GT continued resulting in dedicated stores’ contribution falling to around 45 per
cent today. Currently Patanjali products are available in 3,00,000+ pivot stores.

Alternative channels
While Patanjali’s scorching pace of growth has stupefied most FMCG players, the concept of
winning in alternative distribution channels is not new. Select players have adopted a
“flanker” strategy to bypass competition, entrench their position, encircle and then launch a
frontal attack in mainstream channels.

Notable examples include Starbucks’ consumer packaged goods (CPG) business. Starbucks
leveraged its retail store footprint to build a flourishing CPG business. The intent was to
capture a larger share of coffee consumption – reaching consumers whenever they want
great coffee.

The stores provided a perfect platform to drive effective sampling and build partnerships
with retail consumers. Starbucks then enhanced availability through a tie-up with the CPG
giant Kraft. Today, with its own network, these at-home consumption products are now
available in grocery stores, airports, hotels, and convenience stores as well.

In the case of Yellow Diamond Wafers, the company targeted a relatively lesser contested
space – smaller mom-and-pop retailers within the intensely competitive wafers market.
Yellow Diamond also provided higher margins than competition to ensure a very high shop
share with those retailers. In six years, Yellow Diamond grew to ₹700 crore. Yellow
Diamond is now planning to enter the more mainstream bigger retailers.

Developing an alternative channel strategy can help a company create white-space


opportunities and dominate them. This approach is valid both for incumbents as well as
new entrants into the FMCG market.

DIGITAL MARKETING STRATEGY


Digital marketing is the showcasing of products or services using digital technologies, mainly on
the Internet, but also including mobile phones, display advertising, and any other digital
medium. A survey shows following data about Digital Marketing industry in India:
● 34% of the companies were already present in integrated digital marketing strategy in
2016
● 72% marketers believe that traditional model of marketing is no longer enough, and
digital marketing will increase the company revenue by 30% by the end of 2017
DIGITAL MARKETING STRATEGY OF PATANJALI
In 2017, November, Patanjali was the third most advertised brand in India behind Cadbury and
Fair and Lovely. The brand gained popularity due to the presence of Yoga Guru, Baba Ramdev
and his popularity and trust among his customers.

HOW PATANJALI ENGAGES IN DIGITAL MARKETING?


1. .NET SITE
In a strategy different than all MNC’S, Patanjali has a site for displaying and selling its
products online which is a representation of how Patanjali has embraced the online
segment and is trying to reach their products to every individual in different parts of the
country. Also, it is a fact that Patanjali products have a reach like no other brand.
2. .ORG
In conjunction with the point mentioned above, the company also has a .org site which
lists the company policy, mission, vision, etc., thereby communicating their purpose to
the customers.
3. BRAND IMAGE OF BABA RAMDEV
One of the most influencing factors has been Baba Ramdev in the instrumental success
of Patanjali. He adopted a strategy of smartly influencing customers by:
● Creating a channel of communication between customers and the brand
● Voicing his opinion about the about the “Ayurvedic, Natural Products” of the
brand, therefore ensuring the quality of the brand in the minds of the consumers
● Addressing complaints via twitter
● Use of not just media like television, but also platforms like YouTube, appearing
on TV shows like The Kapil Sharma Show, participating in game shows, etc.
● Ensuring health benefits and quality of all its products.
Source: http://bit.ly/2gZdpKn
Also, Patanjali has tied up with big e-commerce giants like Amazon and Flipkart to push its
products in the online segment. Other than this, it plans to enter the sanitary napkin and diaper
segment with this tie up with the e-players and sale through these portals. It has increased its
presence in Google, Facebook, You Tube (viewership went up from 30 lakh to 15 crore), etc. To
appeal to the southern states like Andhra Pradesh, Kerala, Tamil Nadu, etc., it introduced a "Go
Swadeshi" movement in local languages and in fact has 80% response from Karnataka, Orissa
and Punjab.

LOW PRICING STRATEGY OF PATANJALI

NOT ONLY DOES THE COMPANY RELY ON THE POPULARTIY OF Baba Ramdev, but it also uses a
low pricing strategy to attract the consumers to its brand I addition to ensuring best quality. In
order to conquer the market Patanjali follows a PENETRATIVE PRICING STRATEGY. Penetrative
pricing strategy is a strategy generally used be the new entrants into the industry of charging
lower prices as compared to the industry to gain a market share over its competitors. The brand
knows that it cannot gain over its competitors by charging a higher price. Its competitors
include:
● Colgate
● Dabur
● HUL
● The above diagram shows that Patanjali has risen to second in position in terms of
revenue just behind HUL.
● Price of products like Chyawanprash, Honey, Detergent is less as compared to all its
competitors but one of its best-selling products i.e. Ghee is more expensive in
comparison.
● Also, while the Colgate, HUL share has fallen that of Patanjali and Dabur has increased.
● This can be attributed to the inclination towards natural, “Ayurvedic” products.

