The Curious case of Patanjali

Patanjali Ayurved is a fast growing FMCG company in India, which focuses on food, healthcare and medicinal products. It was founded in Delhi by Indian yoga guru Baba Ramdev and Acharya Balkrishna in 2006 with the aim of promoting ayurvedic products amongst consumers.  According to Patanjali, all the products manufactured by Patanjali are made based on Ayurveda and have only natural components. Further, its profit goes for charity purposes. 

Patanjali saw exponential growth and declared its annual turnover of the year 2016–17 to be estimated ₹10,216 crore (US$1.4 billion), becoming one of the largest consumer goods company in India. Patanjali Ayurved has diversified rapidly and has also initiated its expansion by dealership partnerships and distributor channels across India and abroad. However, the company has been progressively weighed down by controversy and is losing trustworthiness and profits in recent years.

Why did this steep decline in growth occur while other FMCG companies kept growing? To understand what went wrong, we must first see what went right for them...

STRATEGIC SUCCESSES 

Let's see how Patanjali achieved rapid growth by examining  the strategic successes:-

PATANJALI PRODUCT STRATEGY:-

• Patanjali has a diverse product offering in its marketing mix. 
•  The product range of Patanjali has more than 400 types of FMCG goods like cosmetic products, food items, haircare, skincare, toothcare etc. and a wide range of medicines said to cure over 300 health issues.
• As per the company, these products are Ayurvedic and free from any harmful chemicals.

Clearly, the promise of health acted as a differentiator and a large variety of quality products drew attention and condidence from customers. 

PATANJALI PRICING AND COMPETITIVE STRATEGY:- 

• Patanjali Ayurved entered in an extremely competitive segment in the Indian FMCG industry. The main players in India in this category are the likes of HUL, P&G, Marico, ITC etc. 
• As Patanjali ventured into various segments its pricing was defined by the competition in that segment such that it becomes easier for the customers to switch from their existing brand and adopt their products. For example, Patanjali noodles competes with Maggi, toothpaste competes with Colgate, chywanprash competes with Dabur...
• Patanjali attempted to replicate the existing FFMCG marketing model but focused on giving a healthier and natural variant to its target audience for each competing product. 
• Thus, the prices of Patanjali products are driven by segment, geography and most importantly competition pricing. At the same time, it competes by marketing its products as a healthier alternative to pre-existing popular products at a similar price.

This strategy seemed to work perfectly as Patanjali started taking over market share from competitors.

PATANJALI PLACE & DISTRIBUTION STRATEGY:- 

• Patanjali has managed to reach a wide population in a short span of time. 
• Patanjali sources most raw materials from rural areas and has an excellent distribution network as it has tied up with the likes of Future group, Reliance retail, Hypercity etc. 
•  This has enabled the Patanjali brand to ensure that its products are widely available across various cities and towns in India. Close to 5000 retailers are actively promoting Patanjali products along with smaller grocery stores. 
• With the increase in ecommerce in the Indian segment, Patanjali is also effectively increasing its presence online and in 2018, the company announced the launch of its e-commerce platform www.patanjaliayurved.net. 
• The home-grown FMCG company also started selling its products online through leading online retailers such as Amazon, Flipkart, Bigbasket, Grofers and Paytm Mall. 
• Patanjali Ayurved has also started its FMCG expansion in form of dealership and distributorship channels across the country. 
• It expects wider growth in overseas distribution as well and presently its products are widely available in countries like Nepal, Saudi Arabia, UAE, Middle East, Bangladesh, SriLanka etc.

PATANJALI PROMOTION & ADVERTISING STRATEGY:- 

• Patanjali has considered advertising for its products as a high priority for driving sales. 
• The promotion and branding in Patanjali marketing mix utilizes all media channels like print, TV, online ads, billboards etc. 
• Patanjali's brand ambassador is yoga guru Ramdev Baba, who has a large fan following, which enabled the brand to grow fast.
• The advertisements of Patanjali has been aggressive where they have showcased the importance of using natural and ayurvedic ways of making products opposed to other methods.

