PATANJALI PRODUCTS: DISRUPTIVE FORCE IN THE

INDIAN FMCG MARKET

ABSTRACT
The case discusses the emergence of India-based Patanjali Ayurved Limited (Patanjali) as one of the
strong companies in the Indian FMCG sector, posing a threat not only to Indian fast moving consumer
goods (FMCG) companies but also to large multinational FMCG companies. The case traces the journey
of Patanjali from a small pharmacy called ‘Divya Pharmacy’ incorporated in 1997 by yoga guru Baba
Ramdev and Ayurveda expert Acharya Balkrishna (Balkrishna), to a company that garnered revenues
of US$ 370 million for the year ending March 2015.

In 2006, Patanjali was incorporated to sell ayruvedic medicines and over-the-counter products. It also
started selling products like wheat flour, clarified butter, and juices made of Indian gooseberry and
aloe vera. Patanjali was quick to expand in the market, launching several products that were of high
quality, priced competitively, and reflected the Indian ethos. These products were initially distributed
to the small clinics that Patanjali had established. Patanjali slowly started distributing its products
through small mom and pop stores, and by 2012, emerged as the fastest growing consumer products
brand. By 2015, analysts were starting to opine that Patanjali could well be on its way to changing the
dynamics of the FMCG market in India .

THE RISE AND RISE OF BABA RAMDEV AND PATANJALI

On January 11, 2016, Credit Suisse, a global financial services and investment banking company,
downgraded Colgate Palmolive (Colgate) in India to neutral, opining that Colgate was facing stiff
competition in the dental cream category from India-based Patanjali Ayurved Limited (Patanjali).
According to Credit Suisse, “Colgate’s volume growth has seen a significant drop in 2015-16, which is
divergent from peers who are seeing steady volume growth. The key reason is the strong traction that
Patanjali has gained in the category.”

Home grown FMCG companies like Dabur and Jyothy Laboratories had smaller market shares when
compared to the foreign players. They could not give the foreign players much of a competition as
they lacked financial and other resources. Most of the Indian FMCG companies focused on producing
western products like detergents, soaps, and toothpastes. Some local FMCG companies like Dabur and
Emami focused on producing ayurvedic and herbal products like cosmetics and personal hygiene
products. But they had a limited market share as consumers preferred western products. Companies
like Jyothy Laboratories, which produced products like fabric conditioners and detergents, depended
on one or two of its star products for most of its revenues...

India-based Patanjali was started in 1997 as a small pharmacy to make healthcare products by Baba
Ramdev (Ramdev) and Acharya Balkrishna (Balkrishna) . By 2015, the company manufactured and sold
800 different products including medicinal, cosmetic, and food products. The high quality,
competitively priced products found several takers, and Patanjali started to make its presence felt in
the Indian fast moving consumer goods (FMCG) market. Patanjali posed a threat not only to Indian
FMCG companies but also to multinational FMCG companies such as Colgate, Procter & Gamble Co.
(P&G) and Hindustan Unilever Limited (HUL). (Refer to Exhibit I for more on FMCG companies in India).
According to a report by Reliance Securities, a brokerage firm, “Priced anywhere between 10%-30%
cheaper than peers, Patanjali poses serious challenge to flagship products of many companies.
Companies like Dabur are expected to be most impacted by Patanjali while companies like Colgate,
Emami and HUL to be marginally impacted.”

Patanjali was formed in 1997 as a small pharmacy called ‘Divya Pharmacy’ in Haridwar , India, by
Ramdev and his collaborator, ayurveda expert Balkrishna, to manufacture ayurvedic medicines.
Balkrishna was involved in making the ayurvedic medicines whereas Ramdev focused on yoga. For
about three years, the duo made the medicines and distributed them free of cost to patients.

Ramdev was born as Ramkrishna Yadav in Alipur, a village in the Mahendragarh district of Haryana
state in India. He joined Arya Gurukul, Kanpur, where he studied Sanskrit and yoga. He held a
postgraduate (Āchārya) degree with a specialization in Sanskrit grammar, yoga, the Vedas, and the
Upanishads from a Gurukul in Haryana. He changed his name to Ramdev, abandoned the worldly way
of life, and went to the Himalayas to practice self-discipline through meditation. He gained
prominence after he started the Divya Yog Mandir Trust, Kankhal, near the holy place of Haridwar in
north India in 1995 where patients suffering from various diseases were reportedly cured using
Ayurvedic medicines and yogic practices. ....

Along with yoga, the medicines made by Divya Pharmacy also grew in popularity. Ramdev and
Balakrishna opened Patanjali Chikitsalayas (Clinics) and Patanjali Arogya Kendras at several locations
in India. At the clinics, the doctors’ services were free. These clinics also had an attached pharmacy,
where the medicines by Divya Pharmacy were available. After the medicines became popular due to
their effectiveness, Divya Pharmacy diversified into additional products. But obtaining funds for
expansion was difficult since Divya Pharmacy was registered under a trust. At that time, funds began
to come in from patients who had benefitted from the yoga and the ayurvedic treatment. These
included Indians from other parts of the world and also local businessmen. Subsequently Divya
Pharmacy was able to obtain loans from banks. Thus, Patanjali Ayurved was incorporated in 2006 as
a private company, with Patanjali Yogpeeth as the flagship trust...

