New Delhi: India’s slowing growth has left few sectors of the economy untouched and hurt the bottomlines of some of the country’s biggest companies.
But Baba Ramdev’s Patanjali Ayurved, a rising FMCG star until recently, has more than the slowdown to blame. Unplanned expansion, a poor supply chain, inconsistent product quality and business practices – along with the slowdown – have come together to pull the company down like no others in the sector, analysts said.
Launched in 2009, Patanjali had badly disrupted the FMCG market over the last five years. Riding on its ‘swadeshi identity’, the Haridwar-headquartered firm had risen to become the country’s second-biggest FMCG player, behind the conglomerate Hindustan Unilever (HUL), by 2017.
According to a report by global consumer research firm Kantar Worldpanel, Patanjali’s sales, in terms of volume, has shrunk in urban areas, whereas its growth has reduced to a third in rural areas.
The firm’s sales volume has declined by 2.7 per cent in urban areas for the financial year ending April 2019, while its rural sales grew 15.7 per cent. In sharp contrast, the year before, the company grew 21.1 per cent in urban areas and 45.2 per cent in rural regions.
A Reuters report, quoting data from CARE Ratings, said “provisional data indicated sales of just Rs 4,700 crore in the nine months to 31 December (for FY 2018-19)”. It is the second successive poor year for the company.
At its peak in the 2016-17 fiscal, Patanjali had managed sales of Rs 10,000 crore. It then predicted that it would double its sales to over Rs 20,000 crore in the next year. Instead, sales plunged to Rs 8,100 crore in the 2017-18.
Before the current downturn, the Haridwar firm had grown at almost 100 per cent year-on-year between 2014 and 2017. The company had also managed to push its turnover from nearly Rs 2,000 crore in 2014-15 to Rs 5,000 crore in 2015-16 before further doubling it to Rs 10,000 crore in 2016-2017.
Among the worst in the sector
Although the FMCG sector hasn’t been immune to the slowdown, Patanjali’s competitors have fared relatively better.
According to data quoted by Hindu Businessline, sourced from consultancy firm Prabhudas Lilladher, “Hindustan Unilever Limited’s (HUL) volume growth in the first quarter was 5.5 per cent, down from the year-ago period’s 12 per cent.”
The report also said Marico’s volume growth was 7 per cent this quarter, down from last year’s corresponding quarter’s 10.4 per cent. Dabur India’s volume growth stood at 6 per cent (in the first quarter), versus the 21 per cent during the same period a year ago.
Patanjali appears to be feeling the heat. Its once-ubiquitous advertisements can hardly be found on TV, radio and in print.
According to data with AdEx India, a division of TAM Media Research, Patanjali was the third biggest FMCG advertiser in India in 2016, behind HUL and Dettol-maker Reckitt Benckiser.
Between January and July of 2018, Patanjali had slipped to 11th place. It has now further dropped to 40th rank in the same period of 2019.
The company also hasn’t launched a single new product in the last nine months while retailers in the Delhi-NCR region complain that its much-hyped range of baby care products, Shishu Care, hasn’t been available for the last three months. It is also missing from online platforms.
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A falling empire?
At the heart of New Delhi’s shopping district of Connaught Place, Patanjali Chikitsalaya was one of the firm’s most frequently visited outlets. Located right opposite to the iconic Odeon Cinemas, the store stood out for the Patanjali signboard with a smiling Ramdev.
While the signboard continues to exist, the store has been shut; it has been taken over by a tobacco outlet that has let the smiling Ramdev stay.
At Gole market, in one of the other top-selling Patanjali outlets, there is a dearth of the company’s products. The outlet has, instead, stocked up with other FMCG products.
Several retailers in the Delhi-NCR region said this had been the trend, with overall demand for ‘brand Patanjali’ having fallen.
“I don’t remember the last time that I sold the Patanjali fruit juices or a packet of their porridge,” said Praveen Kumar, owner of a small Patanjali outlet in the congested lanes of Karol Bagh in West Delhi.
“Half of their products remain unavailable due to which I have started procuring all other Ayurveda and herbal brands such as Khadi and Jiva Ayurveda.”
