Ramdev's Patanjali takes a shot at turning noodles desi

Baba Ramdev alights swiftly from a white Mahindra Scorpio at his Gurukul Gaushala farm in Haridwar and strides into a small room, 22 armed security men - he enjoys Z class security - following him. "Noodles are very much Indian," he tells Business Today. "They are integral to the cuisine of many of our North-eastern states. In the rest of India too, eating seviyan, in both sweet and salted forms, is common." Ramdev is the moving spirit and brand ambassador of Patanjali Ayurved Ltd - though he does not own a single share in it - a company which has built its reputation on providing Ayurvedic and authentically Indian products. But its 101st product - launched in the country on November 16 - is noodles, traditionally associated with Southeast Asia. "Our noodles are made of atta," he adds. "Woh to Indian hain. Agar maidey se banaey toh Chinese. (That is Indian. If noodles are made of maida, they're Chinese.)"

Instant noodles are a Rs 5,300 crore market in India, according to Euromonitor, with market leader Maggi from Nestle India enjoying a 63 per cent share. Given the quality problems Maggi has lately been facing, the timing of the noodles foray may be just right for Patanjali, but the move has its share of critics. "It doesn't fit in with the Indian heritage of all the other products Patanjali offers," says brand expert Jessie Paul. "Also, instant noodles, however pure the ingredients, can't be said to be healthy. It is the first step to brand dilution." Ramdev's close associate, Acharya Balkrishna, who owns over 93 per cent of Patanjali Ayurved, however, insists the company has only catered to popular demand. "People started mailing us morphed images of Patanjali Marie biscuit wrappers with 'Maggi' written on them," he says. "The idea came to us only then. I told Swami Ramdev that people have been sending us such photos. He said, 'People want some such product from us. We should consider their demand'."

Balkrishna also strongly denies that Patanjali's noodles are unhealthy. "The wheat content in Maggi noodles is very little, while ours is a wheat-based product," he says. "We are using rice bran oil, which is far better for health than the palm oil other noodles makers do." Despite higher input costs, Patanjali's noodles will be sold at Rs 15 a packet, while those of rivals sell for Rs 25. "We never bothered about the cost of rice bran oil," adds Ramdev. Finally, there is the tastemaker, the make-or-break component of instant noodles. "Tastemaker is the key and it has been developed in house," says Ravindra Kumar Chaudhary, CEO, Patanjali Food and Herbal Park and a herbal cosmetics professional, having formerly worked with Emami, Surya Herbal and Shahnaz Husain. "To prepare the tastemaker, we are procuring fresh peas from Uttarakhand farmers and processing them at our vegetable processing plant at Bajpur. The same goes for the beans and carrots used."

Sceptics remain unconvinced. "Even if the tastemaker is being made in house, the noodles are being produced by third parties," says an industry insider who claims to know, but does not want to be named. "When you are cooking in someone else's kitchen, quality trials should be stringent. Standardisation of raw material itself can take months. Water in every Indian locality tastes different, and its impact on taste and quality needs to be gauged. There should be packaging, transportation and shelf life trials. Very few of these steps have been factored in. Faith in Baba can only bring in the first-time buyer." But, if the noodles succeed it will be another big triumph for Ramdev.

Media Star

So far, their success record has been formidable. Ramdev rose to national fame as a yoga guru through his programmes on TV channels - Sanskar in 2001 and Aastha from 2003. He readily acknowledges the role of the media in his rise. "Patanjali ko bananey mein ek se 10 per cent humara role hai, baaki role media ka hai (My own role in the rise of Patanjali is just one to 10 per cent, the rest of the credit goes to the media)," he says. Earlier, in 1995, when Ramdev was still a little known yoga teacher in Haridwar, Balkrishna set up Divya Pharmacy - under the aegis of Ramdev's guru, Swami Shankar Dev's, ashram - to make Ayurvedic and herbal medicines. "When Divya Pharmacy was set up, we hardly had the money to pay for the registration," says Ramdev. "For the first three years, till 1998, we distributed the medicines free. From buying the raw materials to grinding and mixing, we did everything ourselves."

