India’s Newest FMCG Upstart is Making Rivals Sweat

Published on 10 Aug, 2016

India's FMCG Market Analysis

India’s newest FMCG upstart is unsettling her markets.

A home-grown brand that touts itself as holistically ayurvedic, Patanjali Ayurveda Limited is growing aggressively enough to displace other veteran and more well-established brands in the Indian market.

Patanjali Ayurveda Limited is fast emerging as a serious threat to other big Indian FMCG players thanks to a combination of aggressive marketing and value proposition. Renowned Yoga guru and brand ambassador Baba Ramdev has set Patanjali on a steep growth trajectory, and his fellowship has helped transform the brand from a cottage industry to a major player in India’s FMCG space.

Indian consumers seem to have a renewed interest in all things herbal, with many turning to the country’s ancient art of healing and prolonging life — Ayurveda — for natural cures and supplements. This is giving nightmares to well-established FMCG market players like HUL, P&G, Emami, Nestle and Dabur, among others, who seem to be losing their FMCG market shares in India. 

Based on the available figures, Patanjali has raked in revenue of INR 2,006crore (USD 328 million), with a net profit of INR 317 crore (USD 52 million) in 2015.

Patanjali Has Witnessed More Than Just Healthy Growth in Revenue and Net Profit

Having already surpassed Jyothy Labs’ net revenue —a competitor with a three decade head start — in under a decade, Patanjali has also closed the gap with its next biggest competitor, Emami Limited, over FY15.

Patanjali is More Than Just a Blip on India’s FMCG Radar


Patanjali is undoubtedly growing faster than any of its peers, consistently besting most of them in both revenue and profit over the past five years.

For the year ended March 2016, Patanjali’s revenues more than doubled, with y-o-y growth surging by almost 81% as reported for the same period in the previous year.


India's Biggest FMCG Players — Revenue (INR crores)
 
FY12
FY13
FY14
FY15
FY16
Patanjali 453.0 849.0 1,191.0 2,006.0 5,000.0
Jyothy
Laboratories
663.0 1,018.7 1,260.2 1,437.8 1,575.4
Emami 1,389.8 1,627.1 1,705.1 2,030.6 2391.5
Marico 2,965.4 3,407.1 3,682.5 4,681.2 4974.4
Dabur 3,757.5 4,349.4 4,870.1 5,431.3 5,750.0
Colgate
Palmolive (India)
2,693.2 3,163.8 3,578.8 3,981.9 4162.3
Unilever 22,116.4 25,810.2 28,019.1 30,805.6 31,987.2
P&G Hygiene
and Health Care
*
1,297.4 1,686.8 2,050.9 2,333.8 NA

Source: MoneyControl.com, Release by Registrar of Companies, Media Reports
Note:  (1) Revenues represents total operating revenues including excise/service tax/other levies and other operating revenues
         (2)Data for P&G Hygiene and Health Care is for the year ended June


India's Biggest FMCG Players — Revenue Growth (%)
 
FY12
FY13
FY14
FY15
FY16
Patanjali NA 87.4% 40.3% 68.4% 149.3%
Jyothy
Laboratories
9.3% 53.7% 23.7% 14.1% 9.6%
Emami 15.6% 17.1% 4.8% 19.1% 17.8%
Marico 26.2% 14.9% 8.1% 27.1% 5.7%
Dabur 14.5% 15.8% 12.0% 11.5% 5.9%
Colgate
Palmolive (India)
17.8% 17.5% 13.1% 11.3% 4.5%
Unilever 12.1% 16.7% 8.6% 9.9% 3.8%
P&G Hygiene
and Health Care
*
29.4% 30.0% 21.6% 13.8% NA

Source: MoneyControl.com, Release by Registrar of Companies, Media Reports
Note:  (1) Revenues represents total operating revenues including excise/service tax/other levies and other operating revenues
         (2)Data for P&G Hygiene and Health Care is for the year ended June


The company has not yet disclosed its profits for FY16. 

If historic performance is anything to go by however, growth will be as strong as it has over the past few years.


India's Biggest FMCG Players — Net Profit Growth (INR crores)
 
FY12
FY13
FY14
FY15
FY16
Patanjali 56.0 91.0 186.0 317.0 NA
Jyothy
Laboratories
83.5 44.0 106.1 142.8 162.4
Emami 154.7 221.7 398.2 471.6 327.7
Marico 336.6 429.1 577.2 545.2 701.9
Dabur 463.2 591.0 672.1 762.6 939.5
Colgate
Palmolive (India)
446.5 496.8 539.9 559.0 576.5
Unilever 2,691.4 3,796.7 3,867.5 4,315.3 4,082.4
P&G Hygiene
and Health Care
*
181.3 203.2 302.0 346.1 NA

Source: MoneyControl.com, Release by Registrar of Companies, Media Reports
Note:  (1) Revenues represents total operating revenues including excise/service tax/other levies and other operating revenues
         (2)Data for P&G Hygiene and Health Care is for the year ended June



India's Biggest FMCG Players — Net Profit Growth (%)
 
FY12
FY13
FY14
FY15
FY16
Patanjali NA 62.5% 104.4% 70.4% NA
Jyothy
Laboratories
4.0% -47.3% 140.9% 34.6% 13.7%
Emami 23.4% 43.3% 79.6% 18.4% -30.5%
Marico 6.7% 27.5% 34.5% -5.6% 28.7%
Dabur -1.7% 27.6% 13.7% 13.5% 23.2%
Colgate
Palmolive (India)
10.9% 11.3% 8.7% 3.5% 3.1%
Unilever 16.7% 41.1% 1.9% 11.6% -5.4%
P&G Hygiene
and Health Care*
20.2% 12.1% 48.6% 14.6% NA

Source: MoneyControl.com, Release by Registrar of Companies, Media Reports
Note:  (1) Revenues represents total operating revenues including excise/service tax/other levies and other operating revenues
         (2)Data for P&G Hygiene and Health Care is for the year ended June


Patanjali met its 2016 revenue target of INR 5,000 crore (USD 764 million), surpassing some of its biggest competitors such as Jyothy Laboratories, Emami, Marico, and Colgate Palmolive (India) in terms of revenues.


