Companies
A new Patanjali: The monk who sold toothpaste is at it again
Summary
- Riding on his yoga prowess, Baba Ramdev made his way into Indian households in the early 2000s. But of late, Patanjali’s brands have struggled to resonate with consumers. Can the company ever make it to the top league of FMCG players dominated by the likes of HUL and Dabur?
Mumbai: In April 2016, addressing a press conference in New Delhi, yoga guru Baba Ramdev, the face of Patanjali Ayurved, declared, “Colgate ka to gate khul gaya, Nestle ka to panchhi urne wala hai, Pantene ka to pant gila hone wala hai, aur do saal me Unilever ka lever kharab ho jayega (Colgate’s gate has opened; Nestle’s bird [the Swiss company’s logo] has flown, Pantene’s pants are going to get wet, and in two years, Unilever’s lever will fail)."
A month earlier, speaking to reporters in Bengaluru, he had said, “Colgate will be below Patanjali by this year (in terms of revenue), and in three years, we will overtake Unilever."
Such was his confidence back then that Patanjali Ayurved, the company he had co-founded with Acharya Balkrishna, would send the multinational corporations (MNCs) that had lorded over India’s fast-moving consumer goods (FMCG) landscape for decades packing.
In the end, however, the Patanjali founders failed in that endeavour as the MNCs took a leaf out of their ayurvedic playbook to beat them at their own game. Today, the khadav(sandal) is on the other foot, with Patanjali seeing an erosion in revenue while its rivals, both Indian and foreign, are on the ascendancy.
The founders are now looking to make a fresh attempt to rejuvenate Patanjali’s fading brands and make a dent in the FMCG space.
Eyeing the top league
In 2019, Patanjali Ayurved acquired bankrupt edible oil major Ruchi Soya through the insolvency resolution process, and later rechristened it Patanjali Foods. The company is now at the forefront of the founders’ FMCG ambitions, with Patanjali Ayurved taking a back seat.
In 2023-24, the edible oil business contributed ₹22,383 crore—about 70%—to Patanjali Foods’ revenue, while the FMCG segment brought in ₹9,643 crore, or about 30%. The company wants half of its revenue to come from the FMCG category by the financial year 2028.
To this end, Patanjali Foods recently announced plans to acquire Patanjali Ayurved’s non-FMCG food business (it had acquired the foods business in 2022).
“Patanjali Ayurved has some marquee brands, whose product quality is very high and they have an extensive distribution as well. It is safe to say that if this acquisition goes through, our reach both in non-food and food segments will go up significantly," Sanjeev Asthana, chief executive officer (CEO), Patanjali Foods, told Mint.
In 2022, Patanjali Ayurved had transferred its foods portfolio, including Patanjali Cow’s Ghee, Patanjali Chyawanprash, Patanjali Biscuits and Patanjali Honey to Patanjali Foods. With the latest move, Patanjali Foods will own the entire home and personal care portfolio, including toothpaste brand Dant Kanti, hair oil Kesh Kanti and bathing soap Neem Kanti.
Dant Kanti, with annual sales of ₹1,323 crore in 2023-24, is the biggest brand in the portfolio, according to investment banking and broking company BOB Capital Markets Ltd. The Patanjali body cleanser range (sales of over ₹353 crore), Patanjali Super Dish Wash Bar ( ₹238 crore), Patanjali Kesh Kanti shampoo ( ₹195 crore) and Patanjali Aloe vera Gel ( ₹177 crore) are the other top brands that Patanjali Foods will acquire from Patanjali Ayurved, a report from BOBCaps added.
However, experts believe the company will need to do much more to break into the top league of the FMCG world. Moreover, some analysts say that Patanjali Ayurvedhas been getting in the way of Patanjali Foods, pointing to a series of legal and regulatory challenges it faces, that have, in turn, dented the latter’s brand image.
Upending the market
Riding on his yoga prowess, Baba Ramdev made his way into Indian households in the early 2000s. His early morning shows on devotional channels such as Sanskar TV and Aastha, where he taught yoga on live television, amassed a huge following. Ramdev banked on this popularity and started holding yoga camps through which he promoted Ayurveda and launched Patanjali Ayurved in 2006. Balkrishna was the majority stakeholder in the company and Baba Ramdev claimed to be only its face.
Patanjali Ayurved started out as a purveyor of ayurvedic medicine. Over time, the company tapped its extensive retail presence via ‘Patanjali Arogya Kendra’ outlets to test the waters in the consumer goods market. It went on to create categories such as cow’s ghee and ayurvedic toothpaste.
