Business Strategy report on PatanjaliSubmitted To: Dr. Abrar Ali Saiyed Submitted By: Group - 13 Anisha Mody – 50 Abhik Shah – 65 Anurag Shah – 66 Ashna Shah – 68 Harsh Shah – 69 Riya Shah – 74 Amrut Mody School of Management Table of Contents Business Strategy report on Patanjali......................................................................................................... 0 Table of Contents ....................................................................................................................................... 1 Introduction ................................................................................................................................................ 4 Industry Analysis ....................................................................................................................................... 5 Competitor Analysis .................................................................................................................................. 7 PESTEL ANALYSIS ................................................................................................................................. 8 Political:................................................................................................................................................. 8 Economical: ........................................................................................................................................... 8 Social: .................................................................................................................................................... 9 Technological: ....................................................................................................................................... 9 Environmental: ...................................................................................................................................... 9 Legal: ................................................................................................................................................... 10 Inference: ............................................................................................................................................. 10 GENERIC STARTEGY .......................................................................................................................... 11 Facts and Inference about low cost leader: .............................................................................................. 11 Facts and inference about differentiator: ............................................................................................. 12 Facts and inference about niche: ......................................................................................................... 12 PRODUCT LIFE CYCLE ....................................................................................................................... 13 Facts: ................................................................................................................................................... 13 Inference: ............................................................................................................................................. 13 CURRENT AND PAST STRATEGY ..................................................................................................... 14 Strategic Positioning............................................................................................................................ 14 Facts: ................................................................................................................................................... 14 Inference: ............................................................................................................................................. 14 Strategic Fit .............................................................................................................................................. 14 Facts: ................................................................................................................................................... 15 Inference: ............................................................................................................................................. 15 BCG Matrix of Patanjali .......................................................................................................................... 16 Ansoff Matrix of Patanjali ....................................................................................................................... 17 Patanjali Value Chain Analysis................................................................ 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Page 1 of 28 VRIN Analysis ......................................................................................................................................... 