Patanjali Plans Ahead to Maintain Growth Momentum

With swift growth in revenue and net profit over the last few years, Patanjali expects to further double its sales this year, from INR 5,000 crore in FY16 (USD 764 million) to INR 10,000 crore (USD 1,497 million) in FY17.

In 2015, Patanjali took advantage of a ban imposed on "Maggi" (a popular Indian brand of instant noodles) and launched their own whole-wheat "Atta Noodles" to fill the market void. During FY17, Patanjali plans to invest over INR 1,000 crore (USD 150 million) in five to six new processing units, and has set aside another INR 150 crore (USD 23 million) for an R&D center.

The company also has plans afoot to improve its online presence, with focus on e-Tailing and better inventory management. Having established itself in northern India, Patanjali now plans to tap markets down south, beginning with a new distribution hub to cater to the growing demand for its products. Patanjali also plans to enter new segments such as animal feed, dairy, and khadi garments, besides bolstering its already popular lineup of products.


Popular Patanjali Products

Ready-To-Eat Food

Cookies, Biscuits, Candies, Ketchup, Pickles, Murabba, Honey, Papad, Snacks, Namkeen, Sweets (Soan Papdi), Cornflakes, Aata Maggi.

Grocery And Staples

Ghee, Mustard Oil, Dals, Pulses, Atta, Besan, Salt, Spices, Rice, Fruit jam, Herbal Tea, among others.

Personal Care

Toothbrush, Toothpaste, Dant Manjan, Kajal, Shaving Cream & Gel, Handwash, Soaps, Face cream, Lip Care, Face Wash, Body Lotions, Foot Care Cream, Body Wash, Hair Oil, Body Ubtan.

Beverages

Juices & Fruit Drinks, Sharbat, Squash.

Healthcare

Health Drinks, Chyawanprash, Nutrition & Supplements, Digestives.

Home Care

Cleaning & Washing (detergents & soaps) , Herbal Gulal.

Others

Books and Media, Medicines

Source: Company Website


Patanjali Garners Greater Market Share Through Attractive Product Pricing

As with all things organic, herbal products used to cost considerably more than the usual fare.

Patanjali changed that for good.

Emphasizing the benefits of natural products and capitalizing on nationalist pride by branding their products as Swadeshi (made in India), Patanjali has quickly captured a sizable market share and a dedicated following. While prevailing market players charged a premium for herbal and ayurvedic products, Patanjali served customers a similar fare at lower prices. The company also enjoyed several tax and duty exemptions from the government, as their products were peddled under the umbrella of several charitable trusts. These exemptions allowed the company to pass on savings to consumers.

India's Biggest FMCG Categories and Competitors

Even if competing brands engage in price wars to sway their market shares, it’s unlikely to dent Patanjani’s now well-rooted brand loyalty. A brand loyalty whose growth was, for the most part, organic in its own right.

It’s worth noting that Patanjali has proliferated mostly by word of mouth.

Patanjali has become one of the fastest growing FMCG companies in India with minimal marketing spends. They’re now investing more in conventional marketing and advertising, airing regular commercials across major Indian channels. The company has also tied up with the retail arms of Reliance (Reliance Fresh) and Future Group (Food Bazaar, Big Bazaar and FBB) to drastically increase the reach and availability of Patanjali products across major outlets in various cities across India.


Competitors are Adopting Strategies to Contend With Patanjali

Patanjali’s competitors have responded for the most part by reviving existing products, improving focus on advertising, and utilizing cash reserves to fund acquisitions.  

Hindustan Unilever Ltd. (HUL) re-positioned itself this year by renewing its brand Lever Ayush in the ayurvedic and herbal products segment. Last year, ITC acquired the personal care brands Savlon and Shower to Shower, while Emami acquired Australia-based personal care company Fravin, as well as a foray into the hair-care segment through its acquisition of Kesh King

Most Indian FMCG firms — flush with cash reserves and unencumbered by debt — are desperate to defend their market shares, fervently looking for M&A opportunities both domestically and internationally. They’re likely to spend heavily in the near future, with many shoring up their advertising spend as well as plans to launch new brands.



India’s FMCG Market Growth to Stay Steady

According to data released by Statista, India’s FMCG market has grown from USD 11.6 billion in 2003 to an estimated USD 33.4 billion in 2015.

Based on the category-wise penetration by players in India’s FMCG space, there exist opportunities for growth in several categories with low penetration levels.

India's FMCG is Poised for Growth

India’s expecting a healthy monsoon in 2016, and that’s always a stimulus for her economy.

A good monsoon usually heralds growth in India's consumer spending as well as demand in rural markets, important factors that are expected to boost growth in India’s FMCG sector.


Patanjali’s Here for the Long Run

Through competitive pricing, value proposition, and a focus on ayurvedic products, Patanjali has established a firm foothold for itself in India’s FMCG space.

Plenty of existing customers have turned brand loyalists and evangelists.

New customers are flocking to the brand not only for its low prices, but also for the holistic benefits they offer.

Built on the backs of such satisfied customers, the Patanjali brand’s plan to expand is likely to see stellar success. Within just five years of its first forays into India’s FMCG space, a hitherto unknown brand is now a label to reckon with, going head-to-head with some of the market’s most established players. As one of its fastest growing FMCG companies right now, Patanjali’ success definitely marks a new chapter in the Indian FMCG space.


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