The company positioned its FMCG products in the ‘ayurvedic’ category and tapped Ramdev’s image along with a ‘swadeshi’ angle to market the products.
“With the acceptability of yoga going up, the acceptability of natural and ayurvedic also started rising and that gave Patanjali Ayurved’s FMCG products a big boost," said Vineet Trakroo, CEO of Evolution Strategy Advisors, a Gurugram-based marketing consultancy firm. “Dant Kanti Toothpaste and Patanjali Ghee were some of the initial products that worked well for Patanjali Ayurved. He also created a lot of categories; for instance, cow ghee did not exist as a category earlier," added Trakroo.
Dant Kanti toothpaste started denting the market share of brands such as Colgate, Pepsodent, Close-Up and Sensodyne. It also changed the category mix of the oral care market in India, according to a 2020 report by HDFC Securities.
In 2013, Colgate-Palmolive had a57.9%share of the oral care market by sales volume, while Hindustan Unilever had a 22.8% share. Dabur India had a 12.5% share, and Patanjali Ayurved had just 0.4%, the report noted. But by 2020, these companies had lost significant ground to Patanjali Ayurved, which had captured a 9.4% share by then. Colgate-Palmolive’s share dropped to 52.7%, while Hindustan Unilever’s share declined to 16.1%. Dabur India, however, gained market share and had a 16.4% share of the oral care market, mostly on account of the emergence of herbal oral care as a major category.
According to the report, before Dant Kanti, the herbal oral care segment had less than a 10% share in the overall oral care category. With the introduction of Dant Kanti, herbal oral care grew to 30%, the largest segment in the category. The overall oral care market in India then, according to the report, was valued at ₹10,000-12,000 crore.
The company witnessed similar success with some of its other products, such as Patanjali Ghee, Patanjali Honey, Patanjali Amla Juice and Patanjali Kesh Kanti, in the 2010s and went on to clock a turnover of ₹10,561 crore in 2016-17, according to filings with the Registrar of Companies, as compared to ₹300 crore in FY12.
However, after scripting that runaway success, production issues, quality control mishaps, a tussle with distributors and the resurgence of its competitors halted Patanjali’s rapid growth.
Slipping and sliding
After consistently growing for over a decade, Patanjali Ayurved’s revenue declined in 2017-18, with turnover at ₹8,148 crore, down from ₹10,561 crore in 2016-17, according to filings with the Registrar of Companies.
While Patanjali Ayurved recovered slightly in the later years, it could not replicate its whirlwind success. Most of its brands have struggled to resonate with the larger consumer cohorts.
After its initial success, Dant Kanti, for instance, has not gained much share in the oral care market but Patanjali Ayurved continues to hold a 9-10% share in the segment, say industry stakeholders, citing Nielsen data.
“Dabur India has the highest market share in the herbal or ayurvedic segment with its four brands (Dabur Red Toothpaste, Babool, Meswak and Dabur Herb’l) holding about 16% share in the overall oral care category. Patanjali Ayurved has around 9% market share in the overall oral care category," said Shirish Pardeshi, head of research at domestic brokerage house Centrum Broking.
According to experts, most of these brands have captured some share in their respective segments but have failed to go beyond. The acquisition by Patanjali Foods is an attempt by the group to rejuvenate these brands.
A new mix
In its bid to grab a larger slice of the FMCG pie, Patanjali Foods is also launching a slew of products. The company recently ventured into segments such as food staples, spices, dry fruits, premium biscuits and cookies.
The biscuits business, acquired in 2021-22, stands out, recording 22% growth last year, as per Patanjali Foods’ filings to the stock exchanges. The company’s biscuit portfolio is now valued at about ₹1,600 crore annually. The most popular brand is Doodh Shakti, a ₹1,000 crore brand, as per filings with the stock exchanges.
But it will take much more to dislodge segment leaders Parle Products and Britannia. The two rivals are well-entrenched, with brands such as Parle-G, Krackjack, Hide & Seek (all Parle), MarieGold, Tiger and Good Day (Britannia). Together, they control over 50% of the biscuits market, according to a 2021 report by Edelweiss.
Patanjali Foods has not been able to make much of an impression in the other categories it has entered because of intense competition. In the staples and spices market, for instance, it has not been able to make a mark against the might of corporate giants ITC (Aashirvaad), Tata Consumer Products (Tata Sampann) and Adani Wilmar (Fortune). It faces another competitor in Dabur, which has entered the branded spices market by acquiring Badshah Masala.
