Limits of swadeshi

Patanjali should focus on the basics

Patanjali’s managing director, Acharya Balakrishna, has ascribed the stagnation of revenues over 2017-18 to the lingering effects of demonetisation in 2016 and the accelerated deadline for implementing the goods and services tax (GST) in 2017. Both are plausible explanations and, indeed, most other fast-moving consumer goods (FMCG) companies cited these factors as a drag on performance. But companies, from Dabur to Hindustan Lever to Nestle, that compete with this Haridwar-headquartered firm, with its sprawling portfolio of Ayurveda food and personal care products, all reported jumps in revenue and profit in roughly the same time-frame. Nestle, for instance, which took a significant hit in 2015 over the withdrawal of its best-selling Maggi noodles from the market following a contamination scare, saw full-year domestic sales grow 8.2 per cent. Most of Patanjali’s competitors saw increases in October to December sales — that's two quarters under the GST regime. For Hindustan Lever, net sales expanded 2.5 per cent and Nestle saw a 10.9 per cent jump in sales — profit growth for all were similarly healthy. 

In other words, Patanjali was competing on a level playing field, at least in terms of policy-induced constraints. Its stagnation — revenues hovered around the Rs 105 billion figure of 2016-17 — is disappointing principally because Patanjali has been a game changer for the FMCG industry since its dramatic expansion in 2014, five years after its market debut. Shrewdly cashing in on the nationalist wave that swept the sociopolitical landscape at the time, Patanjali leveraged its image as a home-grown herbal/Ayurvedic product company so effectively that it forced its multinational competitors to react. Patanjali located its selling proposition on the growing power of its chief promoter, yoga guru Baba Ramdev. It worked on the cusp of the beauty-health template and flooded the market with reasonably priced products and well-chosen distribution points that also served as Ayurvedic health centres. 

Its meteoric success, however, also brought along competitive pressures and safety issues. For one, the multinationals reacted swiftly, plugging the gaps in their portfolios by launching smartly packaged Ayurvedic products or by simply buying smaller companies with such portfolios and boosting their packaging and distribution networks. Hindustan Lever, for instance, bought Indulekha, an Ayurvedic hair care brand, and launched the Ayush brand of products.  The multinationals also cashed in on their reputation for consistency and quality, just as reports started appearing that a raft of Patanjali products had failed quality tests, including food safety standards for some of its herbal drinks and noodles, and a local court fined the company for misbranding some of its products. For any personal care and food product company a perceived lack of safety outweighs all brand properties. 

With alternatives readily available from reputed firms to fill the gap, it was no surprise that Patanjali’s ambitions to double revenues in 2017-18 failed. It also probably spread itself too thin by launching as many as 1,000 products, with more in the pipeline. A standard strategy that all companies follow is to consolidate their position in a few categories and then go for the next big product expansion drive. Like the launch of the Nirma detergent many decades ago, Patanjali needs to absorb the lesson that local brand values and low pricing only work when they operate in conjunction with standard marketing efforts,  including product reliability. Without these basics, even the most robustly patriotic of consumers can be notoriously fickle.