18 PORTERS FIVE FORCE MODEL ......................................................................................................... 20 Hambrick’s Framework ........................................................................................................................... 22 Arenas .................................................................................................................................................. 22 Vehicles ............................................................................................................................................... 22 Differentiators ..................................................................................................................................... 23 Staging: ................................................................................................................................................ 23 Economic Logic ....................................................................................................................................... 24 Bibliography............................................................................................................................................. 27 Page 2 of 28 Abstract Patanjali, founded in 2006 by Baba Ramdev and his aide Swami Acharya Balakrishan has grown into a 10,000 crore company in 2017. It has disrupted the entire FMCG market with its unconventional growth story. The credit goes to Baba Ramdev who has very meticulously decided the timeline for each action and delivered unprecedented success. Patanjali’s vision is to provide herbal/ayurvedic/natural solutions to all the problems and in this pursuit it is also elevating the livelihoods of local farmers. It has also leveraged the emotional route by bringing in the ‘Swadeshi’ angle to market its products. The strategy followed by Patanjali is unconventional in that they have not made any significant investment in marketing and promotion and have relied on word of mouth publicity. Baba Ramdev has done minimal promotion by endorsing the brand in his yoga sessions televised on national channels. The FMCG industry has a lot of big players with dominant market leaders in each category. Patanjali is in direct rivalry with most of them and with time has been able to take away market share from the best-selling brands. In retaliation, the market leaders are bringing out newer herbal products at lower price points or putting into action other strategies. However Patanjali has the advantage of being the forerunner and have gained sufficient traction that it will be difficult to displace them. The entrance of Patanjali has not just marked its increased share of the pie but it has also managed to increase the size of the pie itself. Page 3 of 28 Introduction • Patanjali, founded in 2007 by Baba Ramdev and his aide Swami Acharya Balakrishan has grown into a 5000 crore company in 2015. It has disrupted the entire FMCG market with its unconventional growth story. The credit goes to Baba Ramdev who has very meticulously decided the timeline for each action and delivered unprecedented success. • Patanjali’s vision is to provide herbal/ayurvedic/natural solutions to all the problems and in this pursuit it is also elevating the livelihoods of local farmers. It has leveraged the emotional route by bringing in the ‘Swadeshi’ angle to market its products. • The drivers for Patanjali purchase are lower price points which induces sampling and when they find no noticeable difference with the pricey brands, they tend to stick to Patanjali. • The key differentiators for Patanjali are its herbal or ayurvedic offerings and the free consultation it provides to the customers at Arogya Kendras/ Chikitsalayas through its certified Ayurvedic doctors. • Besides it has also increased its distribution channels through franchise stores, retail chains and kirana stores. However the supply is not proportional to demand and a lot of customers are not able to find the desired products. To solve this, they have invested in food parks and have outsourced manufacturing to other SMEs while conducting stringent checks to ensure consistent quality • The strategy followed by Patanjali is unconventional in that they have not made any significant investment in marketing and promotion and have relied on word of mouth publicity. • Baba Ramdev has done minimal promotion by endorsing the brand in his yoga sessions televised on national channels. The FMCG giants cannot rely on such a strategy because they cannot sell the products at such low prices or provide free doctor consultations and other activities on a continuous basis. Thus it is not feasible for other companies to follow this model. • The FMCG industry has a