Baba Ramdev-led Patanjali open to collaboration with 'videshi' MNCs as long as it doesn't clash with its 'desi' values: Report

Baba Ramdev, the yoga guru and promoter of home-grown FMCG company Patanjali Ayurved, has in the past been vocal about taking the deep-pocketed multinational foreign companies operating in India head-on

FP Staff November 11, 2019 13:30:12 IST
Baba Ramdev-led Patanjali open to collaboration with 'videshi' MNCs as long as it doesn't clash with its 'desi' values: Report
  • Baba Ramdev, the yoga guru and promoter of home-grown FMCG company Patanjali Ayurveda, has in the past been vocal about taking the deep-pocketed multinational foreign companies operating in India head-on

  • Ramdev, a household name whose TV yoga shows are watched by millions, has been the public face of Patanjali since it was set up in 2006 and remains its brand ambassador

  • Devotees and detractors alike say Patanjali's management style is a far cry from standard corporate culture

After repeatedly touting 'swadeshi' as its calling card and railing against multi-national corporations (MNCs), Baba Ramdev-led Patanjali Ayurved Ltd (PAL) is now considering four global deals, according to a news report. The company's chief executive Acharya Balkrishna told The Economic Times in an interaction that it is 'not averse to working with multinationals as long as it doesn't clash' with its values.

He refused to name the multinationals, the news report said.

In the past, there were reports of French luxury group Louis Vuitton wanting to invest $500 million in Patanjali — that’s almost half of its remaining Asia fund in it.

“We would love to work with him if we can find a model,” Ravi Thakran, managing partner, L Catterton Asia told The Economic Times.

MNCs in country to 'loot', said Baba Ramdev

In the past, Baba Ramdev has compared MNCs to the erstwhile East India Company that had entered the country with a purpose to "loot".  Ramdev had said that he aimed to make India free from the MNCs.

In 2017, while speaking at a function to mark the birth anniversary of Yogi Bharat Bhushan, Baba Ramdev had said that the MNCs in India were not working for the country's development, rather their sole objective was to "loot" India.

Patanjali agle panch varshon mein in videshi kampaniyon ko moksh de degi (Patanjali will finish the MNCs up from the Indian market in next five years), he had said.

PAL, which has relied on Baba Ramdev’s popularity to build a brand in record time and boost sales, has been hailed a disruptor in the fast moving consumer goods (FMCG) space. However the firm is reportedly battling head-winds for some time now.

Three years ago, yoga guru and entrepreneur Baba Ramdev was riding high.

The consumer goods empire he co-founded had tapped into a wave of Hindu nationalism after the election of Prime Minister Narendra Modi in 2014. Customers were snapping up Patanjali Ayurved’s affordable, Indian-made products such as coconut oil and ayurvedic remedies, in a mounting threat to foreign companies that had bet big on India.

In fiscal 2019, PAL's revenues were Rs 8,135 crore compared to rapid rise in turnover from around Rs 2,000 crore in 2014 to Rs 10,000 crore in 2017. Revenues were flat in 2018. A bigger concern for the homegrown FMCG maker is that consumer off-take has declined, cited a Credit Suisse study on PAL.

“Turnover figures will force multinational companies to go for kapalbhati,” saffron-robed Ramdev declared in 2017, in reference to a yoga breathing exercise, vowing sales would more than double to 200 billion rupees ($2.84 billion) in the year to March 2018.

But instead, Patanjali’s sales plunged 10 percent to 81 billion rupees, according to its annual financial report.

And in the last fiscal year, it likely deteriorated further, say company sources and analysts. Provisional data indicated sales of just 47 billion rupees in the nine months to 31 December, CARE Ratings said in April, based on information from Patanjali, according to a PTI report.

