Patanjali BOS Report Group 3 Condor PDF

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Creating a Blue Ocean Move for Patanjali

Project Report

Submitted By:

Submitted To:

Parang Mehta

Dr. Mayank Dhaundiyal

Nehal Kapoor Vedantam Gupta Ishani Dubey Tiirth Jhamb

Patanjali Ayurveda Patanjali Ayurved was co - founded by Acharya Balkrishna and Baba Ramdev to propagate the science of Ayurveda. Today, some of the ayurvedic products produced by PAL are a strong synergy between ancient wisdom and modern technology. Even though Acharya Balkrishna is the primary stakeholder of the company (92% stake), the main driving force behind Patanjali Ayurved is the charisma and philosophy of Baba Ramdev, a yoga guru and an ascetic of Indian origin. It all started in the year 1995 when Baba Ramdev established Divya Yog Mandir Trust with the help of Acharya Balkrishna and Acharya Karamveer under the guidance of Swami Shankardev ji. The trust mission was to put Yoga

and Ayurved on the world map.

With the aim of popularizing Yoga , Baba Ramdev started teaching Yoga through small camps and shivirs. The breakthrough moment came in the year 2002 when Sanskar, a spiritual channel in Hindi, signed Baba Ramdev for its morning Yoga program. The program was a hit. N ext year in 2003, the rival channel of Sanskar, Aastha signed up Baba Ramdev for its 5 am Yoga

program titled “Divya Yog ”. This program made Baba

Ramdev a household name across the country. This

also gave a big boost to Baba

Ramdev’s Yog a Shivirs/Camps(Ramdev, Wikipedia) A typical Yoga Shivir of Baba Ramdev comprises of Yoga and Pranayam postures with Baba Ramdev explaining the benefits of each of those postures, the benefits of embracing Ayurved, the testimonials of people who got cured from terminal illnesses by practicing yoga and pranayama, singing patriotic songs and above all Baba Ramdev explaining ill effects of the MNCs and their products on the Indian economy and how they are looting India and exploiting Indian populace. It is estimated that around 70 million people have been touched by Baba Ramdev through his Yoga

Shivirs and experts assume this number to rise to 200

million, going forward. The live telecast of Yoga Shivirs was instrumental in building the Brand Patanjali, Yoga, Ayurveda and above all Baba Ramdev. Both Baba Ramdev and Acharya Balkrishna were working with a single minded focus to restore the original place of Yoga and Ayurved as described in the Indian scriptures and

ethos. In 2006, Baba

Ramdev and Acharya Balkrishna established “Patanjali Yogpeeth Trust”. A landmark organization fostering the cause of Yoga, Pranayam and Ayurved. This further strengthened the brand Patanjali. Also Patanjali Yogpeeth Trust is considered to be an organization which laid the foundation for Patanjali Ayurved Ltd to grow at a rapid pace. The basic objective of Patanjali Yogpeeth Trust is to spread the awareness of Yoga, help the economically weak section of society by providing them free treatment of diseases and to perform cutting edge Research and Development in Ayurved. Patanjali Yogpeeth Trust is located on DelhiHaridwar highway in a sprawling campus of 100 acres. It employs around 200 doctors and has a huge treatment facility through which ayurvedic treatment is provided to the economically weaker sections of the society. It is now a multinational organization with its branch offices located in countries like US, UK, Canada, Nepal etc. Through Patanjali Yogpeeth Trust Baba Ramdev has touched millions of lives till date. Baba Ramdev and Acharya Balkrishna have established number of institutions since they established Divya Mandir Yog Trust. These institutions have also contributed to the success of Patanjali Ayurved Ltd by providing raw material, manpower, technological knowhow etc. Some of these institutions include: (a) Patanjali Yogpeeth Trust (b) Patanjali Ayurved College (c) Patanjali Chikitsalaya (d) Yoga Gram (e) Goshala (f) Patanjali Herbal Botanical Garden (g) Organic Agriculture Farm (h) Patanjali Food and Herbal Park Ltd.