lot of big players with dominant market leaders in each category. Patanjali is in direct rivalry with most of them and with time has been able to take away market share from the best-selling brands. In retaliation, the market leaders are bringing out newer herbal products at lower price points or putting into action other strategies. • However Patanjali has the advantage of being the forerunner and have gained sufficient traction that it will be difficult to displace them. The entrance of Patanjali has not just marked its increased share of the pie but it has also managed to increase the size of the pie itself. Page 4 of 28 Industry Analysis • Fast moving consumer goods (FMCG) is the 4th largest sector in the Indian economy. There are three main segments in the sector – food and beverages which accounts for 19 per cent of the sector, healthcare which accounts for 31 per cent and household and personal care which accounts for the remaining 50 per cent. • The FMCG sector has grown from US$31.6 billion in 2011 to US$ 49 billion in 2016. The sector is further expected to grow at a Compound Annual Growth Rate (CAGR) of 20.6 per cent to reach US$ 103.7 billion by 2020. FMCG market in India (US$ billion) 150 CAGR 20.6% 100 104 49 50 0 2016 2020 Source:(https://www.ibef.org/industry/fmcg-presentation) • Accounting for a revenue share of around 60 per cent, urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India and recorded a market size of around US$ 29.4 billion in 2016-17. • Semi-urban and rural segments are growing at a rapid pace and accounted for a revenue share of 40 per cent in the overall revenues recorded by FMCG sector in India. The rural FMCG market in India is expected to grow at a CAGR of 14.6 per cent from US$ 29 billion in 2016 to US$ 100 billion by 2020. • Growing awareness, easier access, and changing lifestyles are the key growth drivers for the consumer market. The Government of India's policies and regulatory frameworks such as relaxation of license rules and approval of 51 per cent Foreign Direct Investment (FDI) in multi-brand and 100 per cent in single-brand retail are some of the major growth drivers for the FMCG market. Page 5 of 28 Source:(https://www.ibef.org/industry/fmcg-presentation) • Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 672 billion in 2016, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely to boost revenues of FMCG companies. • People are gracefully embracing Ayurveda products, which has resulted in growth of FMCG major, Patanjali Ayurveda, with a m-cap of US$ 14.94 billion. The company aims to expand globally in the next 5 to 10 years. Source:(https://www.ibef.org/industry/fmcg-presentation) Page 6 of 28 Competitor Analysis Source:(https://www.vccircle.com/how-patanjali-outsmarted-older-rivals-to-become-indias-no-2-fmcg-firm/) • Consumer products manufacturers ITC, Godrej Consumer products Limited (GCPL) and HUL reported healthy net sales in FY17. • But the sales volumes are not growing as rapidly as expected. The growth margins have diminished and have taken a toll on all major companies. • Aggregate financial performance of the leading 10 FMCG companies over the past 8 quarters displays that the industry has grown at an average 16-21 per cent in the past 2 years. • PAL's competitors have received its entry in good health as they believe that the revival of their ‘herbal trend' could help them reap higher profits from increasing sales in this segment. • People are gracefully embracing Ayurveda products, which has resulted in growth of FMCG major, Patanjali Ayurveda, with a m-cap of US$ 14.94 billion. The company aims to expand globally in the next 5 to 10 years. Page 7 of 28 PESTEL ANALYSIS Political: • Government Support: The current government is promoting Ayurveda and yoga through formation of AYUSH. AYUSH is a governmental body in India purposed with developing, education and research in Ayurveda, yoga, naturopathy, etc. The Bharatiya Janata Party, in its election manifesto, said it would increase public investment to promote AYUSH. Economical: • Inflation Rate: NSSO report states that the expenditure on healthcare is highest in rural India and fifth highest in urban India. With Inflation rate increasing continuously, people are looking for substitutes and cheaper products like Patanjali. The brand and trust of Patanjali, has formed the potential substitute. • Economic Factors like Rates: The raw materials for manufacturing are procured from environment and are not imported much other than technology so exchange rates are too minimal to consider. • Taxation: Cost of raw materials or input products have direct impact on final price of products. There are no concessions presently on Ayurveda products, but there are few discussions in the government to levy tax concession on Ayurveda products. Tax concessions will