My Ssec Capstone Project The Patanjali growth story is a mirage

The Patanjali growth story is a mirage

The Patanjali growth story is a mirage; the brand has crumbled.
Once a disrupter in the Indian FMCG market, Patanjali now faces declining sales and stagnant growth this year after having grown at nearly 100 per cent in turnover year-on-year since its inception.
Patanjali’s stagnant sales come at a time when its competition in Hindustan Unilever, ITC Ltd and Nestle India have reported stellar growth.
The reason for this decline could be attributed to a combination of internal factors driven by Patanjali’s strategies as well as external factors driven by the competitive response of FMCG giants like HUL and Colgate.
Patanjali’s strategy has always been carpet-bombing the market with all kinds of products rather than on selecting high growth and high margin segments and focussing on them. Its presence in multiple businesses certainly seems to be diluting its focus.
Patanjali’s portfolio spans over personal care products, toothpaste, home cleaning products, dishwasher and detergents, staples such as wheat flour, rice, salt, cooking oil, tea, fruit juices, and dairy products, apart from a range of ayurvedic products.
According to business reports, Patanjali is yet to grab a large enough share of any category to pose a material threat to the leading player of the market. And any aggressive gains by Patanjali in these categories may threaten desi players such as Emami, Dabur India or Amul far more than the MNCs.
Ayurvedic products need a lot of research and development, which could take significant amount of time. Patanjali seems to entirely overlook this fact and is trying to run an Ayurveda business at a mass level, the company typically launches two-three products a month in all the product categories it is present in.
With such growth, it will be difficult for it to maintain product quality, so there’s been a growing concern over their product quality.
The demand for Patanjali products has decreased significantly, mostly because their products are not available on the shop shelves due to their low store filling frequency.
The company’s umbrella branding strategy helped it gain loyal consumers only among Ramdev’s followers and those with a yen for swadeshi products but those consumers are shifting back to other reliable alternatives in the market.
Recently, Patanjali’s social media app Kimbho, supposed to be a competitor to Facebook’s Whatsapp, had to be withdrawn within a few days of release due to various security concerns.
Rather than fixing the problems with existing products, Patanjali Ayurved MD Acharya Balkrishna has recently said that he is all set to roll out his clothing business, named Patanjali Paridhan.
As Patanjali’s products only retailed through 10,000 exclusive chikitsalayas and yoga kendras, it could do away with market research and work with a hit-and-trial approach to product releases. From its single mega-facility in Haridwar, the firm met the customer demands.
But if Patanjali is to succeed in its ambitious plans of giving the MNCs a run for their money, a strong national presence will require substantial investment in manufacturing units in southern, western and eastern India. Acquiring a countrywide distribution presence will require more refined supply chain and inventory management infrastructure.

Among external factors, demonetisation and GST affected all packaged goods companies. Patanjali’s business was also impacted by intensifying competition, especially in the herbal personal care segment but most FMCG companies, post the demonetisation and GST lull, have bounced back.
A report says that the lowering of rates of most FMCG products post GST has helped the cause along with the improvement of rural demand due to good monsoons. All the FMCG companies which supplied to semi-urban and rural marketplaces through venders have now started aiming these markets directly, surely a huge worry for Patanjali.
The reason behind the decline of Patanjali sales could also be consumer fatigue and FMCG companies like Colgate and HUL investing greatly in natural products to bring back consumers who may have drifted to Patanjali.
Competitors like Dabur and Colgate have been protecting their market share from Patanjali proactively. While Dabur responded with deliberate pricing, HUL released nationally an ayurvedic collection of products. Colgate, too, came up with an ayurvedic offering Colgate Herbal.
The key factors leading to the decline in Patanjali are lack of renovation, incompetence to crack general trade distribution, weakening of the ayurvedic credentials on the unnecessary extension, strong competitive comeback from MNCs with their own ayurvedic/herbal offerings, and a decrease in advertising spend.
Patanjali has a long way to go when it comes to building a sustainable business model and product portfolio among dynamically changing Indian consumer preferences and demands.

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