In 2006 Baba Ramdev and Acharya Balkrishna established Patanjali Ayurved to provide products and other ayurvedic medicines to its patients. In 2012 the duo decided to unlock the potential of Patanjali Ayurved by expanding it into the mainstream Indian retail sector.

“Baba Ramdev and Acharya Bal Krishna knew that they have created a captive market with their efforts since last one and a half decade, which values health, yoga, pranayama and above all brand Baba Ramdev. This captive market is health conscious, looks out for affordable products, believes in the philosophy of swadeshi (home grown) and above all considers Baba Ramdev as their ideal. When Patanjali Ayurveda launched its products in the Indian retail sector, this captive market was among the first to buy and use its products. This captive market developed instant loyalty to Brand Patanjali. The role of this captive market was not only limited to buying, using and spreading good word of mouth about PAL products but they also became partners with PAL by becoming their franchisees. In the initial days majority of the franchisees established by PAL came from this captive market. These franchisees along with the distribution of products also advertised and promoted PAL products in their respective regions, hence establishing brand Patanjali firmly into the mind of local populace. When compared to an FMCG multinational which uses

a

traditional distribution channel, PAL followed a different distribution strategy, effective in catapulting it to its present position. Today Patanjali’s turnover stands close to USD 1 billion (Rs 5,000 cr, FY ending 2016) with a mammoth goal of reaching close to USD 1.5 billion (Rs 10,000cr by FY ending 2017) and

close to USD 3 billion (Rs 20,000 cr by FY

ending 2020). Patanjali Ayurved’s value creation and delivery strategy encompassing both the Strategic and Tactical Marketing is instrumental in making it a force to reckon with in the Indian FMCG industry1.”

1 https://www.researchgate.net/publication/305481474_Demystifying_the_Brand_Patanjali__A_Case_on_Growth_Strategies_of_Patanjali_Ayurved_Ltd

FMCG Industry in India “The Indian FMCG sector contributes majorly to the Indian economy. Being the fourth largest sector of the Indian economy is a source of employment to 3 million people and accounts for 5% of the total employment in India. FMCG products are basic necessitates and are consumer by all classes of the society and all social classes and people from all strata consume these products. The FMCG market is highly competitive in India as there are many international companies, domestic companies and many unorganized sectors which sell unbranded and unpackaged products. 50% of the revenue for FMCG companies come from selling products worth 10 rupees or less. Urban areas in the country are responsible for 66% FMCG product consumption and 33% by rural areas. FMCG products have less shelf life and are usually sold in packaged form. Mainly, the FMCG sector can be divided into personal care, household care, branded and packaged foods and beverages and tobacco. The FMCG market in India has expanded radically from $31.6 billion in the year 2011-12 to about $52.8 billion in the year 2017-18. the industry is expected to grow up to $103.7 billion by the year 2020. With the increase in rural and urban income, the sector grew by 16.5% in June 2018 with the support of balanced inflation.2 The rural segment in India has a revenue share of only 4% in FMCG products. The urban segment has a majority share with 55% of the revenue that has been witnessed in the FMCG sector. The market had a revenue of $52.8 billion in the financial year 2018 and it is expected to reach up to $103.7 billion by FY 2020. The increase in brand awareness and access of FMCG products in rural and urban areas is changing the life style of consumers. The increase in the disposable income of individuals in rural and urban areas is beneficial for the FMCG sector as many companies are primarily targeting the BOP markets. The BOP market consists of 60% of the consumers but due to the lack of income, the revenue share was extremely less.” 2 https://www.ibef.org/industry/Fmcg-presentation

Figure 1: FMCG Industry in India

The FMCG sector has heavily been affected with the increase in the use of technology and the connectivity across the rural villages and small towns. Due to the technological advancements in these towns and villages, brand awareness has increased. The willingness to consume these products and ability to purchase these products is increasing due to disposable form of income in these geographies. Due to mobile phones, TVs and radios, even before a product enters the market, consumers have a sense about the product as advertising is at large on these platforms. Traditional advertising strategies like billboards, newspapers, word of mouth have also been helpful to these FMCG companies., word of mouth have also been helpful to these FMCG companies.3

3 https://www.exchange4media.com/marketing-news/brands-see-big-markets-in-small-towns-89568.html

