A team from Religare met the management led by Acharya Balkrishna. Some key points from the meeting
Having emerged as a key player fast-moving consumer goods space (FMCG) space, Patanjali Ayurved is all set to continue aggressive expansion with ambitious targets. Patanjali Ayurved's 'natural' positioning has gone down well with the Indian consumers and has emerged as a key strength for the brand. A team from Religare recently met Acharya Balkrishna, Managing Director of Patanjali Ayurved. Here are a few key takeaways from the meeting and quick snapshot of the organisation that is giving sleepless nights to established FMCG majors:
- Revenues: Patanjali generated extraordinary revenues of Rs4,500-5,000 crore in FY15-16. Its revenues were around Rs2,000 crore in the FY14-15, implying that its revenues more than doubled in the last year.
- Revenue Distribution: Ghee, toothpastes and herbal cosmetics are have clocked good revenues. Revenues from ghee stand at Rs700 crore, while toothpastes contribute to Rs300 crore. Herbal cosmetics contribute to Rs250 crore of its revenues.
- Future Targets: It has an ambitious target to grow at 100%-125% on an annual basis with diversifying into international markets if growth in domestic markets is saturated. In order to carry out expansion and modernisation of its facilities, it requires investment of Rs1,000 crore. This amount will be raised largely through debt.
- Future Product Plans: It plans to launch dairy products, baby care products, premium herbal cosmetics and gauva drinks. The management believes that India's personal care market has a higher potential to grow vis-a-vis the food market.
- Research & Development: It has set up Patanjali Research Institute, a new research and development centre. It has around 250 people on its internal R & D and quality check team.
- Pricing Strategy: Its pricing is not driven by competitor's prices. It prices products on a 'Cost + Profit' basis.
- Distribution Network: Patanjali products are distributed through 80 super stockists, 2000-300 distributors, 1200 chitikslayas and 7000 Arogya and Swadeshi kendras. The company now plans to enhance its presence through modern retail format and e-commerce.
- Manufacturing: 90% of its products are manufactured in-house. It has a manufacturing facility in Haridwar. It intends to maintain this in-house manufacturing proportion to ensure product quality
- Key Challenges: Patanjali Ayurved believes raw material availability could fall short in the medium term due shortage in cultivation of herbal ingredients.
The impact of its aggressive expansion on FMCG sector revenues would be keenly tracked by analysts in the Q4FY15-16. The strategies that would be adopted by FMCG majors to protect their market share would be interesting to track. These could be increasing their advertising spends or launching more natural variants in the future. With other spiritual gurus like Sri Sri Ravi Shankar also planning expansion, competition for FMCG majors will continue to rise.
most of the fmcg items (which have fuelled growth) are not from its own factory in hardiwar.