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Patanjali 'changes game' in FMCG

News, 08 January 2016

NEW DELHI: Leading FMCG brands in India are considering how to react to the rapid growth of Patanjali, whose products now command standalone spaces in many retailers.

Founded by yoga guru Baba Ramdev, Patanjali offers a range of ayurvedic products, which include fruit juices, herb tea and toiletries. It expects to report revenues of around Rs 5,000 crore in the coming financial year, up from Rs 2,000 crore last year.

A report released this week from brokerage firm IIFL, reported in Money Control, highlighted the challenge it presents to major players such as Colgate, Dabur and Hindustan Unilever (HUL), all of which it expected to be affected.

"What makes Patanjali a credible threat is that it does not try to beat other FMCG companies at their game; it changes the game for them," it said.

"The reason for Patanjali's success is its unique business model of a single brand, a wide spread of categories, exclusive store network and a close association of a personality," the report continued. Other factors include low prices, the appeal of ayurvedic products and a wish to buy Indian brands.

The Economic Times noted that many retailers are now following the example of Reliance Retail which a year ago began grouping all Patanjali brands, from ghee to shampoo, in their own in-store space.

"This is the first time in grocery retail that standalone spaces are being given to one entire umbrella brand clubbed together," claimed Aditya Pittie, chief executive of the Pittie group which is the exclusive distributor for Patanjali Ayurved across organised trade.

"Patanjali is causing disruption across all categories," he added.

That is a slight exaggeration as there are some product areas – cigarettes and alcohol, for example – that a brand focused on health and wellness is not going to enter.

But the biggest players in other areas are sitting up and taking notice, with Dabur and HUL revamping their ayurvedic lines.

Data sourced from Economic Times, Money Control; additional content by Warc staff