GROUP 10MIHIR SANGODKAR B15029

NIKHIL CHOUDHARY B15031

NIRRANSH JAIN B15032

PRAKHAR AGARWAL B15035RUTU VELANI B15044

STRATEGIC MANAGEMENT

PATANJALI: BUSINESS MODEL

AND

EFFECT ON THE FMCG SECTOR IN INDIA

COMPANY HISTORY

1

2

3

4

1997

PAL started as a small pharmacy in Haridwar

2006

Established as a Pvt. Ltd. company

2010The world’s largest food park opened

TIMELINE

In 1997, Patanjali Ayurved Limited (PAL) started as a small pharmacy in Haridwar, by P.P. Swami Ramdev Ji Maharaj

Acharya Balkrishna established Patanjali AyurvedLimited as a formal private company on 13th January 2006 along with Baba Ramdev .

2012Hit revenues of Rs. 450 cr, 450 stores

5

6

PRESENT

TIMELINE

Baba Ramdev does not own any percentage of equity in the company

On 5 January 2010, the world’s largest food park opened 20km from the holy city of Haridwar, Uttarakhand, India. The INR 500 cr Patanjali Food and Herbal Park is spread across ~95 acres in first phase; and has generated direct employment for 7,000 people. The construction started in February 2009 and was completed in a record time of less than a year

2015Hit revenues of Rs. 2,000 Cr., has 4000

stores

2015Deals signed with Future Group and DRDO

CURRENT SCENARIO

1

Food park is now spread over 150 acres

~85% of products are manufactured by PAL in-house and only few products outsourced.

2

Current Product Portfolio: edible oils, biscuits, and noodles to toothpaste, hair and skin care products, and groceries

Expansion: cosmetic products, baby care products, animal feed and dairy products.

3The rise of PAL has been so staggering and well entrenched in consumer psyche that large Indian and Foreign Research houses are considering this pretty much a Disruption Factor in the overall consumer sector.

4Aug 2015: CLSA came out with a report titled “Wish you were listed, Patanjali Ayurved” and summarized the threat it presented to listed counterparts

5

Patanjali's revenue > Dabur, Emami, Marico, and Godrej Consumer. Ghee is the biggest money spinner for Patanjali, contributing 30-35% to its revenue, followed by healthcare (20%), and toothpaste Dant Kanti (8 %)

6PAL has provided more than 2.00 Lac indirect employment

IDEA

FACTS

COMPANY ANALYSIS

Strengths Weakness

OpportunitiesThreats

S W

T O

• Low export levels• Strong competitors and

availability of substitute products

• Less expenditure on marketing and promotional activities

• No distribution network in rural areas

• Changing lifestyle and rising income levels

• Change in trend of becoming more health conscious and using more organic products

• Large domestic market• Rural market to be tapped

• 100% natural products with little side effects

• Brand image of the trust • Considered socially

responsible for health of the society

• Established distribution network in urban areas

IDEA

SWOT ANALYSIS

• Political Interference• Removal of import

restrictions• Controversies

01

PRODUCT

All Existing Products and

herbal products for

different diseases.

04

PROMOTIONYoga Shivir,

Youtube,Social media Free media promotions

03

PLACE

Franchise Stores, Super/Hyper markets & Online marketplace

02

PRICEValue Based Pricing Alignment of cost,

customers & competitors.

SEGMENTATIONDemographic basis – Age groups from 15-64Psychographic basis – Personality, lifestyleand class

TARGETING75% of the world’s population uses herbal care products65% of India’s rural population uses Ayurveda remediesTrend shift towards natural herbal products

POSITIONINGAyurvedic products are positioned as products who can treat diseases with zero side effectsJuices and food products are portrayed as a healthy way of life

MARKETING MIX MODEL

Market Penetration

- Yoga Shows

- Spiritual lessons in ashram

Product development

- Research in Ayurveda and

herbal medicines

Market Development

- Targeting youth and newly

health conscious customers

Diversification

- Cosmetics

- FMCG products

- Health Drinks

EXISTING PRODUCTS

NE

W M

AR

KE

TS

NEW PRODUCTS

EX

IS

TIN

G

MA

RK

ET

S

Products like Patanjali Shampoo and health drinks are in growth stage of the life cycle

New diversified products like fertilizers and clothing are in introductory stage

ANSOFF MATRIX

PRODUCT LIFE CYCLE

BUSINESS STRATEGY

01 PERSONAL BRANDING

02 YOGA SHOWS

03 ONLINE & OFFLINE SHOPPING EXPERIENCE

04 ADVERTISEMENTS

05 SOCIAL MEDIA

MARKETING AND BRAND BUILDING

Cult personality and charisma of Baba Ramdev

535 branches of Patanjali Yog Ashram

Pan India Yoga Shows

Broadcasted in 170 countries

3 books and 2 video CDs

Authentic and trained sales consultants Customers problems solved on 1:1

interaction Easy to navigate website UI with full details HD resolution photos and videos of products

Commercials on Star TV and ZEE TV

Simple ads to disseminate info – INFOMERICALS

No false promises

Spending is only 1 – 1.5 % of revenues turnover

500k followers on twitter

6 million Facebook page likes

50k subscribers for YouTube channel

11 million views on YouTube

channel Language – Hindi and English Regular updates and replies

0

5

10

15

20

25

30

35

40

Product

Dis

count

%

Patanjali vs Competitors Price Comparison

Chyawanprash Juice Ghee honey

Facewash Shampoo Toothpaste Bathing Soap

Cornflakes Detergent

How is it possible?