The medicines proved so popular that Ramdev and Balkrishna sought to scale and diversify into other products. But that proved difficult since Divya Pharmacy was registered under a trust. At the same time, with Ramdev's popularity soaring, substantial funds began to come in - sizeable loans from the likes of NRIs Sarwan and Sunita Poddar, as well as locals such as Govind Agarwal - which in turn helped to get bank loans. Thus was born Patanjali Ayurved as a private company in 2006, which has since rolled out a range of products - in healthcare, hair care, dental care, toiletries, food and more - at breathtaking speed.

"Product development at Patanjali works on three basic principles," says Balkrishna. "They are: competitive pricing, purity of raw materials used and innovation." Take Aloe Vera juice, one of Patanjali's earliest offerings. Ramdev, in his yoga classes, had been recommending Aloe Vera juice for its health giving properties, but disciples kept complaining that, at Rs 1,200 a litre, it was way too expensive. "We reached out to farmers and found Aloe Vera leaves were being sold fairly cheap," says Balkrishna. "It's just that the juice manufacturers were reaping huge profits. We sourced the leaves from farmers in Rajasthan and Uttar Pradesh and were able to sell the juice for Rs 150 a litre in 2006. Even today, it costs Rs Rs 200 a litre."

Purity is a given for all products - Patanjali has ventured into categories such as desi ghee precisely because of complaints that most brands in the market were adulterated. Indeed, desi ghee has since become the most popular of Patanjali's products, bringing in Rs 442 crore - or 36.78 per cent of the company's total revenue - in 2014/15. As for innovation, Patanjali has displayed it with products such as amla juice and amla candies. "We found farmers in UP's Saharanpur district cutting down amla trees as there were no buyers for amla," says Balkrishna. "We convinced them not to do so and sell us the amla instead."

Yet another reason for Patanjali's success is the thrift it practices. "Our profit margins are miniscule because the main aim is not to make profit," says Ramdev. "Profiting from patients is against the philosophy of Ayurveda, so we aim at minimum profit from our health products. Our input costs are low because we source directly from farmers, avoiding middlemen." Salaries are also modest. "Humare yahaan crore ki salary paane waala koi vyakti nahee hai, (There is no one in our company who is paid crores as salary)," he adds. "Most companies have administrative costs of around 10 per cent of their revenue, but in our case it is just two per cent."

Big Is Beautiful

Patanjali claims to have earned revenues of Rs 2,007 in 2014/15, which puts it on par with some of the top players in the fast moving consumer goods (FMCG) sector such as Procter & Gamble (P&G) Health Care with Rs 2,409 crore, Jyothi Laboratories Ltd. with Rs 1,504 crore or Emami Ltd. with Rs 2,220 crore in the same year. This was almost double the revenue of Rs 1,195 crore in 2013/14. Near 100 per cent growth was also witnessed two years earlier - revenue rising from Rs 454 crore in 2011/12 to Rs 849 crore in 2012/13. "In comparison, rival companies such as Dabur and Marico are growing at about 18 to 22 per cent annually, while the overall FMCG market for daily use items has been expanding 15 to 20 per cent for the last 20 years," says Harminder Sahni, Founder and Managing Director of management consulting firm, Wazir Advisors. Not surprisingly, in August this year, global brokerage firm CLSA released a glowing report on Patanjali, titled Wish You Were Listed, estimating it to be bigger than Jyothi Laboratories and Emami. Ramdev and Balkrishna expect Patanjali's revenue to cross Rs 5,000 crore in this financial year, and at the rate it has been going, the figure does not seem fanciful. "Once revenues reach Rs 5,000 crore, its market cap would be around Rs 40,000 crore," says Sahni.