Baba Ramdevled Patanjali open to collaboration with videshi MNCs as long as it doesnt clash with its desi values Report

File photo of Baba Ramdev. Reuters

Not passing on GST benefits to consumers

The home-grown FMCG has been battling to douse other fires, as well. In April, the Directorate General of Anti-Profiteering (DGAP) reportedly widened its probe against FMCG and consumer durable firms for not passing on the net benefit of GST rate reduction to the consumers, a media report said.

According to Business Standard, the DGAP is investigating Patanjali Ayurved among others. The DGAP indicated that Patanjali Ayurved profiteered around Rs 176 crore on various FMCG items till August 2018, the report said.

"We are now extending our investigation to check further profiteering by Patanjali till March 2019," a government official was quoted as saying in the report.

The GST was rolled out on 1 July, 2017.

Many missteps flounder growth

According to interviews with current and former employees, suppliers, distributors, store managers, and consumers, Patanjali’s ambitions have been hobbled by missteps.

In particular, they highlight inconsistent quality as Patanjali expanded very quickly.

The company says its rapid expansion did bring some teething problems, but that they had been overcome.

Patanjali also suffered, like many others, from Modi’s 2016 ban on high-denomination banknotes and 2017 introduction of a new goods and services tax. The moves disrupted economic activity.

"Problems were expected"

Patanjali says it has 3,500 distributors that supply some 47,000 retail counters across India. Patanjali shops, mostly popular with rural Indians rising into the middle class, sell snacks like mango candy or ayurvedic remedies promising to cure joint pain.

Ramdev, a household name whose TV yoga shows are watched by millions, has been the public face of Patanjali since it was set up in 2006 and remains its brand ambassador-his bearded face smiles down from ubiquitous billboards and hoardings in Indian villages.

But the company is owned by his business partner Acharya Balkrishna, who met Ramdev at a Sanskrit school three decades ago and holds 98.55 percent of Patanjali’s shares, according to a 2018 company filing.

The 46-year-old Balkrishna, whose net worth Forbes had earlier put at $4.9 billion, brushed aside concerns about the company’s health during an April interview at one of Patanjali’s yoga centres near Haridwar.

“We suddenly expanded, we started three-four new units, and so problems were expected. We have solved that network problem,” said Balkrishna, referring to supply chain issues that affected deliveries. The problems were concentrated in “set-up and networking”, he said, without elaborating.

One ex-employee said issues included not having long-term deals with transporters, which complicated planning and increased costs. Patanjali executives also lacked the software needed to effectively track sales, another former worker said.

Balkrishna declined to give sales estimates for the current fiscal year or last but said future results would be “better”.

Reuters sent follow-up questions to Patanjali’s public relations officer KK Mishra, who said the queries had been forwarded to a special committee. Calls and messages to Balkrishna’s assistant about the queries went unanswered.

Third party suppliers

As Patanjali has ramped up its offering to more than 2,500 goods, it has prioritised scale over quality and farmed out production to third parties, which has dented quality, two former office executives and a supplier said.

In 2017, Nepal’s drug watchdog found that six Patanjali medical products had microorganism content above a maximum ceiling set by the regulator. Santosh KC, an official at Nepal’s Department of Drug Administration, said there were no problems with other Patanjali products.

Balkrishna denies there have been quality issues, noting that India’s national laboratories accreditation board has approved Patanjali’s central lab.

“Quality is not a problem,” Balkrishna said.

Patanjali products marketed as ayurvedic come under the regulatory purview of the Ministry of Ayush, created in 2014 to promote alternative therapies including Ayurveda. The ministry did not respond to a request for comment on Patanjali’s product quality.

India’s food regulator FSSAI, which oversees Patanjali’s processed foods, declined to disclose data on quality tests, saying it only did so in the event of safety concerns.

Balkrishna said only “a few products”, including wheat, pulses and rice, were sourced externally.

Reuters reviewed 81 Patanjali products in a Mumbai Patanjali store and found that 27 of them had labels that listed the goods as partially or wholly manufactured by other Indian producers.

