What went wrong with Patanjali's fairy-tale growth story?

Yoga guru Baba Ramdev-promoted Patanjali Ayurved reported 2.38 per cent growth in revenue at Rs 8,330 crore in the financial year 2018-19. While there surely is a marginal recovery after a steep fall in revenue from Rs 10,561 crore in 2016-17 to Rs 8,135 crore in 2017-2018, the company is still miles away from its erstwhile fairy-tale growth story. The company, which had seen a revenue jump of over Rs 10,000 crore between 2011 and 2017 on the back of array of products such as toothpaste, soaps, atta, honey and ghee, suddenly seems to have much less visibility. There was a time when almost all the modern retailers were more than happy to create exclusive Patanjali aisles as that increased footfalls into their stores, but that's no longer the case.

So, what has gone wrong with the FMCG upstart which literally shook stalwarts such as HUL, Dabur and ITC with its disruptive products? Its Dantkanti toothpaste forced the likes of Colgate and HUL to innovate and spruce up their natural offerings. Today, barring Dantkanti and Patanjali ghee, most of its other products don't seem to resonate with consumers. In fact, in an earlier interview with Business Today, Patanjali head honcho, Acharya Balkrishna, had admitted that the next level of growth wouldn't be easy for the company unless they strengthen their supply chain and distribution.  "The first Rs 5,000 crore was organic growth, as we sold to people who knew us. Now we have to work hard. We have to plan our supply-chain, marketing and distribution. We are mapping demand and accordingly planning our production capacity," he had said.

Also Read: Patanjali reports Rs 8,330 crore revenue in FY 19; food items account for 62% of total sales

While Balkrishna went on to attribute his company's de-growth to the slowdown caused by demonetisation and GST, distribution is something which they have clearly ignored. Ask a manager of any modern retailer store about Patanjali, the immediate response would be their replenishment cycle is bad and very often the stores are out of stock. "Sales in the last one year has dipped by close to 50 per cent. The whole FMCG business is about habit, and when a product isn't available, consumers obviously switch allegiance," says the head of a leading grocery retail chain. It is not just modern retail stores, Patanjali products are not seen in the neighbourhood kirana stores either. The company had set up a large number of Patanjali franchise stores, which are dwindling too.

Also Read: Baba Ramdev-led Patanjali to infuse Rs 3,438 crore in Ruchi Soya to settle dues

Apart from distribution challenges, the quality of Patanjali products has come under the scanner several times and that has impacted its pure and pristine brand promise. Marketing gurus say that the company's strategy of entering multiple categories at one go has backfired. They should have focused on fewer categories and built them to a scale rather than carpet bombing. Patanjali clearly needs to recalibrate its strategy in order to see future growth.

Both Baba Ramdev and his associate Balkrishna have always maintained that capital isn't a challenge and that they would never sell stake to a foreign company as that would dilute their swadeshi image. But the yoga guru in few recent interviews has stated that he is in talks with several foreign investors.