Patanjali Super Growth Faces Pit Stops

August 23, 2018 07:20 AM

Last month, Baba Ramdev, founder of Patanjali Ayurved, was busy mocking his market rivals, saying that the latter were well on their path to attaining "moksha". But the numbers don't back him up. The yoga guru's company, which had recorded over 100 per cent growth rate about a year ago, has since witnessed a considerable dip in demand, even as the competition has grown in strength.

Citing data from Kantar Worldpanel, a global consumer research firm, The Economic Times reported that Patanjali's sales volumes grew just 7 per cent during October-March 2018 against 52 per cent growth in the corresponding period in 2016-17. Moreover, toothpaste and honey were the only two categories in which it expanded market share over the past year, while its share in soaps and edible oil remained the same. Worse, a recent Ambit Capital report reveals that Patanjali's share in hair oil, shampoo and butter has actually fallen.

A senior manager of a modern retail company previously told Business Today that the demand for Patanjali products dipped primarily because of product unavailability. "Their store filling frequency is pathetic. When the consumer asks for the product and it's not available she obviously moves to other brands," he said.

Indeed, the two key factors behind Patanjali's phenomenal rise in this decade, value pricing and differentiated positioning, can only continue to woo customers if the products are actually seen on the shop shelves.

Making matters worse, Patanjali's new forays have failed to make waves. For instance, its messaging app Kimbho - supposed to be a rival to Facebook's WhatsApp - was taken down yet again. Then, there were factors like GST-led disruptions, increasingly aggressive rivals and capital constraints from unsold inventory, all of which resulted in a year of no growth for Patanjali. In comparison, HUL, ITC and Nestle recorded double-digit growth in the last fiscal.

The company's strategy of carpet-bombing the FMCG market by foraying into every possible category, from personal care to food and home care and even food, may have backfired. After starting out as a small pharmacy in 1997, Patanjali slowly picked up steam and went on to launch more than two dozen mainstream FMCG products, and is now eyeing the apparel sector and dairy products, among others.

The daily added that Patajali's penetration rate is also slowing down. Kantar data shows that the company's products are present in 37 per cent of households now, compared with 31 per cent a year ago and 16 per cent about two years ago.

Despite these hiccups, Patanjali is confident that it will resume its growth path in the ongoing fiscal. "We are strengthening our management structure and supply chain to address global expansion. This will result in another phase of our growth driver status in the FMCG marketplace, both in value and volume terms," SK Tijarawala, spokesperson at the Haridwar-based company, told the daily.

But this time round, the competition is better prepared. Patanjali's success catalysed the market for herbal, ayurvedic and natural products, which now account for about 10 per cent of the consumer goods market. In the past six fiscals, these products grew at a CAGR of 21 per cent compared with 11 per cent for the overall FMCG sector.

So, along the way, in addition to the entrenched domestic players like Dabur and Himalaya, leading MNC rivals also launched natural and herbal products to counter Patanjali's challenge. For instance, Hindustan Unilever relaunched the Ayush brand of ayurvedic personal care products.

The new launches in the pipeline for Patanjali will now determine whether Baba Ramdev's enterprise will be able to kick-start the sputtering growth or whether it will continue to crumble like a house of cards.

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