help PAL to decrease the price and divert their funding to build other competencies. GST has not much impacted PAL as per a news article which states as follow: Page 8 of 28 • Increased Disposable Income: India’s disposable income is increasing which in turn will increase consumption and purchasing power among people. Shift in preference will be towards premium personal care products and household products. Social: • Diseases and Life Expectancy: Diseases like Heart attacks, Blood pressure, Cancer are increasing in society. The main cause is use of adulterated products and life style of people. The improvement in life expectancy has been attributed to better diet and health consciousness among people. This trend enhances the scope of companies like PAL. • Consumer trend: The people of India are becoming more health conscious. This trend opens up market for companies like PAL which offers Ayurveda products which are presumed to be good for health and are best in terms of quality. The affordable price also helps to capture market share. Technological: • Research & Development: PAL has set up Patanjali Yogpeeth trust at Haridwar which is constantly involved in research and developing the medicines of Cancer and AIDS. • Automation: For the manufacturing unit, the company has high frequency drier unit for preparing one lac tablet per hour, high speed auto coater for coating the tablets and many more. • Introducing new ways by using current technology: With the help of available technology, new herbs are identified and are used in creating new medicines. It is also working on developing new farming ways. Environmental: • India, a rich source of herbs: Certain herbs are available in India only which may not be available anywhere else in the world. Ayurveda is considered free of chemicals and has no side effects which have direct advantage over Allopathic. Ayurveda products are more eco-friendly. Page 9 of 28 Legal: • Various acts related to Ayurveda: The Drugs and Cosmetics act 1940, the drugs and magic remedies act 1954, the medicine central council act-1970, etc. Laws for quality assurance are also are also passed to fulfil various quality assurance tests. Inference: • Political factor shows that Indian government is promoting Ayurveda through AYUSH which in turn is beneficiary for PAL. • Currently, economic factors are also in favour of PAL as GST has not affected PAL much. • Society is becoming health conscious which in turn is good for PAL. • PAL is very good in research and development and has currently imported a technology from US to produce corn silage. • India is rich in herbs which is an advantage for PAL. • Various acts related to Ayurveda are also formed. Page 10 of 28 GENERIC STARTEGY Competitive Advantage COST LEADERSHIP DIFFERENTIATION Broad S Target HUL ITC C O P FOCUS D E Narrow Narrow Target COST FOCUS DIFFERENTIATION FOCUS Target Patanjali (focuses on minimizing Patanjali (focuses on swadeshi, cost through backward integration, shuddh, ayurveda products) low expense on advertising) Facts and Inference about low cost leader: • PAL delivers products at low cost. • Patanjali products are 15%-40% cheaper than its competitors. • Backward integration: Patanjali is connected with the farmer community. • Forward integration: Patanjali products are sold through3 channels. Patanjali Chikitsyalayas, Patanjali Arogya Chikitsyalayas and non-medicinal outlets. They have 15,000 exclusive retail outlets in Page 11 of 28 India and also have tied up with Reliance, Big bazaar and well-known retail chains in India. It also has online presence. • Procurement: The farm products are collected from primary collection centers. This cuts the middlemen and helps to reduce procurement cost. To reduce cost further they also go for bulk procurement. • Low investment in advertisement: Its expenditure on advertisement and promotion is lesser. Brand ambassador is Baba Ramdev himself which further saves cost. • Low cost operation: The low cost processing of the raw material ensures economy of scale and capacity utilization along with high volume output. Source: Business standard Facts and inference about differentiator: • Differentiates by emphasizing on “swadeshi products”, “shudh” and “herbal” products. • Its exclusive distribution channel. Facts and inference about niche: • The niche strategy Patanjali focus is on health conscious middle class customers. • PAL focuses on customers who promote Swadeshi products over foreign products. Source: profit.ndtv Page 12 of 28 PRODUCT LIFE CYCLE Facts: • Patanjali is fairly a young company with a huge product portfolio. • It is constantly innovating to come up with new products. • From 2012 to 2015, it posted CAGR of 64.7% of revenue growth and sales worth Rs. 2000 crores. Inference: • Bestselling products like ghee and toothpaste Dant kanti