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Patanjali Ayurved SWOT & PESTLE Analysis

Last Updated : 16 May, 2017

OVERVIEW

Name of the Company: Patanjali Ayurved

Business Sector: FMCG

Operating Geography: Asia, India, Global

About the Company: Headquartered in Haridwar, Uttarakhand in India, Patanjali Ayurved is the fastest growing FMCG Company in India. The company was started in 2006, and has about 200000 employees. Patanjali Ayurved was established in 2006 by Acharya Balkrishna & Baba Ramdev.

Revenue: $ 740 million FY ending December 2015

SWOT & PESTLE Analysis

The SWOT analysis for Patanjali Ayurved is presented below:
Strengths
Weaknesses
1. Patanjali has had a strong growth in a short span of time
2. Strong brand ambassador in the form of Baba Ramdev has helped boost the brand’s image
3. Patanjali portrays itself as a healthy ayurvedic option as compared to competitors in FMCG products category
4. Patanjali has a wide array of products giving it a wide visibility in the consumers’ mind
5. Patanjali relies on excellent word of mouth buzz marketing and nationwide promotional campaigns
6. Patanjali uses penetration pricing to fight competition and capture a target market from all segments
7. Patanjali has a strong distribution network helping it to gain economy of scales
8. Patanjali products are extensively sold on e-commerce platforms, giving it an all-round accessibility
1. Too much reliance on Baba Ramdev as a Brand face can be dangerous as any controversy with Baba Ramdev can directly bring Patanjali in controversy as well.
2. Lesser manufacturing units don’t fit in with the brand’s aim of achieving high revenues
3. Patanjali has launched too many products in a short span of time, thus it not being able to consolidate the product positions in the market
4. Revenues are dependent on 5-6 main products which is not sustainable in the long term
5. Penetration pricing is not a long term sustainable strategy in order to earn profits
Opportunities
Threats
1. Patanjali has a huge potential to expand in the rural market
2. Various tie-ups like that with Future group will help Patanjali to more successful
3. Diversifying to other retail segments can help Patanjali in having an all-round Indian presence in the industry
4. Patanjali has the potential to increase its global market as Ayurveda is increasingly gaining prominence worldwide
1. FCMG competitors coming up with Ayurvedic product variants
2. Poor farming season can heavily affect Patanjali business as it is dependent on natural ingredients for its products
3. A negative word of mouth on social media can prove detrimental to the brand sales
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Strengths

1. Patanjali has had a strong growth in a short span of time- Patanjali has grown at an increasingly rapid pace. While, in the FY ended 2012-2013, it had revenues of 840 crores, it registered revenues of INR 5000 crores in 2015-16 growing at 150% over the previous year. Such strong revenues in a short span of time helps the brand to gain a foothold in the established FMCG business.[1]

2. Strong brand ambassador in the form of Baba Ramdev has helped boost the brand’s image- Baba Ramdev, a Yoga Guru has garnered immense goodwill and massive fan following over the years. Thus, a brand promoted by him, which is perceived as organically made also, enjoys a massive appeal to the masses. [2]

3. Patanjali portrays itself as a healthy ayurvedic option as compared to competitors in FMCG products category- Patanjali procures its ingredients naturally and through Farming, thus providing very organic products to customers. Thus, with the growing rise of Ayurveda, the Ayurveda products have also benefitted strongly.

4. Patanjali has a wide array of products giving it a wide visibility in the consumers’ mind. It has more than 800 products in various segments including Natural Health Care, Natural Food Products, Ayurvedic Medicine, Herbal Home Care and Natural Personal Care. So many product segments provide it exposure to a wide range of potential customers who might purchase Patanjali’s other products after having experienced one product. [3]

5. Patanjali relies on excellent word of mouth buzz marketing and nationwide promotional campaigns- Patanjali relies on word of mouth marketing and Brand Loyalty of its products to spread a positive word about the brand. It also has a nationwide marketing campaign, which is led by Baba Ramdev himself. Patanjali doubles its ad insertion in TV channels, thereby creating an MNC style of advertising. This two way marketing has helped Patanjali go a long way in making the brand it is today. [4]

6. Patanjali uses penetration pricing to fight competition and capture a target market from all segments- To gain a foothold, Patanjali has priced its products at 15-30 % lower than its competitors. Such a pricing, known as Penetration pricing helps to attract customers, and there on through its quality, can make these customers as Patanjali loyal. [5]

7. Patanjali has a strong distribution network helping it to gain economy of scales-Patanjali has 15,000 stores across India. It further has invested 1000 crores in increasing this number to have a retail presence through 4,000 distributors, more than 10,000 company-owned outlets, 100 Patanjali-branded stores and supermarkets, the company said in a statement recently. [6]

8. Patanjali products are extensively sold on e-commerce platforms, giving it an all-round accessibility- Patanjali products are not only sold in brick and mortar stores, but also extensively sold on online space. Thus, even if a person doesn’t have access to a Patanjali store nearby, he/she can purchase it online, also giving the option of convenience of purchasing online. This option helps the brand in not losing on untapped market.

Weaknesses

1. Too much reliance on Baba Ramdev as a Brand face can be dangerous as any controversy with Baba Ramdev can directly bring Patanjali in controversy as well. – Baba Ramdev has been known to make controversial remarks and taking a stance against certain political parties. Because, the brand association of Patanjali is high with Baba Ramdev, people would assume that even Patanjali as a brand has allegiances to political parties. This may make them stay away from the brand.