Initially, Patanjali shunned the conventional distribution network, preferring to rely on its own channels of super distributors, distributors, Chikitsalayas (franchise dispensaries) and Arogya Kendras (health centres which sell Ayurvedic remedies). Once it turned to retail outlets from 2011, revenue began to multiply manifold. In October this year, Patanjali achieved another coup by tying up with the Future Group to sell its products at Big Bazaar and other Future Group stores in 245 cities and towns. "Patanjali understands India's heart and soul and, in due course, will become one of our largest partners," says Kishore Biyani, Founder and CEO, Future Group. "Its competitive pricing is a big attraction. We are creating special and permanent shelf space for some of its flagship products." He expects to start with Rs 80 crore worth of supplies per month from Patanjali.

Already, a few Patanjali products have made major inroads - apart from desi ghee, its toothpaste Dant Kranti, for instance, launched in March 2010, brought in revenues of Rs 200 crore in 2014/15. But the alliance with the Future Group is expected to ramp up sales much more. "It is a win-win situation for both Patanjali and Future Group," says brand expert Harish Bijoor. "Patanjali gets a modern trade-face, which it possibly did not have before. The Future Group will give Patanjali fresh customers from a market which might not have opened up to it as quickly otherwise." It will also put the competition on notice. "The first threat will be to home-grown players like Dabur and Emami," adds Bijoor. "Next, it will put top line and bottom line pressures on companies like P&G and Hindustan Unilever."

MNC Hatao

"We do not think about competition," says Balkrishna. But a little probing reveals that while Patanjali is happy to co-exist with indigenous companies, multinational ones are a different matter. "Humara ek simple funda hai: MNCs ko replace karna (We have a simple principle: we want to replace MNCs)," says Ramdev. "We don't want to put anyone down, but we would like to instil swadeshi pride so that Indian money does not go out of the country." He is aware that the competition is gunning for him. "The MNC mindset is such that whenever an Indian does anything, MNCs think we are competing with them," he says. "MNCs are creating special war rooms to combat Patanjali. We are not into any such war rooms. We don't analyse other companies' strategies or conduct market surveys and feasibility studies. It is only when people ask for cheap and healthy options that we try to respond." And as far as possible, he prefers to use indigenous machines at Patanjali's manufacturing units. "If there is no Indian alternative, we have to use whatever is best suited for the job," he adds. Ramdev recalls how his dream of Swadeshi goes back to his early days in the gurukul. "Our clothes slowly turned brownish as we didn't use Rin, but we were hurt that there was no Indian alternative available in the market." Patanjali has launched a premier detergent cake called Supreme.

The emphasis on health will never waver - however much it detests MNCs, Patanjali will not, for instance, get into aerated drinks just to counter Coca-Cola and Pepsi. But, is catering to vanity ethically okay? Patanjali will launch a premium beauty care line called Saundarya this year. "We are not opposed to beauty products but to the illusions fostered by them," says Ramdev. "We oppose the advertisements showing dark women becoming fairer by using a particular product." Indeed, the same applies to products other than those promoting beauty too. "Lifebuoy hai jahan tandurusti hai wahan (Where there's Lifebuoy, there's health)," he adds, parroting a popular jingle for Lifebuoy soap. "How can a soap make you healthy? Health comes from healthy eating and working out. We want people to face reality."

Patanjali's own advertising was limited in the past, but has increased considerably of late, with ads appearing on general entertainment TV channels (GECs) such as Star and Zee. It is also in talks with The Walt Disney Co. owned UTV channel. The day Business Today met him Balkrishna's waiting room was full of GEC representatives. Actor Hema Malini, who reportedly once took yoga lessons from Ramdev, has been roped in to endorse Patanjali's line of maida-free biscuits. A big advertising push is expected soon, with ad agency Mudra drawing up an expansive campaign. With 69 per cent of sales happening in North India, the company is looking particularly hard at regional Southern channels, apart from considering setting up a distribution hub in the South. "But our ads will remain different in that they only seek to inform the customer," says Rakesh Sharma, Patanjali's Marketing Head. "We won't make false promises or sell dreams."

