Once a disrupter, Patanjali faces slowing sales: Study

MUMBAI: Patanjali Ayurved, a disrupter in the FMCG space, is facing a slowdown in consumer offtake. The brainchild of yoga guru Baba Ramdev and CEO Acharya Balkrishna was growing at nearly 100% year-on-year, taking its turnover from around Rs 2,000 crore in 2014 to Rs 10,000 crore in 2017. Last year, however, in the midst of challenging MNC biggies like Colgate-Palmolive and Hindustan Unilever (HUL), Patanjali ran into unfamiliar headwinds.

Ramdev had proclaimed that Patanjali would grow at 100% each year and would eventually overtake HUL. The ground reality appears to be far from the target set by the company. Its revenues in fiscal 2018 were flat, but the bigger worry for Patanjali, according to a Credit Suisse report, is the many categories in which consumer offtake has declined. While the company continues to hold sway over toothpastes with Dant Kanti, and in ghee, incremental gains in these categories are said to have declined.

The drop, said the report, is more profound in categories where Patanjali's products were not differentiated, such as honey and hair care. In categories like chyawanprash, Credit Suisse quoted Nielsen data to say it was showing a decline in offtake for Patanjali. Even in strong categories like toothpaste and hair care, Nielsen data quoted by Credit Suisse indicates that Patanjali's market share growth rates are dropping sharply.

Patanjali Ayurved did not respond to a query from TOI on the report.

The reason behind the decline could be consumer fatigue and FMCG companies like Colgate and HUL investing heavily in natural products to lure back consumers who may have drifted to the rival camp. Competitors like Dabur and Colgate have been defending their turf. While Dabur responded with strategic pricing, HUL launched nationally an ayurvedic range of products. Colgate, too, was forced to come up with an ayurvedic offering.

Spoilt for choices, consumers could have temporarily veered away from Patanjali. At a recently held investors' meet, Dabur India CEO Sunil Duggal said the company is focusing on defending market share in the face of disruptive, aggressive competition. "In the past, perhaps we were a little bit more concerned about defending profit. Now we are completely committed to defending share. Also, our response time to disruptive competition has been accelerated to the maximum possible extent. While we maintained the quality of Dabur Honey, we offered consumers better value in terms of lower price," Duggal told investors.The report said, "The key factors leading to the decline in Patanjali are brand fatigue setting in due to lack of renovation, inability to crack general trade distribution, dilution of the ayurvedic credentials on excessive extension, strong competitive response from large companies with their own ayurvedic offerings, and a sharp drop in advertising spends."

According to the report, Patanjali saw a massive surge in household penetration in calendar year 2017 from 27% to 45%, driven mainly by non-core users who bought into the ayurvedic and naturals positioning of the brand rather than core loyalists. "We are seeing many of these consumers lapsing out as the novelty value and buzz around the brand has gone down and other companies are offering similar products," it said.

"We believe it is a combination of internal factors which are driven by Patanjali's own strategies and external factors driven by competitive response which is causing the slowdown in Patanjali," said the report.