Therefore, as we can see, Patanjali has been increasing MARKET SHARE by keeping prices LOW.
● There is a difference of 25-30 percent of price being less in almost every product when
compared to International Brands which helps Patanjali reach each household in every
sector in India.
● Also, the products are natural, lower in cost and allows Patanjali to charge a lower price
and still retain its margins.
● The lower cost products make it easy for the customer to switch their preferred brand
and switch to Patanjali.
● Also, the target segment is PRICE CONSCIOUS customers, therefore, the low price
strategy helps in increasing the customer reach.
Financial Performance
Patanjali took the market by storm by creating a Blue Ocean for its products by branding
them as “Natural” products and with Swadeshi tag. As a result, the Sales Revenues and
market shares have dramatically increased during the growth phase of the company. The
revenues of the company were comparable to that of the revenues of other well
established brands in the country. With its “Cost Leadership” strategy, the company has
concentrated on gaining the market share and product penetration at the cost of profits by
maintaining an average Net Profit of 14.28%.

Source: Based on figures reported by Patanjali in Annual Reports

Based on the financials reported by the company in FY 2017, we observed that Ghee is the
major contributor to Patanjali’s revenues followed by Tooth paste and Pharmacy business.
Source: Financial Reports of Patanjali

However, we observed that the growth rate of the company has been plummeting since FY
2017 During FY 2018, the company has ended with the same financial performance as that
of the previous year which is 50% of their set targets for FY 2018. Patanjali’s growth rate
during FY 2018 was only 4%(which is negligible as compared to the company’s past growth)
while its competitors HUL, ITC, Nestle and Dabur recorded growth rates of 12%, 11.3%,
10.5% and 8.3% respectively.

Source: BSE
Though the company blamed the stagnated growth on GST and Demonetization, we see
this as an issue with the company’s Business Strategy. The company has also faced tough
situations with the product quality issues in foreign countries in the past one year.

In our research during the course of this project, we observed that the competitor
companies were quick in catching up with the Patanjali’s strategy by adding Ayurvedic
based natural products to their existing product line. This can be seen as a threat to
Patanjali’s growth in the coming years which makes it an emergency situation for the
company to restructure their existing strategies.

VRIO Analysis
Patanjali has grown into a big company now with a lot of resources and capabilities. To
understand if they are a source of sustainable competitive advantage, we also performed the
VRIN analysis on all these resources. Each of the capabilities developed is discussed below:

Production plant
Patanjali has its main production plant or rather the headquarters in Haridwar. It has world class
state-of-the-art facility where all the products are manufactured. This is valuable because most
of the products are produced here. The value comes not from just producing but from producing
natural and herbal products. In a sense, it is rare as well, as the scale of production of ayurvedic
or herbal products is unprecedented. However, this is neither costly nor inimitable. But it is non-
substitutable since the production cannot take place at such a scale without the plant. Thus it is
a source of competitive advantage for Patanjali.

Application of technology and know-how of Ayurveda


The raw materials for all Patanjali products are derived from Ayurveda and are naturally
available. The herbs, and the knowledge about the medicinal benefits and how to mix these
herbs to arrive at the magic product is something Patanjali has expertise in. This makes the
resource valuable and rare. The competitors like Dabur and other brands which do produce
herbal products do not do so at such scale. It is inimitable and nonsubstitutable as there are no
other solution to this. You have to know the formulation to be able to produce them. Patanjali is
privy to all the secrets of Ayurveda and thus have a competitive advantage over other brands.

Brand image
Patanjali is piggybacking on the image of Ramdev Baba. Baba Ramdev is the brand
ambassador of Patanjali and has projected it as a healthy, natural and organic solution to all the
problems. He shot to fame through yoga which was simple and easily adopted. This gave him
credibility. He used this credibility to relaunch Patanjali and have associated better health with
Patanjali. He is the reason why Patanjali could grow so quickly and is so popular today. Thus
the brand image created is valuable as it is giving sleepless nights to other FMCG brands who
have been in India for the past 50 years or more. It is not rare to have a good brand image but
the brand ambassador of such charisma is rare. It is non-imitable for the same reason that the
brand’s image is directly linked to Baba Ramdev. Finally it is substitutable as there are other
ways of building brand image and credibility.