Lure of National Pride

Every employee at Patanjali dresses in white - white shirt and trousers or white kurta-pyjamas. The aura of spirituality is further reinforced by small details, such as the prasad every Balkrishna visitor gets before departing - a saffron bag containing a couple of Patanjali products, books on Ayurveda, a list of Ayurvedic treatments and Patanjali's products to cure common ailments. Working hours are long, but no one seems to mind. The day Business Today visited, all senior managers were at work in the rooms even close to 11 pm. "If you work late hours in a corporate set up, HR thinks you are inefficient, unable to complete your work in the stipulated time," says C. P. Nagpal, Head of the Food and Juice Operations at Patanjali, who was formerly with Dabur. "Here it is different. Here we all know we are working for a cause."

The cause also draws applicants in droves, unfazed by the not-so-great salaries provided or the hard work demanded. "For the first time, I feel I'm working for society at large and not just chasing numbers," says Sharma, who came to Patanjali in 2011 with 24 years of marketing experience behind him. Applicants for marketing jobs were milling all over, the day Business Today visited, as Patanjali with its rapidly expanding footprint, looked to augment its marketing team. There is talk that from next year, Patanjali will start visiting B-school and engineering campuses for placements.

Though Ramdev has no financial stake in Patanjali, his influence permeates every corner. His portrait - along with Balkrishna's - hangs in every room. Product decisions are taken by Ramdev and Balkrishna together and developed by a core team comprising Ramdev's younger brother Ram Bharat, another close Ramdev associate, Swami Muktanand, and the top management of Patanjali. Decisions about marketing strategy and advertising are usually left to Balkrishna, but here again Ramdev's relentless touring is a vital part of the strategy. He travels more than 200,000 km a year, and precisely for this reason keeps himself aloof from the company's day-to-day functioning. "My top priority is yoga and jan maanas sampark (meeting people)," says Ramdev. "A person touring so much cannot be part of an establishment. That requires one to have management and execution skills, and to be present on the premises most of the time." It is Ramdev's vision that has pushed Patanjali towards acquiring scale. "I believe, whatever we do should be done well," says Balkrishna. "Swamiji believes whatever has to be done, should be done big."

Is Patanjali too dependent on Ramdev? He admits that currently it is. "Gradually, I'll step back," he says. "We would like our principles to be in the forefront." He has even given thought to succession planning. "Globally, corporate houses are run by CEOs, but Patanjali will be run by sadhus and acharyas like Balkrishna and me after we depart," he adds. "We are preparing 500 sadhus to take over. They will run the company the Patanjali way: a corporate structure, with a spiritual culture."

Post healthy instant noodles, many more new products are in the offing. Three more manufacturing units are being set up in Madhya Pradesh, Gujarat and Rajasthan. Nagpal says his team is working on herbal chocolates, rasgulla, idli and dosa mixes and an energy drink called Powervita to rival Bournvita, all of them expected to roll out shortly. But, however large Patanjali gets, it will never fulfil CLSA's hope of being listed on the bourses. "If we have shareholders and directors, they will want to run the company their own way," says Balkrishna. "It might clash with our goal of providing the best products at the cheapest prices."

Will Patanjali be able to achieve the scale it seeks? "It will need to command a large share of the counter at retail outlets," says Debashish Mukherjee, Partner and Co-head, Consumer and Retail Industries (India and Southeast Asia) at consulting firm AT Kearney. "Managing that for products doing well as well for those not doing so well, is something its competitors have mastered. Patanjali will need to do so too. It will also have to adapt products to different regions."

No doubt, Ramdev and Patanjali - and even Divya Pharmacy - have had their share of controversy. Ramdev's political involvement as well as his comments on matters as diverse as homosexuality and Shah Rukh Khan, have drawn flak. Patanjali also has several ongoing tussles with the Income Tax Department and with the Enforcement Directorate. But Balkrishna believes that the biggest crisis has been faced and overcome - that was when senior CPI (M) leader Brinda Karat accused Divya Pharmacy of using human and animal bones in its products. "Humne media aur investigating agencies ko apna unit dikhaya, khul key saare processes dikhaye aur sabkee aashanka door hui (We opened our unit to the media and investigative agencies, showed them our processes and removed their suspicions)," says Balkrishna. "People's trust in us increased rather than being reduced. It brought us a lot of attention and demand for our products shot up."

(Research Inputs by Niti Kiran)