Impact?

Why such low pricing?

Business Philosophy – “Upkar and Not Vyapar”

Make in-roads in lower and lower middle class of society

Low input costs of production

Procurement of RM directly from farmers avoiding middlemen

Very Low administrative expenses-Patanjali – 2% , Industry – 10 %

Profit Margin – 11.3%

Revenue – 2000 crores in FY 15

Revenue expected in FY 16 is 5000 crore

e.g. Amla candies

PRODUCT DEVELOPMENT – 3 PILLARS

1. COMPETITIVE PRICING

2. NATURAL RAW MATERIAL

3. INNOVATION

DISTRIBUTION SUPPLY CHAIN

Chikitsalyas (1500)

Patanjali tied up with Future Group in 2015 Products to be sold in 245 Future Group stores pan

India Expected sales are 8 crores per month via these stores

Retailers(over 300000)

Super Distributors (72)

Arogya Kendra (3500)

Distributors (2000)

Supplier

• Collect RM from rural households

• Some money given to villages for building roads, schools etc.

Producer

• Demand for different item is placed at Haridwar

• Items delivered to distribution centers through Patanjali’s own transport

Consumer

• Products available at distribution centers/retail outlets

• Certified doctors also available at Chikitsalyas

No intermediaries at any stage Significant cost saving on commissions

DISTRIBUTION ANDSUPPLY CHAIN

DESI TAG

TIMING OF PRODUCT LAUNCHHIRING POLICY

COMPANY CULTURE

Emphasis on hiring expert people with domain knowledge Doesn’t hire MBAs or “Digital Ninjas”

Preferred Degree – M.Sc. Biology or M.Sc. Pharma

Started with Ayurvedic medicine – established faith

Next, health supplements and consumables –

cereals, wheat – “WoM publicity” Finally FMCG products – soaps, detergents,

cosmetics, baby care products etc.

Appeal to Indianess – shun MNC products

“Swadeshi brand” – genuine and

pure Refused foreign investment to protect

desi tag

Very professional but not profit maximization

Purpose driven – “reinvest in society and nation”

Spiritual Culture – no

smoking/drinking Dress code – white kurta

OTHER STRATEGIES

VALUE CHAIN ANALYSIS

01

03

04

02

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT TECHNOLOGY AND PRODUCT

DEVELOPMENT

PURCHASING, LOGISTICS

PRODCUTION

DISTRIBUTION

MARKETING & SALES

SERVICE

MARGIN

VALUE CHAINANALYSIS

FIRM INFRASTRUCTURE

Mega marts are being built across the country

IDEA

VALUE CHAINANALYSIS

Patanjali Food and Herbal Park Patanjali Herbal research Institute

Patanjali Yogapeeth Swami Shankardev Vanprastha Aashram

HUMAN RESOURCE MANAGEMENT

Average compensation 22,000 P. M.

High rates of hiring from other FMCGs

Swadeshi Model, local talent not top tier

Non Smokers, not alcoholics, Satvik

High emphasis on training, employee work life balance – Spiritual not corporateculture

VALUE CHAINANALYSIS

TECHNOLOGY AND PRODUCT DEVELOPMENT

Technology transfer agreement with DRDO

Development Seabuckthornproducts

Cold arid agro animal technologies

Weather resistant, grown in Green houses

Solar driers, low cost storage, high altitude farming

DRDO FICCI ATAC initiative

Cash from yoga related activities reinvested in Product Development

PURCHASING & LOGISTICS

Providing a new lease of life to packaging companies like Essel Propak, Manjushree Technopackand Dynaflex

PRODUCTION

1: 3.3 Finished goods : Raw material

Expansion to 32 processing units from 5

5 Crore tablets per day capacity

VALUE CHAINANALYSIS

DISTRIBUTION

Own retail stores, tie up with Future Group

SALES AND MARKETING

Increase advertising spend

Agencies like McCann and Mudra

Direct Marketing and through the Medium of Yoga and Sanskar Channel

Modern retail stores like Hypercity, Starbazar

Online Platform

SERVICES

Non-Residential Yoga Camps

Yoga Classes

Gurukul At Kishangarh Ghasera

Patanjali Cow-Science and Herbal AgricultureResearch Institute at Dharali, Uttarkashi

Patanjali Chikitsalaya-Patna

Indirectly run services : medical nature

MARGINS

20-25 per cent cost advantage

15-30 per cent cheaper than other branded competition

fill a gap in the information asymmetry where in the customer is unsure of the maximum benefits that can be derived from FMCG products

FMCG IMPACT

$49 Billion – Equal mix of branded and

unbranded products

Growth has slowed down in the past 3 years due to GDP, Inflation, low IIP and No SKU innovation or refinement of Supply Chain

Growth picking up in 2015-16 back with 7th pay commission, global oil glut and rising

GDP

Top players by Market Capitalization are HULand ITC

FMCG IMPACT

INDIAN FMCG INDUSTRY 1

2

3

4

Price: • 8-77% aggressively priced over market

leaders • Emami and Dabur share prices fell

Colgate Palmolive downgraded to Neutral on Toothpaste losses

Product:• Product piggybacking like PowerVita and

Atta Noodles• Increasing the size of the Ayurveda pie –

Indulekha + Ayush = HULSri Sri Ayurveda

Promotion:• Below the Line through Happening Haryana• Pushing Himalaya and Dabur into creative

marketing

Place: • ‘Patanjali Destinations’ – Future Group• INR 10 billion at Big Bazaar against INR 13

billion by HUL

THANK YOU