PRODUCTS BASED ON TRADITION

Patanjali ayurvedic medicines were said to be 100 percent natural, made from potent herbs available
in the Himalayas. The medicines were reportedly highly effective against different diseases right from
a simple cold and fever to cancer.

The company’s venture into the FMCG segment began with the simple Indian gooseberry in 2005. At
that time, some farmers from places near Haridwar met Ramdev and told him about their gooseberry
plantations, which they were planning to destroy, as there was no demand for gooseberries. Ramdev
then came up with the idea of making juice from gooseberries, so that the plantations would not have
to be destroyed and the farmers would also benefit. A fruit processing unit in the northern state of
Punjab agreed to process and make juice out of the gooseberries. The amla juice that was launched
eventually became highly popular and Patanjali started sourcing gooseberries from farmers all over
the country.

AT COMPETITIVE PRICE
The Patanjali products, which were of good quality, were priced 20-40% lower than the products of
multinational companies. The higher product pricing of multinational FMCG companies was due to
their expenses for hiring brand ambassadors, heavy market promotions. etc. In the case of Patanjali,
Ramdev himself played the role of brand ambassador for all its products through his yoga camps,
television yoga classes, and appearances.

REACHING THE INDIAN HINTERLANDS

At the beginning, Patanjali preferred to rely on mainly its own distribution channels of super
distributors, distributors, Chikitsalayas, and Arogya Kendras. It opened its franchise model in a few
select areas where there was minimal or no competition because of non-availability of other
competitive brands. Also, most of the franchises were owned by the followers of Ramdev.

APPEALING TO CUSTOMERS
Traditionally, all multinational and large domestic companies advertised their products through
indirect channels such as television, newspapers, and magazines. Patanjali advertised through the
direct method during yoga camps and during the yoga programs that were telecast. When Sanskar
channel started telecasting Ramdev’s yoga in 2002, millions of people across the country began
following him. After the first products were introduced, Ramdev mentioned products like amla juice
and aloe vera juice during the yoga camps, and people readily bought those products.

POSING A THREAT TO FMCG COMPANIES?

Patanjali, which began as a nondescript company, took only a few years to grow into a challenger to
the existing FMCG companies in India. The growing popularity of Patanjali products disrupted the
market and took the FMCG sector in India by storm (Refer to Exhibit II for more on FMCG Market in
India). In 2016, the popularity of the Patanjali products was growing rapidly. In a span of a decade
Patanjali became a Rs.50 billion company. Its phenomenal growth could be gauged by the fact that
Dabur took more than 70 years to become a Rs.50 billion company. Patanjali is considered to be one
of the fastest growing companies in India, and its revenues are expected to reach Rs.200 billion by
2020 as predicted by brokerage firm IIFL.

CHALLENGES
Although Patanjali was growing rapidly, beating popular brands like Coalgate and Dabur there were
many challenges that lay ahead for it. The company needed to increase its scale of operations in order
to compete with FMCG majors in the country. Sourcing of raw material, for instance, was one of the
major challenges as it was critical to cope with the multiplying volumes. Direct sourcing could become
a challenge, which could impact the low input costs. The company also went into contract
manufacturing to meet high demand. This could also add to the costs.

According to some industry experts, Patanjali’s quick success did not guarantee its growth in the
future. Some of the factors which contributed to its fast growth might, in fact, become stumbling
blocks, they said. Patanjali might face problems if Ramdev’s personal image was adversely impacted…
QUESTIONS FOR DISCUSSION

1. What are the major factors do you think contributed to Patanjali’s overwhelming success?
Briefly explain 3 most important factors.
2. Describe the importance of marketing communications in building a brand in this case
context.
3. What should be the future expansion strategy of Patanjali to sustain as a leader? How
should it overcome the competition in one of the most challenging market?
4. Can the growth of Patanjali be credited to its business model? Or was it just because of the
sentiments of Indian consumers involved with the founders? Back your answers with
explanation.
5. What should the other companies like Dabur, Britannia, Nestle, Colgate etc. do to regain
market share from Patanjali. What should the leaders like HUL and ITC do keep themselves
positioned as market leaders?

Answer the above five questions in a maximum of 1000 words in total. You may choose to
answer them all together in one go or one at a time
EXHIBIT I
TOP FMCG COMPANIES IN INDIA IN FY 2016-2017 (In No Particular Order)

Companies Revenue(INR) Net Income(INR)

ITC 37000 CRORE 10000 CRORE
HUL 32000 CRORE 4100 CRORE
BRITANNIA 8000 CRORE 750 CRORE
NESTLE INDIA 8000 CRORE 450 CRORE
DABUR 6000 CRORE 1000 CRORE
MARICO 5000 CRORE 700 CRORE
10000 CRORE AS CLAIMED BY
PATANJALI AYURVED
THE COMPANY
GODREJ CONSUMER 4900 CRORE 750 CRORE
GSK 4500 CRORE 700 CRORE
COLGATE PALMOLIVE 4500 CRORE 600 CRORE

EXHIBIT II
More about FMCG Market in India
EXHIBIT III
The Rise of Patanjali