have reached growth stage. • Spices are still at its nascent stage to reach the growth stage and are just at the introductory stage. Page 13 of 28 CURRENT AND PAST STRATEGY Strategic Positioning There are 3 kinds of strategic positioning: • Need Based Positioning • Variety Based Positioning • Access Based Positioning Facts: • PAL produces variety of products in categories of personal care and food. • PAL manufactures more than 900 products including 45 types of cosmetic products and 30 types of food products. • PAL sells through nearly 4,700 retail outlets as of May 2016. • It also sells its products online and is planning to open outlets at railway stations and airports. • It has tied up with Pittie Group and Future Group on 9 October 2015. • As per the tie-up with Future Group, all the consumer products of PAL will be available for the direct sale in Future Group outlets. PAL products are also available in modern trade stores including Reliance Retail Hyper city and Star Bazaar apart from online channels. Inference: • Among above 3 kinds of strategic positioning PAL has mapped itself into Variety Based and Access Based positioning as it offers variety of products at its exclusive retail outlets as well as at various retail hyper city. Strategic Fit Fit Drives Both Competitive Advantage and Sustainability There are 3 types of fit: • 1st order fit: Simple consistency between each activity (function) and the overall strategy. Page 14 of 28 • 2nd order fit: Occurs when activities are reinforcing. • 3rd order fit: Optimization of effort. Facts: • PAL is continuously expanding in personal care industry, food industry including into spices, ghee, juices, etc. Now it may also penetrate textile industry and there are rumors that it may penetrate restaurant business too. Inference: • PAL is an example of simple consistency which is a first order fit as the underlying philosophy remains consistent – to deliver value-for- affordable price money products to middle class consumers too. Page 15 of 28 BCG Matrix of Patanjali High relative market share Low relative market share STARS QUESTION MARK Kesh Kanti Cornflakes High market Dant Kanti Oats growth rate Chyawanprash Healthy noodles Juices Candy and chocolate Powervita CASHj COW DOG Ayurvedic medicine Panchgayya soap Honey Kayakalp oil Ghee Low market growth rate Inference: From the BCG matrix above, we can see which products fall into the category of stars, question mark, cash cow and dog, respectively. We can infer the market growth and the market share of these products from the matrix. Page 16 of 28 Ansoff Matrix of Patanjali Existing Products New Products Market Penetration Product Development Existing Yoga Ayurvedic Spiritual lessons Herbal market Market Development Diversification Youth FMCG Middle class Cosmetics Health New market Inference: From the ansoff matrix above, we can see that patanjali is into an existing market, but launching new products, hence product development. Since the products of patanjali are aryuvedic and natural, they are chemical free, which makes them different from the existing products in the market. Page 17 of 28 VRIN Analysis Patanjali has grown into a big company now with a lot of resources and capabilities. To understand if they are a source of sustainable competitive advantage, we also performed the VRIN analysis on all these resources. Each of the capabilities developed is discussed below: Production plant Patanjali has its main production plant or rather the headquarters in Haridwar. It has world class state- of-the-Art facility where all the products are manufactured. This is valuable because most of the products are produced here. The value comes not from just producing but from producing natural and herbal products. In a sense, it is rare as well, as the scale of production of ayurvedic or herbal products is unprecedented. However, this is neither costly nor inimitable. But it is non-substitutable since the production cannot take place at such a scale without the plant. Thus it is a source of competitive advantage for Patanjali. Application of technology and know-how of Ayurveda The raw materials for all Patanjali products are derived from Ayurveda and are naturally available. The herbs, and the knowledge about the medicinal benefits and how to mix these herbs to arrive at the magic product is something Patanjali has expertise in. This makes the resource valuable and rare. The competitors like Dabur and other brands which do produce herbal products do not do so at such scale. It is inimitable and non-substitutable as there is no other solution to this. You have to know the formulation to be able to produce them. Patanjali is privy to all the secrets of Ayurveda and thus have a competitive advantage over other brands. Brand image Patanjali is piggybacking on the image of Ramdev Baba. Baba