Competitive Landscape

Blue Ocean Strategy

Current industry players such as HUL, Dabur, Emami, Marico and Godrej are offering products in the low to medium range where the buyer value is on the lower side. The reason for this low buyer value is that although the products are of decent quality the customers are using them due to unavailability of cheaper and better alternatives. All of these above mentioned brands have product offerings of lower and medium segment. For Patanjali to take the blue ocean shift, they need to focus on adding more buyer value while keeping their costs and hence prices under control, which is exactly what Patanjali’s current product portfolio depicts. They have positioned high quality ayurvedic and swadeshi products at much lower prices capturing a huge chunk of market share. Patanjali’s product portfolio currently is much more diverse as compared to any other FMCG player in India. We have used several blue ocean strategy tools to create a new blue ocean path for Patanjali.

To – Be Strategy Canvas

This is the target or to-be strategy canvas for Patanjali. Current industry players are competing on the following factors: Price, Quality, Product Range, and Availability. The current industry strategy canvas is depicted by the red line and the proposed blue ocean strategy canvas is depicted by the blue line. We have proposed that Patanjali should add value to its customers by enhancing the shopping experience by deploying Ayurveda specialists in their stores who would do a free check up and recommend products to the walk-in customers which would make the shopping experience much richer and exciting for the customers. The second parameter would be introduction of subscription service of Patanjali’s products via a Mobile App and traditional methods of subscription (Newspaper Subscription Model) where the sales representatives of Patanjali would disseminate their subscription forms door to door because Patanjali products are used by all family members and could help Patanjali in retaining customers and facilitate convenience in re-ordering.

Buyer Utility Map

This buyer utility map shows the current red ocean offering by the industry players which is simplicity in the purchase process. This is essentially the fact that just because these companies are established since a long time, they have strong distribution channels leading to their products being available easily and therefore the purchasing process is simple. Our proposed blue ocean offering is that we want to reduce risk in product usage by increasing our quality standards and attracting customers due to the value addition by using ayurvedic ingredients in our product. This makes the customer’s buying decision less risky since the customer is assured about the quality of our products. As mentioned earlier, deploying the Ayurveda specialists would add the fun and exciting element in the purchasing process and the subscription model would make the repurchasing process much more convenient and efficient.

PMS Framework

This is the Pioneer - Migrator – Settler Map for Patanjali. The current offerings of Patanjali can be categorised under this framework as: Settlers (Value Limiting) Products: These are the body & personal care product category comprising of body wash, soaps, lotions, face wash etc. These are me too products and we would suggest to not radically improve them since cost is a big constraint. Another addition to this category would be the launch of their QSR restaurant chain serving Sattvik Food which would be further adding value to the customers. Migrators (Value Improving) Products: These are the healthy food category products which comprise of ghee, dairy products, biscuits, juices etc. These products add value since they are made of purest of the ingredients and due to the influence of Baba Ramdev, these products add much more value to the customers. Another addition to this product category would be the subscription service discussed before.

Pioneers (Value Innovating) Products: These are the ayurvedic medicine category products which are the best in class and the flagship product of Patanjali although their sales amount to a meagre 4% of the whole company, this product category is a winner. The products in this category comprise of asava, syrups, pishti, churan etc. We propose to innovate more in this category and aim to move the healthy food category from Migrator to Pioneer due to the high growth and massive opportunity in this area and we feel that Patanjali would gain much more competitive advantage in this product category.

ERRC Grid

The Eliminate-Reduce-Raise-Create (ERRC) grid is a matrix tool that allows an organisation to focus on both eliminating and reducing along with raising and creating all while unlocking blue ocean. It helps formulating a new value curve by both differentiating and working with lower costs to decrease the value cost trade off. It is an essential way to scrutinise factors that the industry competes on.

Eliminate: For Patanjali, we will be eliminate below par suppliers and will be reducing the product range and costs. We will raise the quality and brand awareness while creating subscription service and B2B offerings.

