Patanjali: Are franchisees as satisfied as customers?

This company produces products around 444 products in the personal care and food category. This includes around 45 types of cosmetic products and 30 types of food products. Patanjali Ayurved, co-founded by yoga guru Ramdev, is targeting revenue of Rs 10,000-crore in 2016-17, after sales grew 150 per cent in the previous financial year to Rs 5,000 crore. 

According to CLSA and HSBC, Patanjali is the fastest growing FMCG company in the country. It is valued at Rs 3,000 crore and some predict revenues of Rs 5,000 crore for the fiscal 2015–16. These are astonishing numbers given the intense competition in the FMCG market. Majors like Hindustan Unilever and Dabur are in the process of reworking their strategies in these categories. India’s entire packaged consumer products market at present is estimated at about Rs 3.2 trillion a year and projected to grow 12-15% annually over the next five years, reaching Rs 6.1 trillion in 2019. This is according to a September 2015 report by industry lobby FICCI and advisory firm KPMG. Looking at all these numbers from Goa, they look very impressive but what is the story in the State.

Sadanand Gaunkar a retired corporate executive based in Taleigao said “I am an enthusiastic consumer of the company’s products. The ghee, the toothpaste and the honey is fantastic. I am in fact promoting the products amongst my relatives, because I believe they are good products.” That was a sentiment one found quite common amongst folks the Herald spoke to. 

Gajanan Pednekar said the pricing was exactly right. He said “All the products, be it jam, toothpaste or biscuits, are cheap and they taste very good. I buy them for my children and they are happy with the taste which is surprising considering how children are today.” 

The sentiment amongst the retail class however is a lot more nuanced. 

Venkatesh Warik a dealer of Patanjali products in Taleigao said business was good since he opened his outlet three months ago. He said “Business is good. The Patanjali products are in the top three in their respective categories. In our outlet the desi ghee is very popular and with the festival season on we have to keep stock.” 

The maintenance of adequate stock is a very important aspect of the retail trade. Major international brands operating in the country ensure the retail outlet is visited once a week at a minimum. This however does not seem to be the modus operandi of Patanjali. 

Venkatesh said “There is great demand for their products but the supply is very erratic because I suppose they don’t have their systems in place because of the dramatic growth they have experienced in the past year.” 

Another complaint common amongst the retailers were the very poor margins in place. A retailer who did not want to be identified said “Patanjali gives us around 10% which is very low. More importantly the credit period is just 2 days which is very difficult to manage, given that I purchase large quantities. It means a huge outflow of cash every second day.” 

Venkatesh Warik said one had to have another business on the side to remain being a Patanjali dealer. 

Venkatesh said “They had promised me an exclusive arrangement in the area which has not happened now with the company ensuring their products are now stocked by the Kirana shops. My regular customer is now going over to that shop because it is now below their house or a very short distance away. I am losing business. I cannot even employ someone to sit here because the margins I earn will go towards paying the salary.” He said he was now able to keep other brands along with Patanjali which was not the case earlier. 

Kirit Maganlal, Promoter Magsons said business was excellent with regards to Patanjali products and the competition was feeling the pinch. Kirit said “The honey, the cow ghee are excellent products and we had queries from several of our customers and for the very first time, we approached a company to represent them.”

He however voiced the sentiments expressed by other retailers when he said the distribution was not in place. In addition he said there were no schemes for volumes because that was how large retail outlets like his made money. The margin of 10%, he said was the lowest given that other companies usually gave around 14% to15%. With regards to the availability of stocks, Kirit said there was always a problem which had to be tackled. 

Kabir Vaghela who has two outlets in Porvorim and Caranzalem said the response was very good. Since he is a franchisee, he cannot stock other brands. With regards margins, the Aurogya Kendra at Caranzalem gives him good margins but the Chikitsalaya offers him even higher margins. He however is also struggling with stocks not being made available. Kabir said “The client is interested but I don’t have the product they want. It is a problem. This issue has even forced a few shops to shut business.” An outlet at Mano Shanti shut down because of the problems stated above. Kabir said “It is strange given that the products were popular and had a large target audience but the inability to provide stocks to the franchisees was resulting in outlets shutting business.” 

Kabir said his outlet at Porvorim generated around Rs 15 lakh per month last year but now it was around Rs 10 lakh per month. While the margin on atta may be 7% on medicine it is 20%. Given that volumes are very high according to Kabir the scale of transactions can only be guessed. 

Some people may snigger but the general perception is that the consumer is getting a very good deal for once.