Ramdev is the brand ambassador of Patanjali and has projected it as a healthy, natural and organic solution to all the problems. He shot to fame through yoga which was simple and easily adopted. This gave him credibility. He used this credibility to relaunch Patanjali and have associated better health with Patanjali. He is the reason why Patanjali could grow so quickly and is so popular today. Thus the brand image created is valuable as it is giving sleepless nights to other FMCG brands that have been in India for the past 50 years or more. It Page 18 of 28 is not rare to have a good brand image but the brand ambassador of such charisma is rare. It is non- imitable for the same reason that the brand’s image is directly linked to Baba Ramdev. Finally it is substitutable as there are other ways of building brand image and credibility. Affiliations with government and community Baba Ramdev has strong connections with the ruling party and the tone of the brand is Swadeshi, which is fully aligned with the tone of the national political party. Hence the brand enjoys a strong reputation and bond with authority. This resource is very valuable but not rare as other companies also influence the political parties. However it is non-substitutable as Patanjali got access to land for food- park because of these relations with governments. However, if the ruling party changes, it might be difficult to obtain these benefits. Hence it is a temporary advantage. Arogya Kendras and chikitsalayas These are the distinguishing factors for Patanjali. While all FMCG brands have good packaging and good marketing, Patanjali has its own ways to build credibility. It has provided certified ayurvedic doctors which have helped increase the trust of the Patanjali brand. They have led to positive word of mouth publicity and are thus valuable, rare and non-substitutable. It is not possible for other FMCG giants to go for this strategy as they cannot hire ayurvedic doctors to recommend their cosmetics and other products, neither is it possible to hire doctors with MBBS degrees as it would be a costly value proposition. Thus it is inimitable as well. Resource Valuable Rare Inimitable Non substitutable Production Plant Yes Technology & know-how of Yes Yes Yes Yes Ayurveda Brand Image Yes Yes Affiliations with government Yes Yes and community Arogya Kendras and Yes Yes Yes Yes chikitsalayas Page 19 of 28 PORTERS FIVE FORCE MODEL Table 1 - Rivalry among competitors Attractiveness Low High 1 2 3 4 5 No of Competitors Large ✓ Industry Growth Slow ✓ Fixed cost High ✓ Differentiation Low ✓ Switiching Cost Low ✓ Table 2- Barriers to entry Attractiveness Low High 1 2 3 4 5 Economies of scale Small ✓ Product Differentiation Low ✓ Brand identity Low ✓ Switching cost Low ✓ Access to channels of distribution Easy ✓ Capital requirement Small ✓ Access to channels of technology Easy ✓ Government protection None ✓ Table -3 Threat from Substitutes Attractiveness Low High 1 2 3 4 5 Availability of close substitutes High ✓ Switching cost Low ✓ Substitute's price-value Better ✓ Table -4 Bargaining Power of Buyers Attractiveness Low High 1 2 3 4 5 Number of buyers Small ✓ Availibility of substitutes Many ✓ Switching cost Low ✓ Buyer's threat of backward integration High ✓ Industry's threat of forward integration Low ✓ Table -5 Bargaining Power of Suppliers Attractiveness Low High 1 2 3 4 5 Number of suppliers Small ✓ Availibility of substitutes Few ✓ Switching cost High ✓ Supplier's threat of forward integration High ✓ Page 20 of 28 1. Rivalry among competitors- High Patanjali competes with both organized and unorganized players in its industry. a.The industry is highly competitive with organized players like Dabur, Zandu, Baidyanath, Himalaya etc. These brands have established marketing channels in both traditional and modern retail and are present in the market since last few decades. They have a strong and loyal base of customers who has been using their products consistently. b.The unorganized players include numerous Ayurvedic centers, chikitsalayas and shalas which make their own products for their customers and also sell the same in the local market 2. Barriers to entry: Moderate to Highsince FMCG industry is capital intensive, the threat to Patanjali is not from new entrants in the segment. There is a vast possibility of product differentiation but brand identity is also important in this industry as it mainly concentrates on herbal and Ayurvedic product in which Patanjali has an upper hand. Major threat to Patanjali is from existing players in different segments for e.g. Colgate entering into the natural and Ayurvedic segment through Colgate Active Salt – Neem. HUL is also reviving its herbal brand Ayush and planning to launch more products in the natural segment to compete with PAL. 3. Threat from substitutes: Low to moderatethe substitute products depend on the respective product category but generally the category in which Patanjali Ayurved is present the threat of substitute ranges from low to moderate. Unorganized players producing their own products can be a threat. 