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Patanjali Ayurved Limited: A Local Player Posing Threat to Multinationals*

CASE STUDY, STRATEGY
ET Cases - GSMC, 14 Pages
AUTHOR(S) : Neetu Yadav - Assistant Professor, Jyoti Tikoria - Assistant Professor - Birla Institute of Technology & Science, Pilani

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Patanjali Ayurved Limited: A Local Player Posing Threat to Multinationals

 

‘Ayurveda’ (life-knowledge) has been an ancient healing system with its historical roots in Indian sub-continent. Ancient India relied heavily on herbal ingredients, minerals and metal components for personal care and medicinal therapies. However, with the dawn of globalization and westernization, numerous Multinational Corporations (MNCs) entered the Indian Fast Moving Consumer Goods (FMCG) space with their varied innovative products for health and personal care. These MNCs such as Hindustan Unilever Ltd. (HUL), Marico, Procter & Gamble, Nestle, Colgate-Palmolive, etc., were present in India for more than quarter of a century. However, late in 2015, these incumbents felt a threat from a local ayurveda player named Patanjali Ayurved which was started in 1997 as a small pharmacy in Uttaranchal by famous yoga guru Baba Ramdev (Ramdev) and an ayurveda expert Acharya Balkrishna (Balkrishna) and became Patanajli Ayurved Limited (PAL), a private limited company, in 2006. Though Ramdev had no stake in the company, Balkrishna owned 92% stake in the firm.

With its presence in health and personal care to organic edible products, Patanjali has emerged as a game changer in Indian consumer goods industry. In merely one decade of operations, it is all set to beat many well-established brands like Colgate, ITC, Godrej Consumer Products, Emami and Marico. After visiting Patanjali’s manufacturing facilities in Haridwar, an analyst from Edelweiss Research (one of the leading diversified financial services companies) remarked, “Imagine Patanjali at INR5,000 crores in 10 years and HUL with its decades of work in India at 35,000 crores. Realize how fast Patanjali has grown. It is a real game changer”. Could it be possible due to citizens’ shift of interest to herbal and organic products or have the company’s differentiation strategies supported it? With an eye on hitting sales of INR5,000 crore ($740 million) by the end of FY 2016, how did Patanjali become a tough contender in the consumer goods space? This case reflects on the success story and winning formula of Patanjali that is posing a threat to well-established MNCs.

Indian FMCG Industry

Indian FMCG industry constitutes of staples (pulses, cereals, dairy, edible oil and fats), packaged food, beverages, consumer health, home and personal care products. Historically, the industry has grown at a Compound Annual Growth Rate (CAGR) of 12%3 and the fastest growing sub-categories are packaged food, edible oil and selected segments of home and personal care products...........

Major Global Players

HUL

Hindustan Vanaspati Manufacturing Company was established as the first Indian subsidiary of Unilever in 1931. Later, Lever Brothers India Limited was established in 1933 and United Traders Limited in 1935. In 1956, these three companies merged to form Hindustan Unilever Ltd. (HUL)...........

Colgate-Palmolive

Colgate, one of the most trusted and loved oral-care brands in India with its presence of more than 75 years is spreading smiles in India. Over generations, it has become synonymous with toothpaste in India.........

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Major Indian Players

ITC

ITC has rapidly scaled up its presence in FMCG businesses with its diversified fifty popular brands through branded packaged foods, lifestyle retailing, personal care products and safety matches...............

Dabur India

A small Calcutta pharmacy shop with a vision to provide ayurvedic health care products, Dabur became a full-fledged company as Dabur India Pvt. Ltd. in 1936. It has presence across the entire FMCG range of products with distinct business portfolio of personal care...............

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Patanjali: Company Background

The holy city of Haridwar in Uttaranchal, on the banks of river Ganga witnessed the evolution of one of the fastest growing FMCG companies which started as a small pharmacy shop in 1997. On January 13th 2006, yoga guru Ramdev with his close associate Balkrishna incorporated it as a Private Limited Company...............

Patanjali: A Game Changer

Ramdev is the brand ambassador and real face of Patanjali. Having gained huge fan following through live yoga camps, Ramdev’s Patanjali is all set to be a billion dollar sales turnover company. India Infoline Finance Limited (IIFL) estimates that in FY 2015-16, Patanjali may achieve revenue of INR5,000 crore.........

Winning Formula

Huge fan following of Ramdev from his yoga camps enabled Patanjali to create its large customer base. A remarkable growth of 150% in turnover of more than INR5,000 crore in year 2015-16 from about INR 2,000 crore in the previous year with an eye to target 250% revenue growth in FY 2016 is hurting dominant FMCG foreign players...............

Way Ahead

A local player Patanajli, with staggering CAGR in just four years in a competition stiff Indian FMCG industry created a buzz in industry, media, academia and management classes. Natural and organic products, wider presence in product categories, high quality with ultra-competitive prices, aggressive advertising and agenda of nationalism collectively built the winning formula of Patanjali...........

Assignment Questions

. Discuss the changes in Indian FMCG industry in the last one decade. How Patanjali has changed the game?
II. What do you understand by sustained competitive advantage? Analyze the competitive advantage of Patanjali and will it be sustainable?
III. ...............