Affiliations with government and community


Baba Ramdev has strong connections with the ruling party and the tone of the brand is
Swadeshi, which is fully aligned with the tone of the national political party. Hence the brand
enjoys a strong reputation and bond with authority. This resource is very valuable but not rare
as other companies also influence the political parties. However it is nonsubstitutable as
Patanjali got access to land for food-park because of these relations with governments.
However, if the ruling party changes, it might be difficult to obtain these benefits. Hence it is a
temporary advantage.

Arogya Kendras and chikitsalayas


These are the distinguishing factors for Patanjali. While all FMCG brands have good packaging
and good marketing, Patanjali has its own ways to build credibility. It has provided certified
ayurvedic doctors which has helped increase the trust of the Patanjali brand. They have led to
positive word of mouth publicity and are thus valuable, rare and non-substitutable. It is not
possible for other FMCG giants to go for this strategy as they cannot hire ayurvedic doctors to
recommend their cosmetics and other products, neither is it possible to hire doctors with MBBS
degrees as it would be a costly value proposition. Thus it is inimitable as well.

SWADESH SAMRIDHI CARD

These cards ensure customer loyalty by providing its customers with additional benefits
during their purchase of Patanjali products from any shops.
1. The cardholder or the nominee will get Rs. 5.00Lacs in case of any death or upto Rs.
2.5 Lacs in case of any permanent disability that happens due to accidents subject to
terms and condition of the Scheme.
2. Swadeshi Nishtha Sahyog will be provided if the cardholder has purchased a
minimum of Rs. 6000/- in the last 180 days from the date of the accident.
3. Cardholder Military/Paramilitary/Police personnel died during any terrorism incident
will also be covered in the definition of the accident for the purpose of financial
assistance under the scheme.
4. For activation of the card, the user needs to visit the nearest Patanjali Mega Store,
Arogya Kendra or Patanjali Chikitsalye.
5. Patanjali will announce the date for the disbursement of financial assistance on the
official website on the Quarterly/Half yearly basis.

Recommendations

Quality:
The company has been facing some allegations about the quality of its products. With the ban
of few Patanjali products by the Government of Nepal on quality grounds, sales of the company
are expected to take a hit in India as well. So, it is better if Patanjali concentrate on testing their
products as per the International Quality standards so that they retain trust of the customers.

Supply Chain:
Lack of proper Supply Chain infrastructure is also cited as one of the reasons for the growth
decline in 2018. There was many reported issues of over and under supply in many of the
regions in the country. As per a report published by……., majority of the smaller retail stores
have turned as victims of the supply crunch which drastically affected patanjali’s sales. So we
recommend the company to invest in more number of warehouses across the country and to
establish partnerships with regional and local distributors to bridge the gap between demand
and supply.

More investments in dairy and food products:


In our study, we found that 31.9% of the company’s revenues are from the sale of Ghee. Even
the other food products of the company are performing well when compared to the other
products. So, it is better that Patanjali invests more in this product line and increase the product
supply so that their revenues can be pushed further.
Product Innovation
With the product differentiation (as natural products) created by Patanjali has been fading away,
the company has to invest on innovation of their existing products. Patanjali’s beauty care
products have shown poor performance as compared to other products due to tough
competition from international peers. So, we recommend cosmetics as one of the key areas of
concentration for product innovation.

Technology Adoption
When GST was rolled out, FMCG sector was severely hit. However, majority of Patanjali’s
competitors recovered swiftly and adopted the new taxation system which was not the case with
Patanjali. Lack of strong technology adoption costed Patanjali’s growth in the most crucial
phase of the company. So, it is high time that the company adopt ERP backed systems so that
it solves the issue of inventory management and supply chain as well.

References

https://www.businesstoday.in/from-the-mag/decoding-the-patanjali-
phenomenon/story/269204.html
Journal of management science, Operations and Strategies; e ISSN 2456-9305, Vol. 1 Issue 3,
2017
https://economictimes.indiatimes.com/industry/cons-products/fmcg/is-ramdev-burning-out-in-his-
race-to-rs-20000-crore-finish-line/articleshow/64232557.cms
https://digiperform.com/growth-hacking-strategy-of-patanjali-india/
http://www.businessworld.in/article/This-Is-How-Patanjali-Evolved-Over-The-Years/27-05-2017-
119056/
https://www.slideshare.net/TojiEasoVarghese/patanjali-supply-chain-management
https://www.edelresearch.com/showreportpdf-30172/PATANJALI_AYURVED_-_VISIT_NOTE-
OCT-15-EDEL