4. Bargaining power of buyers: ModerateBuyers are looking for reliable Ayurvedic compositions. Price and Quality of the productarethemajordeterminants. Buyers do not hesitate to shift if a similar quality product is available at a lower price from a different manufacturer. In FMCG industry the companies generally have the power to decide the pricing structure but due to number of players getting into herbal and Ayurvedic sector the bargaining power of buyers can be considered moderate as there is no switching cost if they are getting similar quality products at a cheaper price 5. Bargainingpowerofsuppliers: Moderate to HighSince this business is highly dependent on the right ingredient; suppliers have a good bargaining power. The bargaining power of the suppliers can be controlled by backward integration i.e. by establishing their own herbal gardens and planting the herbs.Patanjalihascontrolledthebargainingpowerofsuppliersbybecoming a fully integrated organization. It provides end to end solutions in Ayurved. Page 21 of 28 Hambrick’s Framework Arenas Source:(http://www.livemint.com/Industry/TbjxDhgsuEWdZ7KCNo4BBN/We-have-plans-to-open-food-parks-in-four-or-five- locations.html) • Patanjali is planning to add 5 mega food and herbal parks at 5 strategic locations in India. • The ayurveda-to-FMCG major has been funding most of its requirements from internal accruals. • The geographic locations would be Baripada (Assam), Indore (Madhya Pradesh), Nagpur (Maharashtra), Vizianagaram (Andhra Pradesh), and Dankaur (Uttar Pradesh) • This would be an example of strong in-house manufacturing capabilities and will also help them to widespread their distribution network. • The mega food park will help Patanjali in creation of infrastructure for food processing and a “farm- plate” supply chain system. • It would be manufacturing all the FMCG products which will target the lower class and middle class segment. Vehicles Source:(http://www.business-standard.com/article/companies/patanjali-to-borrow-rs-5-000-cr-to-fund-food-parks-117092701457_1.html) • It is planning to borrow 5000 cr to fund its mega food and herbal parks across the country. • They are not planning to raise the fund through equity. • It is looking forward to borrow the money from banks. • This will help them to maintain their competitive advantage on pricing front. Page 22 of 28 • It will also reduce the dependency on third party manufacturers • State of the art production technology will be used to ensure high efficiency and quality control. • It will ensure technology transfer, capacity building and skill up-gradation • Also state of the art infrastructure for the processing centers of agro products will showcase a successful, modern and efficient agro based business venture to the world. Differentiators Image: Patanjali is backing on Prime Minister Narendra Modi’s “Make in India” campaign to promote its goods. All the products that Patanjali manufactures have a “Made in Bharat” label. Patanjali’s communication has always focused on health. Patanjali promotes its products by “Swadeshi is our goal” Price: Pricing plays an extremely important role in putting Patanjali Ayurved ahead of its fierce competitors. Patanjali Ayurved is providing people with option to buy quality honey at around 30% lesser price than Dabur. The pricing strategy is penetrative pricing as Patanjali knows that it cannot conquer the market with higher prices. There is a drop of 25-30 percent of price in almost every product when compared to International Brands which is helping Patanjali reach each and every household in India. Product reliability: Patanjali products are genuine and reliable. They are in most categories are approved / registered and issued FSSAI number. They simply speak about the goodness of their products, highlight hazards in the products in the market and why they are a better alternative. Patanjali Noodles rose to fame while Maggi was away from the market and has done quite damage to Maggi, which once was the king of Noodle’s market and showed how reliable are the products of patanjali. Patanjali has leaped from 173 ranks to the 15 position in the latest Brand Trust Report 2017. Staging: To build up a sustainable and viable business, patanjali has to plan its expansion strategy extremely carefully. Following is the list of all the aspects that Patanjali needs to stage a strategy for: Page 23 of 28 • Value Chain: Build a sustainable value chain, for all agro based and time sensitive products. • Create new infrastructure and upgrade the existing infrastructure • Capacity building on quality standards. • maximize the returns to the farmers for his farm produce by buildings strong and rich backward linkage while slashing the intermediaries and introducing concepts like journal marketing etc • Forward linkage facilities across the country and some other countries. • Stimulate investments in the agro and food processing industry. • Establish state of the art infrastructure for the processing centers of agro products and showcase a successful, modern and efficient agro based business venture to the world. • To be a knowledge resource to the agriculture sector in terms of markets, quality and quantity of production, diversifications of farming activities, organize farming, micro-irrigation etc. • Technology transfer, capacity building and skill up-gradation • Continue its growth in market at unprecedented growth rate and achieve its mission of becoming the biggest FMCG industry in the country. Economic Logic • Baba Ramdev in a very recent interview said that his vision for Patanjali is to make it the world’slargest FMCG brand by 2021. Source:indianexpress.com • To meet his vision for the brand he has decided to expand the current capacity by 3times, thus they have decided to start 5 more strategic food parks. Table 1 Food Parks Costing Page 24 of 28 Food park Investment (in Cr.) Assam 1300 Madhya Pradesh 500 Maharashtra 1000 Andhra Pradesh 1000 Uttar Pradesh 2000 Total 5800 • Patanjali will invest 5800cr in mega food parks in 5 different states in Assam, Madhya Pradesh, Maharashtra, Andhra Pradesh and Uttar Pradesh. Source: (http://www.financialexpress.com/india-news/patanjali-food-park-is-worlds-biggest-rs-500-crore-investment- will-generate-50000-jobs-maharashtra-cm-devendra-fadnavis/373117/) • Revenue of 2016 for patanjali was 5000 cr and for 2017 were 10561. Considering if they get average 16% net profit margin there financials would be as projected: Table 1-1 Financials of Patanjali Year Revenue(cr) Net profit margin Net profit(cr) (%) 2011-12 453 12.36 56 2012-13 849 10.72 91 2013-14 1191 15.62 186 2014-15 2006 15.8 317 2015-16E 5000 16 800 2016-17E 10561 16 1690 Page 25 of 28 • Patanjali has a CAGR of 69.02% for the period 2011-17 with net profit percentage of about 16%. • So to become the biggest FMCG brand of India(HUL is leader with revenue of 30782 Cr.). Patanjali has to maintain a CAGR of 30.66% till 2021. This may seem a steep task but is achievable for Patanjali as they have already invested and established a wide distribution network and a loyal brand identity. • To support this vision they have to increase their production capacity and hence they have already planned to open five new food parks across the country. Following are the projected calculations: • CAGR is considered @ 31 %( due to inflation and decline in growth). • Profit margins @ 15% Table 1-2 Projected Financial for Patanjali Year Revenue (in Cr.) Net Profit Margin (%) Net Profit (in Cr.) 2017-18 13835 15 2075 2018-19 18124 15 2718 2019-20 23742 15 3561 2020-21 31102 15 4665 Thus from the above projected calculations we can conclude that Patanjali can easily become the biggest FMCG brand of the country by 2021 and also its strategies are well aligned with its vision. Page 26 of 28 Bibliography: http://pfhppl.com http://patanjaliayurved.org Works Cited (n.d.). Retrieved from https://www.vccircle.com/how-patanjali-outsmarted-older-rivals-to-become-indias-no- 2-fmcg-firm/: https://www.vccircle.com/how-patanjali-outsmarted-older-rivals-to-become-indias-no- 2-fmcg-firm/ http://www.business-standard.com/article/companies/patanjali-to-borrow-rs-5-000-cr-to-fund-food-parks- 117092701457_1.html. (n.d.). Retrieved from http://www.business- standard.com/article/companies/patanjali-to-borrow-rs-5-000-cr-to-fund-food-parks- 117092701457_1.html http://www.business-standard.com/article/companies/patanjali-to-borrow-rs-5-000-cr-to-fund-food-parks- 117092701457_1.html. (n.d.). Retrieved from http://www.business- standard.com/article/companies/patanjali-to-borrow-rs-5-000-cr-to-fund-food-parks- 117092701457_1.html http://www.financialexpress.com/india-news/patanjali-food-park-is-worlds-biggest-rs-500-crore-investment- will-generate-50000-jobs-maharashtra-cm-devendra-fadnavis/373117/. (n.d.). Retrieved from http://www.financialexpress.com/india-news/patanjali-food-park-is-worlds-biggest-rs-500-crore- investment-will-generate-50000-jobs-maharashtra-cm-devendra-fadnavis/373117/ http://www.livemint.com/Industry/TbjxDhgsuEWdZ7KCNo4BBN/We-have-plans-to-open-food-parks-in-four-or- five-locations.html. (n.d.). Retrieved from http://www.livemint.com/Industry/TbjxDhgsuEWdZ7KCNo4BBN/We-have-plans-to-open-food-parks- in-four-or-five-locations.html https://www.ibef.org/industry/fmcg-presentation. (n.d.). Retrieved from https://www.ibef.org/industry/fmcg- presentation Page 27 of 28