Kumar had opened the shop in 2015 when his monthly revenue was over Rs 15,000. “Today, I barely earn around Rs 4,000 to Rs 5,000 a month,” he said.
Ravinder Pal Singh, owner of a mega Patanjali outlet in MGF Metropolis Mall, Gurugram, said he might shut his store soon.
“Three years ago, my sales stood at around Rs 17 lakh to Rs 18 lakh annually,” he said. “Today, the sales are around Rs 3 lakh, of which we have to pay the electricity bill, real estate rental, salary of the Ayurveda doctor, salary of four other staffers among other expenses. I am running into losses.”
Singh blamed recurring unavailability of products, lack of consumer interest and poor profit margins for the situation.
Mohit Gupta, a store owner at Patparganj in East Delhi echoed Singh’s complaints. “All the products keep going off the shelves due to interrupted supply. It is embarrassing for us when we see consumer returning empty-handed.”
We will be back on top by 2021: Patanjali
Despite its troubles, Patanjali says it will bounce back by 2021 while pointing out that its problems affect other players in the sector.
“The challenges that we are facing today are not exclusive to us,” company spokesperson S.K. Tijarawala said. “We are facing similar headwinds that everyone else has after demonetisation and GST. But we being a new player, have been affected,” he added.
“Our supply chain has now been strengthened to take care of our large stable of products and we are developing a policy on advertisements. By 2021, we will be back as top advertisers and top FMCG company.”
Tijarawala explained that the company was facing difficulties in strengthening the supply chain which has led to the unavailability of its products in the market. “We are in the process of rolling out software at all retail outlets connected to our headquarters that will reduce the gap between the order received and order dispatched,” he said.
As for the advertisements, Tijarawala said the company hasn’t launched any new product this year, and so it is not running many promotions.
“We are on a major strategic point where we need to align our new acquisition plan of Ruchi Soya,” he said. “We are focusing on garnering internal resources to feed the fund requirement to buy Ruchi due to which we have shifted to a saving mode. The idea was to buy it mostly through internal money and not debt.”
In July, Patanjali had won the Rs 4,350-crore bid to take over edible oil player Ruchi Soya.
Comeback will be a challenge for company: Experts
Experts, however, aren’t so sure that the company can arrest the slide.
“Whatever Patanjali is going through is self-inflicted,” said Arvind Singhal, chairman of retail consultancy, Technopak. “Its slowdown is not related to the slowdown in the economy but to the illogical expansion, ill-maintained supply chain and poor product quality.”
Singhal added that it was advertisements that pulled consumers towards the brand. “The company invested hugely in advertisements that made customers excited to try the products. With customer’s demand, channel partners also got excited,” Singhal said. “But the company started sourcing products without quality control. Now the consumer is turned off with their products and recurring shortages. It is very difficult for Patanjali to make a comeback.”
Not just sales, the brand equity is also being damaged, experts claim.
“The power of a brand is not the face of brand endorser rather it’s the business ethics of the company,” said Santosh Sood, former COO of Rediffusion Y&R, a brand consultancy and ad agency. “In this case, the company became a quick hit as consumers connected with the deity image of yoga guru Ramdev and his simple style of living. But the connect is not forever,” Sood added.
“It started promoting the brands as ‘swadeshi‘ and ended up listing its products on American giant Amazon,” he said. “It shows the difference between what they say and do. The revival of brand Patanjali seems difficult and is only possible if they run the company professionally.”
K. Vaitheeswaran, a serial entrepreneur and author of the book Failing To Succeed suspects there’s something wrong with either the quality of Patanjali’s products or its distribution network.
“Developing and launching FMCG products is not tough. It is also not difficult to get early sales and momentum,” Vaitheeswaran said.
“Maintaining the sales momentum, however, requires a lot. The product quality must be so good that it creates a positive word of mouth leading to a cycle of repeat sales. There should also be enormous discipline in creating a sales process across distributors, stockists, retailers to ensure steady movement of inventory on and off the shelves.
“This is a strong point of the multinational FMCG giants. I suspect that if any one of these things is not maintained, early sales momentum will drop.”
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