Patanjali alters the Indian FMCG market, challenges MNCs

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Baba Ramdev’s Patanjali is one of the fastest growing brands in India. The label, which claims to use only natural ingredients in all its products, has grown into an INR 5,000cr company in less than 10 years. Patanjali aims to generate INR 10,000cr in the financial year 2016-2017. The brand sells products of various kinds, ranging from personal care to edible oil.

The rising popularity of Patanjali has alerted market leaders like Nestle and Colgate. Patanjali’s herbal toothpaste Dant Kanti has succeeded in acquiring a significant share in the naturals/herbal segment which accounts for 13-14% of the toothpaste market. Through its toothpaste brand, the Ramdev Baba-led company yielded INR 450cr in financial year 2015-2016. Now, Colgate, which holds 55% share in the Indian toothpaste market, has jumped into the herbal segment with its new product called Colgate Cibaca Vedshakti. The toothpaste costs only INR 50 for 175gm pack. This price is 30% lesser than Danti Kanti’s. Colgate is not new to the naturals segment. It holds nearly 7% share in this segment with toothpastes like Colgate Miswak, Colgate active salt neem, etc. However, this is the first time Colgate has introduced a product with an Indian name.

Should Colgate and other market leaders worry about the rising popularity of Patanjali?

Not really. The oral care market is expanding, opening doors to many new segments like whitening toothpaste, sensitivity toothpaste, herbal toothpaste, etc.

Colgate sells its products through over 5mn stores, while Patanjali so far could reach only 2 lakh retail outlets. In the previous quarter, Colgate reacquired its market share to some extent. This means Colgate users are not really ditching the brand. Other MNCs are also coming up with innovative and attractive offerings.

Demand for Patanjali products are too high but supply is too low. While HUL’s and Nestle’s fill rates are somewhere between 85% and 90%, Patanjali’s is low at 40%-50%. To meet the demands, the company is planning to establish 6 processing factories and one research space by investing INR 1,150cr in the current financial year. Patanjali will also add 8,00,000sq ft of area to its existing warehouse space. The brand has already leased warehouse space of 1.2mnsq ft.

“Patanjali’s entry has brought 3 benefits to the market- Price Competition, Market Expansion, and Product Innovation”

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But what’s behind Patanjali’s rapid growth?

There are many old Ayurvedic/ Naturals brands in the Indian market, for example- Kottakal Arya Vaidya Sala. But Patanjali managed to gain more popularity than these brands, eating a small chunk of other market leaders.

This is because:

Patanjali targeted 2 things:

  • Price sensitivity- (Indian customers are price sensitive. Understanding this, Patanjali launched very low-priced products.)
  • Indians’ preference for herbal products

Patanjali used 2 tricks to grow:

  • Heavy advertisements
  • Tapping new markets- (some low-income people still use dantan/churan instead of toothpaste. Patanjali introduced toothpastes of similar tastes to attract this untapped segment.

Patanjali’s success proves that competition in a market never comes to rest. There is always scope for innovation, expansion and inception of newer segments.