2. Patanjali has launched too many products in a short span of time, thus it not being able to consolidate the product positions in the market- Patanjali has launched more than 800 products in a variety of segments, thus the brand has not been able to grab a big chunk of most of these segments. Thus, it has not been able to consolidate its position, thereby negating the advantage of so many product segments.

3. Revenues are dependent on 5-6 main products which is not sustainable in the long term- A problem for Patanjali is that majority of its revenues are heavily dependent on 5-6 main products such as Cow Ghee, Dant Kanti, Kesh Kanti, Noodles and Aloe Vera gel and juice. This shifts the brands’ focus from all products to its cash cows, thus affecting its quality. [7]

4. Penetration pricing is not a long term sustainable strategy in order to earn profits- As Patanjali products are priced 15-30% cheaper than its competitors, it has a low margin on profits. This strategy is not sustainable for a long term vision, as it faces competitors with deep pockets, and competitors can match Patanjali likewise. [8]

Opportunities

1. Patanjali has a huge potential to expand in the rural market- Patanjali products are perceived to be organic, and thus has a huge potential market in the rural India. This will help Patanjali to have an all-round India presence, as the rural market is immensely big, and sustainable if targeted properly.

2. Various tie-ups like that with Future group will help Patanjali to more successful- Patanjali has successfully made its entry in mainstream retail through the Future group. Thus, its products will be available throughout the Big Bazaar outlets in India. Patanjali products are also available in Reliance Retail stores and such more tie-ups have the potential to consolidate Patanjali’s position in the industry. [9]

3. Diversifying to other retail segments can help Patanjali in having an all-round Indian presence in the industry- Patanjali can expand its operations in clothing and accessories, like how Reliance and Aditya Birla group have done. It can also produce Khadi products, thereby modernizing the industry as well. Such diversification will make Patanjali a household name. [10]

4. Patanjali has the potential to increase its Global market as Ayurveda is increasingly gaining prominence worldwide- Recently, there has been a tremendous publicity of Ayurveda and Yoga in the globe. Patanjali can stake to increase its operation globally in a strategic manner on this basis.

Threats

1. FCMG Competitors coming up with Ayurvedic product variants- Patanjali competitors like behemoth HUL have launched 20 products-from toothpaste and skin creams to soaps and shampoos under its ayurvedic brand ‘Ayush’, to directly compete Patanjali. Also brands like Dabur, Emami and Himalaya are going to be a handy threat to Patanjali’s recent success.[11]

2. Poor farming season can heavily affect Patanjali business as it is dependent on natural ingredients for its products- Patanjali relies on the farming reaps for its ingredients, thus much of its produce is at the mercy of the monsoon season. If, there is an unfavourable monsoon season, the input prices of materials will increase, thereby, increasing the final prices or decreasing the profits.

3. A Negative word of mouth on social media can prove detrimental to the brand sales- Social media has been a boon for the brands in this age, but so has it been a bane. Any recent happenings are trended online, and thus also increase the chance for people to spread hoaxes. Thus, a hoax may prove detrimental to the brand, and also any controversy is subject to widespread and instant criticism, thereby tampering the brand’s image.

Patanjali SWOT analysis has been conducted by Deep Shah and reviewed by senior analysts from Barakaat Consulting.

References

[1]-Business Standard- http://www.business-standard.com/article/companies/baba-ramdev-s-patanjali-aims-to-double-its-revenue-to-rs-10-000-cr-in-2016-17-116042700061_1.html

[2]-Economic Times- http://economictimes.indiatimes.com/slideshows/biz-entrepreneurship/six-lessons-that-patanjali-teaches-indias-fmcg-sector/a-strong-brand-ambassador/slideshow/51874417.cms

[3]-Patanjali Ayurved- https://www.patanjaliayurved.net/

[4]-Livemint- http://www.livemint.com/Companies/hLEBBx17cFY5rPjTjmIP9O/The-Patanjali-story.html

[5]- The Hindu-http://www.thehindu.com/news/cities/mumbai/business/fastmoving-ayurvedic-goods/article8187124.ece

[6]- The Hindu-https://www.google.com/url?hl=en&q=http://www.thehindu.com/news/national/patanjali-to-invest-rs-1000-cr-on-expansion-ramdev/article7929713.ece&source=gmail&ust=1492872192108000&usg=AFQjCNGbW0GRZhj3roUJsGRbBU3Pt2gQIQ

[7]- http://www.indiatvnews.com/news/india-top-5-patanjali-products-behind-company-s-massive-revenue-growth-326163

[8]-The Hindu- http://www.thehindu.com/news/cities/mumbai/business/fastmoving-ayurvedic-goods/article8187124.ece

[9]-Digital Vidya- http://www.digitalvidya.com/blog/patanjali-becomes-household-fmcg-product-after-successful-on-page-optimization/

[10]-Economic Times- http://economictimes.indiatimes.com/industry/cons-products/garments-/-textiles/shuddh-desi-swadeshi-jeans-from-patanjali-coming-soon/articleshow/54277805.cms

[11] Economic Times-http://economictimes.indiatimes.com/industry/services/retail/coming-soon-a-sequel-of-wheel-vs-nirma-behemoth-vs-baba/articleshow/56227190.cms

Business Standard-http://www.business-standard.com/article/companies/competition-from-patanjali-prompts-fmcgs-to-hit-back-116011800008_1.html

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The PESTLE analysis for Patanjali Ayurved will be updated shortly.

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