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GROUP 10
MIHIR SANGODKAR B15029
NIKHIL CHOUDHARY B15031
NIRRANSH JAIN B15032
PRAKHAR AGARWAL B15035
RUTU 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
2010
The 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 Ayurved
Limited as a formal private company on 13th
January 2006 along with Baba Ramdev .
2012
Hit 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
2015
Hit revenues of Rs. 2,000 Cr., has 4000
stores
2015
Deals 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.
3
The 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.
4
Aug 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 %)
6
PAL 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
PROMOTION
Yoga Shivir,
Youtube,
Social media
Free media
promotions
03
PLACE
Franchise Stores,
Super/Hyper markets
& Online marketplace
02
PRICE
Value Based Pricing
Alignment of cost,
customers &
competitors.
SEGMENTATION
Demographic basis – Age groups from 15-64
Psychographic basis – Personality, lifestyle
and class
TARGETING
75% of the world’s population uses herbal care
products
65% of India’s rural population uses Ayurveda
remedies
Trend shift towards natural herbal products
POSITIONING
Ayurvedic products are positioned as products
who can treat diseases with zero side
effects
Juices 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
NEWMARKETS
NEW
PRODUCTS
EXISTING
MARKETS
 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
Discount%
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 AND
SUPPLY CHAIN
DESI TAG
TIMING OF PRODUCT LAUNCH
HIRING 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 CHAIN
ANALYSIS
FIRM INFRASTRUCTURE
Mega marts are being built across the country
IDEA
VALUE CHAIN
ANALYSIS
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 corporate
culture
VALUE CHAIN
ANALYSIS
TECHNOLOGY AND PRODUCT DEVELOPMENT
Technology transfer agreement with DRDO
Development Seabuckthorn
products
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 Technopack
and Dynaflex
PRODUCTION
1: 3.3 Finished goods : Raw material
Expansion to 32 processing units from 5
5 Crore tablets per day capacity
VALUE CHAIN
ANALYSIS
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 Agriculture
Research 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 competitio
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 HUL
and 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 = HUL
Sri 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

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Patanjali: Business Model and effects on the FMCG sector in India

  • 1. GROUP 10 MIHIR SANGODKAR B15029 NIKHIL CHOUDHARY B15031 NIRRANSH JAIN B15032 PRAKHAR AGARWAL B15035 RUTU VELANI B15044 STRATEGIC MANAGEMENT PATANJALI: BUSINESS MODEL AND EFFECT ON THE FMCG SECTOR IN INDIA
  • 3. 1 2 3 4 1997 PAL started as a small pharmacy in Haridwar 2006 Established as a Pvt. Ltd. company 2010 The 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 Ayurved Limited as a formal private company on 13th January 2006 along with Baba Ramdev . 2012 Hit revenues of Rs. 450 cr, 450 stores
  • 4. 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 2015 Hit revenues of Rs. 2,000 Cr., has 4000 stores 2015 Deals signed with Future Group and DRDO
  • 6. 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. 3 The 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. 4 Aug 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 %) 6 PAL has provided more than 2.00 Lac indirect employment IDEA FACTS
  • 8. 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
  • 9. 01 PRODUCT All Existing Products and herbal products for different diseases . 04 PROMOTION Yoga Shivir, Youtube, Social media Free media promotions 03 PLACE Franchise Stores, Super/Hyper markets & Online marketplace 02 PRICE Value Based Pricing Alignment of cost, customers & competitors. SEGMENTATION Demographic basis – Age groups from 15-64 Psychographic basis – Personality, lifestyle and class TARGETING 75% of the world’s population uses herbal care products 65% of India’s rural population uses Ayurveda remedies Trend shift towards natural herbal products POSITIONING Ayurvedic products are positioned as products who can treat diseases with zero side effects Juices and food products are portrayed as a healthy way of life MARKETING MIX MODEL
  • 10. 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 NEWMARKETS NEW PRODUCTS EXISTING MARKETS  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
  • 12. 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
  • 13. 0 5 10 15 20 25 30 35 40 Product Discount% 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
  • 14. 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 AND SUPPLY CHAIN
  • 15. DESI TAG TIMING OF PRODUCT LAUNCH HIRING 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
  • 17. 01 03 04 02 FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY AND PRODUCT DEVELOPMENT PURCHASING, LOGISTICS PRODCUTION DISTRIBUTION MARKETING & SALES SERVICE MARGIN VALUE CHAIN ANALYSIS
  • 18. FIRM INFRASTRUCTURE Mega marts are being built across the country IDEA VALUE CHAIN ANALYSIS 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 corporate culture
  • 19. VALUE CHAIN ANALYSIS TECHNOLOGY AND PRODUCT DEVELOPMENT Technology transfer agreement with DRDO Development Seabuckthorn products 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 Technopack and Dynaflex PRODUCTION 1: 3.3 Finished goods : Raw material Expansion to 32 processing units from 5 5 Crore tablets per day capacity
  • 20. VALUE CHAIN ANALYSIS 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 Agriculture Research 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 competitio fill a gap in the information asymmetry where in the customer is unsure of the maximum benefits that can be derived from FMCG products
  • 22. $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 HUL and 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 = HUL Sri 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