Raise:

For Patanjali to be able to target the three tiers of non customers, it should raise quality and increase brand awareness by creating trends using social media. While Patanjali is a very loved brand in the eyes of many, there are various instances where Patanjali’s quality has been questioned. According to an RTI query in 2017, Patanjali’s alma juice and Shivlingi Beej did not meet quality standards and were reported to contain 31.68% of foreign mater with less than prescribed levels of ph value which could lead to a lot of medical complications after prolonged use. Approximately 40% of the ayurveda products had poor quality. Raising quality will tackle a lot of issues. Firstly, retention of customers will increase and thus the churn rate will decrease. Furthermore, with better quality standards, it will be able to lure the tier 1 non customers to join the brand community of a respectable brand at low cost. It will also be easier to lure the quality conscious as well as brand savvy customer segment which is our tier 2. To enter into an international market, and to cater to an international audience, it is essential that we maintain high quality standards.

Patanjali will only be able to reach the non customer tiers if the brand awareness is increased. To add on to the healthy and organic trend by curating social media buzz around our satvik trend using Patanjali products can be a suggestion. To be able to maintain the current brand image of Baba Ramdev as an ambassador with his great following and raise awareness through different social media platforms using influencers can be a strategy that they should follow.

Reduce:

As of now, Patanjali has a total of more than 900 products which include 45 types of cosmetic products and 30 types of food products. It has over 1000 Stock keeping units. While there are various product ranges for which the demand is extremely high, there also are ranges that the Indian customer segment are not willing to adapt to. For example, the Indian market is not accustomed to breakfast cereals as a source of meal. It is where Kellogs failed to be profitable in India and Patanjali has created breakfast cereal range. While Patanjali could lure the international market towards this range, it is hard for non Indians to adjust to the tastes and textures of indian grain cereal. Such ranges should be reduced and hence these can ultimately reduce costs as well. Even though Patanjali is known to have very low selling, administrative as well as general costs, which is upto 2.5% of revenue. It is already doing better and lowering costs than it’s competitors. However reducing costs is always beneficial for a firm and to target the non customers effectively and efficiently, lower costs will help allocate budget elsewhere as the marketing expenditure is going to drastically increase.

Create: For the convenience of the customers, Patanjali can provide a subscription service. Through this service, the customers can physically tick all the orders of Patanjali products from various ranges. This plan will be realised by connecting the customers directly to their nearest Patanjali stores as well as supermarkets that sell Patanjali products. Patanjali stores will provide special delivery of all items that are subscribed by the user on a timely basis. This could be bi-weekly or monthly or once in two months. This can be extremely beneficial for the firm as psychology suggests that once we see something physically and estimate an amount that is required to be used, we tend to order more products and large quantities.

This service will not be limited to a physical tick list but will be focussing on building an app for this service. The app will showcase all the products from different ranges and will allow the user to create a subscription box for himself depending upon needs and interests. The app will also curate and suggest him products based on his liking.

Six Paths

Path 1- Alternative Industries

Patanjali presently in the Fast-Moving Consumer Good (FMCG) and Clothing. The company has dived into this market and disrupted the whole industry in such a way that the competitors are now revisiting their strategies and techniques of market capture to fight with Patanjali. But it has been a long time since Patanjali has been in this industry and now slowly this segment is becoming a Red Ocean for Patanjali also. In order to stay ahead of its competitors, Patanjali needs to create a blue ocean by which it can compete in the field and maximize it product portfolio and profits.

The two alternate industries in which Patanjali can move into are

1. Sattvik Foods 2. Kitchen Equipment’s For each of the alternate industries we will discuss the trends, the ways Patanjali can enter, competition it can face, the differentiating part of Patanjali with its competitors.

ALTERNATE INDUSTRY 1: SATTVIK FOODS In the Sattvik Foods industry, there are quite a smaller number of players. There are only 3 or 4 restaurants in a metro cities and 1 or 2 in other cities. This shows that this segment has very less penetration and there is an opportunity for Patanjali to enter and disrupt this segment. So, Patanjali has been a very well recognized brand in India and also in other countries. They have the market capturing capability in this segment since the other brands and companies in this segment do not have the power or resources to fight a shark like Patanjali. And eventually those also will be acquired...