Business

Patanjali – A Brand of Disguise

First of all, let me praise Patanjali & specifically Baba Ramdev for their terrific accomplishment in making  it a National brand. They have shaken the empire of likes HUL, P & G, Nestle with quite ease. It took them roughly around 5 years to touch ten thousand crore turnover. How they have achieved it, is a different matter. There are many things about Patanjali which are hard to explain because of lack of data from the company. Patanjali is a private company & doesn’t disclose its financial or other reports other than its turnover & profit claims. But, using simple economic explanations & logic many claims of Patanjali & Baba Ramdev can be put to test. Let’s start with their claim of herbal products.

Pricing of Herbal Products

Here is a little calculation for Patanjali Cow Ghee

Patanjali turnover for Cow Ghee (fiscal 2016-17) 1467 Crore
Patanjali Cow Ghee Price for 1 Kg 580 Rs
Amount of Ghee sold by Patanjali (Approx) 25293 Tonne
Amount of Milk required to produce ghee 632328 1000 Litre
No. of Cows required to produce this much of milk
considering a cow will give 15 Litre of Milk a day for 6 Months in a year
234195 Nos
Fat in 1 liter of Cow Milk 40 Gram
Milk required for 1 Kg of Cow Ghee 25 Litre
Cost of 1 Kg Ghee for Price of 1-liter milk as Rs 30 750 Rs

This calculation doesn’t include logistics, Packaging, processing cost of Final Ghee sold in Market.

They don’t have 2.3 lakhs cows in its cow farms; therefore they are purchasing milk from the local milk collectors. Nowhere in entire North India, pure cow milk price is less than 30 Rs even at the doorstep of a farmer. Also, nowhere in north India, local dairy farmers selling pure Cow Ghee below Rs 1000 for 1 Kg. So, How Patanjali is Selling its pure Ghee at such a lower price?

We can do a similar calculation for Honey or Mustard Oil or other products. The price at which Patanjali is selling their pure products is not feasible.  Farmers themselves can’t have such low cost. Economies of scale cannot justify such a huge difference. The answers are in next paragraphs.

Market Phenomenon

As we know that an increase in consumption of a product either matched by an increase in quantity supplied or by an increase in the price of that product. The case of Patanjali defies this market phenomenon. Let’s assume that all products of Patanjali are herbal & has natural ingredients. Cloves (Laung), black Peeper (Kali Mirch), Amla, aloe vera and many other ingredients are common & are listed on many of Patanjali products. The problem here is neither the production nor the prices of these ingredients have increased significantly in the market after it started manufacturing of products which use them. There should have been spurt increase in the supply of these materials to Haridwar, at Patanjali factory since the launch of its products. But there are no such signs from the market.

The fact is that India doesn’t have a well-developed supply chain for these natural ingredients. The supply is highly irregular with large fluctuations in price. This is the reason that many other herbal brands launched earlier tasted the dust in the market.

Next Big question is how Patanjali had managed to manufacture such large quantity of products from just three factories? They are doubling the quantity each year but there is no clarity on earlier capacity or addition of capacity. Though they have announced to add six more manufacturing plants across India, building a plant takes time.

Just another FMCG company nothing special

As per Mint report published in 2016, Patanjali factory in Padartha is highly restricted & very limited amount of information is given to outsiders. But the information in that report is sufficient to answer above raised questions. Some points from the report –

  • At the factory, pasteurized unsalted butter produced by the Karnataka Co-operative Milk Products Federation Ltd was being mixed with local cow milk to produce ghee.
  • Delhi-based Sona Biscuits makes Biscuits for Patanjali (that also sells biscuits under Sobisco brand)
  • The aloe vera unit is a processing and packaging unit, which was using pulp supplied by Dhandev Resorts and Health Care Pvt. Ltd (a Jaisalmer-based company owned by Roop Ram, an Indian National Congress leader).
  • Patanjali’s juice products, which Ramdev claims to be natural, contains added sugar, water, and use preservatives. These are made by a bunch of companies, including GK Dairy and Milk Products Pvt. Ltd (this company also sells products under the Gopalji brand).
  • Haridwar-based Aakash Yog Health Products Ltd manufactures noodles for Patanjali. Aakash used to make noodles for HUL’s Knorr brand, till recently.

According to the report, many of Patanjali products are herbal clones of other products from big MNCs. Patanjali cosmetic/beauty products don’t seem to be all herbal. They are chemical based products with herbal fragrance & flavors. Everything about Patanjali business is like all other companies. They have sub-contractors, manufacturers, suppliers, and distributors everything as usual. Patanjali has local subcontractors whose quality is not assured and they can have lower quality standards than other regular manufacturers of HUL, P & G. Patanjali plants are highly secured by CISF personnel’s & very limited parts of plants are allowed to access for media. Top officials of the company other than Baba Ramdev & Balkrishan Yadav are not accessible to media and none of their business partners responds to questions.

Advertising Practice

Many of Patanjali claims lies flat when inquired, negative promotions of other companies’ products are often wrong & baseless. Patanjali has a relatively long history of wrong claims & advertisements considering its short span. Here are some –

patanjali
The Image is from Economic Times Report

As said earlier, Patanjali is just like any other FMCG company. But, Baba Ramdev claims to be a social servant; he claims not to consider consumers as consumers but as part of the family. On the other hand, commercials of Patanjali have every sense of consumerism. The advertisement uses health benefits of products, fairness syndrome, Ayurveda and what not. Just like any other brand his products claim to clear pimples, provide fairness, reduce hair fall, make us feel good, confident – this is all consumerism only, nothing else.

What’s wrong in selling cosmetic products under Herbal Name

What’s a big deal if Patanjali is selling chemical base cosmetic/beauty products or any other product by naming them herbal products? This is an obvious question because many other companies do so. The problem is the emotions & trust of people. The problem is branding themselves as Swadeshi and herbal, terming MNCs as lottera but don’t disclose any financial reports themselves. Asking public to use, herbal swadeshi products from them but don’t use them himself in his highly secured Palace. They claims to use all of its profit for charity but doesn’t disclose where they use that. He himself is one of the biggest crusaders against Black Money. But his own company covers everything and nothing is public.

Providing teachings and encouraging yoga for health benefits was a great move. I respect & value Baba Ramdev for that. But Banking on that image for doing business that too which seems unethical will dilute the importance of Yoga in itself. The problem is what he says on TV commercials, news conference, rallies and what lies behind.

India is already a highly emotional & sensitive country when it comes to their “Nation” and “Culture”. Under such circumstance giving further air to these emotions on the base of lies can be a disastrous thing to do. Baba Ramdev is not any common individual or business man now. He is an ambassador of India & its rich heritage. Patanjali is a product of this brand. Fall of Baba Ramdev or Patanjali will also lead to damage to India & its culture. Once done, it will be impossible to recover that damage.

Sources –

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