Patanjali sales fall for first time since 2013 on GST, supply chain issues

Patanjali sales fall for first time since 2013 on GST, supply chain issues

New Delhi, Nov 22: Baba Ramdev’s intention to make Patanjali the biggest fast-moving consumer goods (FMCG) company in India has hit a snag as the company’s sales fell year on year for the first time since 2013.
The fall in the company’s sales was primarily due to its own inability to adapt in time to the Goods and Services Tax (GST) regime and develop a good enough supply chain and infrastructure, it said.
Patanjali’s standalone consumer goods revenue dropped by over 10 percent to Rs 8,148 crore in the year ended March 2018, according to a report by Bloomberg.
Ramdev had aimed for the company to reach a turnover of Rs 20,000 crore within 5 years and take on FMCG giant, Unilever.
In FY16, Patanjali earned Rs 10,000 crore in revenue, a massive jump from the less than Rs 500 crore it earned in FY12. But it won’t be able to report that kind of growth this time around.
Rise and fall
With the Swadesi theme to its name, Patanjali was branded as a fresh alternative to chemical products when it was launched more than a decade ago.
At the time, the company was in the business of selling Ayurvedic products ranging from cosmetics to food items through its ‘arogya kendras’ and ‘chikitsalayas’.
The company paced ahead between FY13 and FY17 with its unique positioning as an Indian brand, but this growth could not sustain due to its weak distribution system.
Market analysts said the company stressed on bringing down its supply-chain costs, thereby failing to refill shelves at its retail outlets regularly enough.
Patanjali had become a household brand in small cities, towns and rural areas, dominated by Hindi-speaking customers.
But as the company grew, it decided to build its presence on e-commerce platforms, shifting focus from its trademark physical outlets.
This was a bad idea as Nielsen data shows that FMCG sales through medical shops are growing at over 19 percent as against a mere 6 percent growth in general trade.
Patanjali’s products gained popularity due to their high quality and the absence of toxins in them.
However, in May 2017, it was reported that 32 of its 82 product samples failed quality tests, including some its most famous and advertised products.
Due to Ramdev’s push, the market for ayurvedic products expanded at a CAGR of 21 percent between FY13 and FY18, while the FMCG market grew at 11 percent.
Competitors took advantage of this and inserted tags like ayurvedic or herbal in their products and got visible results.
According to CARE Ratings, Patanjali’s performance is expected to be subdued this fiscal year.