These suppliers either declined to comment or did not respond to questions.

The construction of Patanjali’s own factories has been dogged by delays, which the company attributes to starting multiple projects simultaneously.

A food plant in Maharashtra due by April 2017 and an ayurvedic and herbal products factory outside Delhi expected by 2016 are now slated for 2020, according to Patanjali.

Baba Ramdevled Patanjali open to collaboration with videshi MNCs as long as it doesnt clash with its desi values Report

File image of Patanjali CEO Acharya Balkrishna and Bab Ramdev

Unpaid suppliers, dwindling ads

Some unpaid suppliers are turning their backs on the company, according to interviews with three suppliers as well as letters, reviewed by Reuters, sent to the company by those owed money.

A chemical supplier said Patanjali started delaying payments by a month or two in 2017. By 2018, delays had grown to almost six months.

Two managers at stores of leading Indian retailers and two mom and pop stores owners, all in Mumbai, said they were only keeping a handful of Patanjali products in stock due to faltering demand.

Faced with the threat from Patanjali, competitors such as Hindustan Unilever and Colgate Palmolive India Ltd have launched ayurvedic products themselves, adding to the competition.

Meanwhile, Patanjali has slashed ad spending. In 2016, it was third biggest Indian television advertiser, but by last year (2018) it did not make the top 10, according to Broadcast Audience Research Council India data.

Patanjali’s main advertising agency, Mumbai-based Vermmillion, declined to comment, according to a PTI report.

Abneesh Roy, a senior retail analyst at broker Edelweiss, said Patanjali would likely lose market share as a result.

Fraught bromance

Ramdev passionately backed Modi in the 2014 election. He tapped into his following as a TV celebrity, mobilizing voters and synchronizing messaging with Modi’s Bharatiya Janata Party (BJP).

Patanjali has benefited from more than an estimated $46 million in discounts for land acquisitions in BJP-controlled states, Reuters revealed in May 2017.

More recently, however, Ramdev seemed to have cooled on Modi, a fellow yoga aficionado.

In its 2017-2018 financial statement, Patanjali complained that demonetisation “affected consumers’ spending habits,” while the sales tax hit “costing and pricing of inputs and products”.

Ramdev also told journalists earlier this year he had withdrawn himself politically. But he popped up on the campaign trail to support the BJP in the April-May election, saying Modi was “the pride of mother India”.

The mixed message has ruffled some in the BJP’s powerful fountainhead, the Rashtriya Swayamsevak Sangh (RSS). ”Ramdev,” one senior RSS official said, “makes different kinds of statements that make it difficult to put trust in him.”

Representatives for Modi, who cruised to re-election, did not respond to requests for comment.

App flop

Devotees and detractors alike say Patanjali’s management style is a far cry from standard corporate culture.

Employees at Patanjali’s main food plant in Haridwar gather to chant “om” every morning. Senior managers must dress in white. Failure to follow wardrobe rules and late arrivals result in pay deductions, current and former employees said.

Patanjali, which said it employs around 25,000 people, last year advertised for salesmen across India. But one ex-employee said Patanjali had also chopped several hundred posts since mid-2017. The company did not respond to queries about staffing.

Patanjali has also announced plans to sell SIM cards, solar panels, bottled water, phones and jeans.

Balkrishna said the diversification was working.

“Solar is good. Our apparel division is going... We have big plans for bio-organic products,” he said to PTI.

In 2017, computer scientist Aditi Kamal pitched Ramdev the idea of an Indian-made messaging app.

“When I said ‘WhatsApp rival and all,’ he said: ‘This is great, why didn’t we think of this before?’” recounted Kamal.

Kamal said she was hired, and six months later was overseeing 100 employees.

But the 2018 launch of the app, called Kimbho, was marred by privacy flaws and Patanjali halted the venture.

“We have not dropped the project completely, but we have stopped,” Balkrishna had said.

--With additional inputs from agencies

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