Exhibits

Exhibit I : Growth Expected to Accelerate Between 2015-2025

Exhibit II: Sales Turnover of FMCG Companies (in INR Crore)

Teaching Note Preview

Patanjali Ayurved Limited: A Local Player Posing Threat to Multinationals

 

Synopsis

The case study enables discussion about creating successful business proposition in short span of time in a hyper competitive industry by creating uncontested market space and making competition irrelevant. In a short span of five years, Patanjali Ayurveda Limited (Patanjali), home-grown manufacturer of natural and organic products, overruled the Indian FMCG space with product efficacy, ultra-competitive pricing, varied product categories, and strong brand ambassador and brand believers. The case enables students to learn differentiation strategies to create one’s own space in price sensitive and hyper competitive market space. The discussion highlights – how phenomenal growth can be achieved and sustained in over-crowded industry. How marketing strategy catalyzes reach to mass market in short span of time? The case discussion bolsters the arguments that phenomenal growth rate can be a reality in price sensitive industry by creating one’s own market space, making competition irrelevant and sustaining competitive advantage.

Prerequisite Conceptual Understanding/Before the Classroom Discussion

The case discussion covers important theoretical concepts of strategic management and marketing management. The students are encouraged to read the following mandatorily as that would be helpful to carry out meaningful discussion and adequate analysis of this case study:

  • • Anita M. Mcgahan, “How Industries Change”, Harvard Business Review, 2004, 82(10):87-94.
  • • Booms, Bernard H.; Bitner, Mary Jo, “Marketing Strategies and Organization Structures for Service Firms”, Marketing of Services. American Marketing Association, 1980: 47–51.
  • • Jay Barney, “Firm Resources and Sustained Competitive Advantage,” Journal of Management 17, no. 1 (March 1991): 99–120.
  • • Kim, W. Chan, and Renée Mauborgne. “Blue Ocean Strategy”, Harvard Business Review, October 2004: 76-84.
  • • Michael E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York: 1980.
  • • Pankaj Ghemawat, “Sustaining superior performance”, Strategy and the Business Landscape, 2nd Edition, Pearson Publication, 2007.
  • • Thomas L. Wheelen and J. David Hunger,” Internal scanning: Organizational Analysis”, Concepts In Strategic Management and Business Policy, 13th Edition, Pearson Publication, 2016: pp. 166-175.

 

Case Positioning and Setting

This case study is developed for post-graduate management programs such as MBA, Executive MBA, and Executive Development Programs for the following specialized courses and topics:

Strategic Management: To teach topics such as ‘Blue ocean strategy’, ‘Sustained competitive advantage’, ‘Industry Analysis’, ‘Competitive strategy’, ‘Business-level strategy’
Marketing Management: To teach topics such as ‘Marketing Strategy’, ‘Sustainable business practices’

Given the approach of this case towards business-level strategies and marketing strategy, instructor may exploit interdisciplinary aspects of the case as per the requirement of specialized courses.

Assignment Questions

I. Discuss the changes in Indian FMCG industry in the last one decade. How Patanjali has changed the game?
II. What do you understand by sustained competitive advantage? Analyze the competitive advantage of Patanjali and will it be sustainable?
III..............

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Product code: STG-1-0041, STG-1-0041A

Abstract

This case presents the unique story of Patanjali Ayurved Ltd. (Patanjali), which was started in 1997 as a small pharmacy in Uttaranchal by famous yoga guru Baba Ramdev and an ayurveda expert Acharya Balkrishna. It has evolved as a game-changer in Indian consumer goods industry with its ayurvedic, herbal and organic range of groceries, medicines, home and personal care items selling via its 1,200 Patanjali Chikitsalayas (operated in franchise mode), 2,500 Aarogya Kendras (operated in franchise mode), 7,000 stores in villages and 5,600 mobile marketing vehicles, clocking a turnover of INR5,000 crore in the FY 2015-16. It is all set to beat well-established FMCG players like HUL, Dabur, Godrej Consumer Products, Emami and Marico. This case reflects on the success story of Patanjali highlighting the marketing and business-level strategies that enabled sustainable competitive advantage and started posing a threat to well-established MNCs. This case reflects on how Patanjali created its own space in a highly crowded Indian FMCG space. Will it be able to sustain phenomenal growth and emerge as the market leader with revenues of INR10,000 crore by 2017 and INR20,000 crore by 2020?



Pedagogical Objectives

  • To develop an understanding of how a local player could become a threat to well-established MNCs.
  • To understand how to beat competition in a price sensitive industry as FMCG.
  • To enable students to learn about building successful marketing strategy to capture mass market.
  • To understand how to leverage core competence to gain sustainable competitive advantage.

Case Positioning and Setting

This case study is developed for post-graduate management programs such as MBA, Executive MBA and also Executive Development Programs for the following specialized courses and topics:

  • Strategic Management: To teach topics such as Blue ocean strategy, Sustained competitive advantage, Industry Analysis, Competitive strategy and Business-level strategy
  • Marketing Management: To teach topics such as Marketing Strategy and Sustainable business practices
Given the approach of this case towards business-level strategies and marketing strategy, instructor may exploit interdisciplinary aspects of the case as per the requirement of specialized courses.


* GSMC 2017, IIM Raipur

This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
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