Spices aside, Dabur has taken the battle to Patanjali Foods in the ayurveda segment, especially in herbal oral care. It has a stronghold over Chyawanprash, with a market share of 60%, and honey, with a 45% share, according to a report by brokerage East India Securities.
“Besides biscuits, most of Patanjali’s launches are not doing well in the market. Their consumers are concentrated in the northern and western regions of the country, while their brand image, too, has taken a hit with recent controversies(involving Patanjali Ayurved), which is impacting their performance," said a market analyst with a top brokerage firm, on condition of anonymity.
Just as they lurched from one controversy to another over the years in their headlong pursuit of success, the founders once again find themselves embroiled in legal trouble over misleading advertisements, trademark infringement, and the sale of banned products, all of which have taken a toll on consumer perceptions of the brand.
In its efforts to target new FMCG segments, Patanjali Foods is also tapping the erstwhile Ruchi Soya’s flagship brand, Nutrela, in the soya chunks category. It has launched products such as honey, wheat flour or ‘atta’ and nutraceuticals under the Nutrela brand.
Nutrela, has long been associated with the soya chunks category and, according to Patanjali Foods’ stock market filings, has about 45-50% market share in the category. Nutrela Soya Chunks raked in revenue of about ₹603 crore in 2023-24.
“Ruchi Soya, before its acquisition, had revenue of ₹500-600 crore from Nutrela. The product did not get that much traction because beyond a stage, people do not consume it, and those who consume it, do not do so regularly," said Evolution Strategy Advisors’ Trakroo. “Soya chunks is a category that works in the northern belt but down south there is no market for it. So, about 30% of the country has no idea about the brand."
Patanjali’s strategy to extend the brand may not work. “The previous management of Ruchi Soya, too, tried to expand the brand to other categories several times but it did not work out," said Trakroo.
He has a point. In 2012, Ruchi Soya had tried to expand Nutrela into the table spreads category, launching butter and margarine, and then in 2014 into the ready-to-cook category. However, these attempts did not pay off.
Enhancing reach
Ruchi Soya, though a bankrupt company, had an extensive distribution network, and with its acquisition, Patanjali Ayurved had hoped to have wider reach for its products. In May 2022, Ruchi Soya (it would be renamed Patanjali Foods a month later) had a pan-India network of over 100 sales depots, over 4,700 distributors, 450,000 general trade retail outlets and 4,600 modern grocery stores.
The extensive network helped to an extent, said experts. “The earlier food brands which were acquired by Patanjali Foods from Patanjali Ayurved have gained significant presence through distribution strength that the former has and we expect the non-food brands portfolio added recently to also grow further, deepening its penetration," said Pardeshi of Centrum Broking.
“We now have over 11,000 distributors and reach about 1.2 million retail outlets directly and about 1.5 million outlets indirectly and we are adding 10,000 to 15,000 stores every month," said CEO Asthana. “We know that we still have much room to cover as our competitors have way more reach than us," he added.
Market watchers say that besides adding distributors, the company also needs to finetune its distribution and incentive strategy.
Patanjali Foods clarified that it is taking steps to keep distributors happy. “Earlier, we have been reluctant to offer foreign tours and other incentives (to distributors) but we have started working on this," said Asthana.
Shedding ayurvedic image
So far, Patanjali has banked on its image as a home-grown entity, its association with ayurveda, and Baba Ramdev as the face of the brand to market its products.
Industry watchers, however, said Patanjali Foods needs to look beyond its current positioning. “The ‘swadeshi’ campaign has been effective in connecting with a particular segment of the market, but it’s important to acknowledge that it may not resonate universally," said Ashish Dhir, senior director of 1Lattice, a market research and consulting company.
“Patanjali’s marketing strategy has always evolved around its belief that it is a very powerful brand and it can sell any product by putting its name on it," said Ankur Bisen, senior partner and head of consumer, food and retail at Technopak Advisors, a consultancy. However, he added, “The Patanjali brand has limited headway to extend, and with its new products, the company is competing with brands like ITC’s Aashirvaad or Adani Wilmar’s Fortune, and hence, it needs a more refined marketing strategy."
The company’s management has realized this and has started roping in more brand ambassadors.
“Patanjali Group has been a reluctant user of external brand ambassadors but for Patanjali Foods, we have roped in cricketer M.S. Dhoni for our Mahakosh and Sunrich edible oil brand and have also signed up Tamanah Bhatia and Tiger Shroff for Kesh Kanti," said CEO Asthana.
While they may not have displaced their multinational rivals, the founders can take credit for transforming Patanjali from a bit player into a genuine contender in the country’s FMCG market. But they have their task cut out to take it to the next level.
