Patanjali as Blue Ocean Strategic

Firm competing with MNCs in

India
IBIGI
Group #3
Sonali Magotra 140201118
Utpal Garg 140201171
Siddharth Nahata 140201157
Apoorv Upadhyay 140103031
Tulasidhar Kaveri 140201120
Sebin 140201143

Introduction

What is Patanjali Ayurved:This is a company formed by Baba Ramdev in 1997. He collaborated

with Acharya Balkrishna, a scholar of Ayurveda, Sanskrit and Vedas in 1990s to manufacture
ayurvedic medicines. Ramdev focused on Yoga while Balkrishna assumed responsibility of
spreading Ayurveda medicine.

Revenue: Patanjali Ayurved is perhaps the fastest growing fast-moving-consumer-goods firm in

India with annual revenues reportedly at more than Rs 2,000 crore. Ramdev expects to take the
revenue to Rs 10000 crore.

Discount and profits: Credit Lyonnais obersves that most of Patanjali products are available at
an attractive discount to competition. The company sources products directly from farmers and
cuts on middlemen to boost profits. It makes 20% operating profit. This is the difference between
total income and expenditure.

Ownership: Baba Ramdev does not hold any stake in Patanjali Ayurveda Ltd. Balakrishna is
believed to own 92%. The balance 8% stake is held by Sarwan and Sunita Poddar, a Scotland-based
non-resident Indian couple. The two are associated with the UK Trust of Patanjali and have donated
land in UK.

FMCG competition: The company is privately held and profitable. The revenue for 2014-15 of
Patanjali Ayurved is bigger than Jyothi Laboratories, the maker of Ujaala and Emami. These brands
have been in business for decades.

Food park: Patanjali Food and Herbal Park was established in 2009 under the food park scheme
of the Indian government. The company reportedly commissioned one of the largest food parks in
the world at a total investment of Rs 500 crore. The food park is spread across 100 acres and
provides employment to over 6,500 people.

Distribution: Patanjali products are sold through three types of medical centres. These include
Patanjali Chikitsalaya which are clinics along with doctors, Patanjali Arogya Kendra which are
health and wellness centres and Swadeshi Kendra, non-medicine outlets. A typical Patanjali centre
is 500 to 1,500 square feet in size. The group has 15,000 exclusive outlets across India. They plan
to grow to 1,00,000 outlets in next few years. They also distribute through general retail stores.

Store profits: Patanjali has 5,000 franchisee stores. Retailers told CLSA that their average gross
turnover is Rs 25,000 every day. Profit margins for retailers are 10-20% across product
categories.

Word of mouth publicity: Consumer companies typically spend 12-20% of revenue on

advertising and promotions. When a new company gets into the business, this spending is
significantly higher. Patanjali has followed a unique word of mouth publicity model and the entire
revenue is without any advertising.

Advertising agency appointed: Things are changing though. Patanjali has hired two top
advertising agencies McCann and Mudra to prepare the business for the next phase of growth.

Vision of PAL
1)

To Strengthen Indian economy by replacing foreign products with

Swadeshi products.

2)

To build the largest retail chain all over India both rural and urban
market

3)

To provide reasonable prices to farmers

4)

To fulfil the demand of customers across India seeking reasonable

prices.

5)

To Support Indian industries by creating demand for Swadeshi

products.

6)

To generate employment for youth, skilled/unskilled and

professionals.

7)

To establish Ayurveda and create a market chain for herbal products.

Product Catalogue

Income and Profit Trends

Revenue Figures- Indian

FMCG

BUSINESS MODEL
As

such no business plan

We

never had a business plan.

We also don't know markets or
marketing," says Acharya
Balkrishna, managing director of
Patanjali Ayurved, which began
operations two decades ago.
"But what we know is serving
the people by providing them
attract high quality products at
prices.

Partnership

with future group to

promote Patanjali products

Market Analysis

Patanjali Ayurved is now Indias fastestgrowing consumer products brand.

rocketing sales of its wide range of staples,

nutrition, cosmetics and personal care products.

estimated supply shortfall of 30-40%

Analysts are saying that its 20 billion-rupee

revenues this year could pose a threat to
established, age-old Indian consumer
brands such as Dabur, Emami and Marico.

Patanjali diversified from yoga and ayurveda

into juices, when amla farmers were
distressed as they found no market for their
produce

Patanjali Amla juice is the top selling product in

the market now

nearly

6,000 litres of juice is produced here

every hour.

Priced

at Rs 200 against Rs 1300 MNC price

Patanjali Vs MNCs

Large FMCG companies, more notably multinationals, are

worried at Patanjali's rise

Privately, they fear that with a friendly regime at the Centre,

it could infringe upon their intellectual property

Also, the Bharatiya Janata Party-led government could help it

make inroads into the large institutional markets like the
armed forces' canteen stores

Instead of outsourcing like established, listed FMCG firms,

Patanjali has flourished on a backward integration model,
using large tracts of land to cultivate and run its factories.

Another issue worrying the MNCs is the low costs of Patanjali

products with only 15 per cent profit margin.

Officials there state it is because Patanjali's administrative

cost is only up to 2.5 per cent of revenue, as against 10 to 15
per cent in large companies.

Experts concede that Patanjali has

created reasonable brand equity, which
would have been impossible with loose
quality controls.

Patanjali broke into TRA's annual Brand

Trust Report for the first time this year,
featuring among the seven most trusted
ayurveda brands in the country

Other drivers include:

Global consumers moving away from

chemical based products

Fast growth in this segment

complimented by high demand

Regulations in ayurvedic FMCG

Global norms on animal testing

Patanjali Vs MNCs

Future-Patanjali tie up

Future group will retail Patanjali's more than 500 products: biscuits, juices,
honey, supplements, toiletries and instant noodles

Now they will be available in Big Bazaar and Food Bazaar supermarket chains in
addition to the Patanjali's stores and some multi-brand grocery stores that they
are currently sold in.

Patanjali sells

cornflakes and muesli ->led by Kelloggs,

almond health drink in a segment dominated by Mondelez Internationals

Bournvita

anti-wrinkle cream that could compete with P&Gs anti-ageing product, Olay.

One of its top sellers is a toothpaste called Dant Kanti which is a potential rival
to Unilevers Pepsodent.

Listed FMCG firms are currently trading at an average earnings multiple of

46. With revenues of close to Rs 2,500 crore and an estimated after-tax
profit of Rs 300 crore, a similar earnings multiple would give Patanjali a
valuation of Rs 14,000 crore.

FUTURE GROWTH

Patanjali Products are becoming more popular in Indian market

due to lower cost with best quality.

In addition to this the swadesh motto of Patanjali is creating huge

impact on Indian customers specially in rural areas. Hence as per
quick market research it is observed that Patanjali is leaving many
brands behind in different segments and will soon become the
number one brand in India.

Future Group expects sales from Patanjali, from new noodles

launch, to the tune of Rs 1,000 crore in next 20 months

At a time when most fast-moving consumer goods (FMCG)

companies are still skeptical about a pick-up in consumption
resulting in improvement in revenues and profitability, Baba
Ramdev-promotedPatanjali Ayurvedis eyeing
250%revenuegrowth in FY16, according to a recentEdelweiss
Researchreport

According to Edelweiss Research, Patanjali Ayurved that operates

in three broad business segments foods,cosmetics ,home care
,and ayurvedic products clocked a turnover of Rs 2,030 crore in
FY15 with an EBITDA around 20%.