The advertising and promotion efforts seemed to get quick results as the sales grew fast...

STRATEGIC FAILURES

Things were looking great till 2017 going by the statistics...But the reality was not as impressive. Patanjali had started facing accusations of inflated claims, misleading advertisements and faced problems with its distribution channel. Many noticed a drop in product quality and Patanjali started loosing relevance in it's own Ayurvedic niche as it attempted to expand into all market segments; while competitors bought out new products in the Ayurvedic segment. Eventually, the statistics reflected these setbacks.

After touching Rs 10,500 crore in FY17-18, Baba Ramdev had set a target of Rs 20,000 crore for Patanjali. The next year, FY18-19, the company saw its revenue falling by over Rs 2000 crore. It had low growth of sales in rural markets and a decline in urban markets. Notably, it is also losing its share in the Ayurvedic segment to HUL, Colgate etc. Following this, Patanjali Ayurved Ltd reported a 21.56 per cent increase in standalone net profit for financial year 2019-20,still showing a much lower pace of growth than FY17-18 or before. 

So what were the key reasons for the drop in growth?

Experts have considered the following strategic errors as reasons for its recent setbacks and possibly impending downfall:-

• Slow adjustment to incorporate GST, causing friction with distributors
• Over diversification of products
• Uninventive and monotonous advertisements
• Inflated claims about product effectiveness
• Decreasing quality 
• Not focusing sufficiently on its niche while competitors invaded it
• No evidence offered to support claims about its health products in multiple cases, even with the brand ambassador undermining the effectiveness of some scientifically proven cures (Meanwhile, the question of why Baba Ramdev's company makes and sells medicines for over 300 ailments when Yoga cures most of those as taught by him in past; remains unanswered.)

Some major setbacks:-

• The Ministry of Defence's canteen stores department (CSD), a massive network of shops catering to members of the military forces and their families, withdrew Patanjali’s amla (gooseberry) juice from its stores after batches of the product were found to be unfit for consumption, on being tested at the central food lab. 
• In 2016, ASCI stopped ad campaigns of Patanjali on 10 complaints for misleading advertisements of products such as Jeera Biscuits, Kacchi Ghani mustard oil, Kesh Kanti and Dant Kanti, among other products. 
• In June 2020, Patanjali Ayurved announced the launch of a COVID-19 treatment kit called Coronil, claiming that it showed 100% favorable results in clinical trials on coronavirus patients. However, there was no clinical data to prove that these new drugs were effective or even safe. After the launch two FIRs were registered against Ramdev, Balkrishna and others, accusing them of cheating and selling fake medicines.
• Contrary to Patanjali's claims; the Ministry of AYUSH had issued a statement, denying having given clearance for the launch of the new drugs and asking the company to stop selling or advertising the product until the trial results were examined by medical authorities. 
• In August 2020, the company was fined Rs 10 lakh by the Madras High Court for false claims made initially.
• While Coronil now sells as a modest immunity booster instead of a certain cure for COVID-19, Patanjali's brand image has taken an embarrassing hit.

WHAT WE CAN INFER

We can conclude that Patanjali started off with innovative ideas and effective strategies but eventually; a confused brand positioning strategy and irrational diversification accompanied with a lack of understanding with distributors, false marketing and quality decrease appear to be the causes of a steep decline in growth.

It is also clear that major strategic corrections are necessary for achieving and maintaining high growth and customer trust again. This may include public acknowledgement of past mistakes,  honest advertising, focus on quality and stopping excessive diversification into unrelated segments. 

Briefly, this case emphasizes on the importance of business ethics, adaptability to environmental changes and sensible expansion while focusing on the niche. It also covers the result of compromising on ethics, quality and being over ambitious.

Authored by- Praharsh Chaubey