FMCG economic slowdown: Patanjali latest victim, sales shrink in Rural India.
While major FMCG brands like Dabur, Britannia, and ITC have acknowledged the economic slowdown, the latest victim is Baba Ramdev’ s Patanjali Ayurveda. According to reports, the slowdown was first seen in the household sector, the automobile sector and for the last 5 years it has trickled down to consumer goods. The four key factors impacting growth are monsoons, elections, GST and macroeconomy. Rural India accounts for 37% of overall FMCG spends and has historically been growing at 3-5% points faster than urban on account of increasing affordability, availability, and demand. However, rural growth is slowing down double the rate.MD Acharya Balkrishna acknowledged the FMCG sector’s sluggish growth and admitted that Baba Ramdev-found Company is also reeling under it. Patanjali’ s revenues for the year ended March 2018 dropped 10% to Rs 8,135 crore from Rs 9,030 crore in FY17 after 5 years of growth. Its net profit fell by over a half at 529crore in FY18 against Rs 1,190 crore a year earlier.
The Haridwar based company which makes a gamut of consumer goods, including personal care and packaged foods, had doubled. Its annual sales from 2013 to 2017. But there was pressure from established rivals such as Hindustan Unilever and Colgate, which have responded to Patanjali’ s rapid rise by launching natural, Ayurveda and herbal products. Balkrishna, said, “ If MNCs have copied us, its matter of pride for us and its good for consumers since they have a choice. We feel no pressure of competition.”
After starting out as a small pharmacy in 1997, Patanjali slowly picked up and launched more than two dozen mainstream FMCG products and is now eyeing the apparel sector and dairy products amongst others. Despite the hiccups, Patanjali is confident that it will resume its growth path in the ongoing FY. He also said Patanjali will now focus on expanding distribution of the existing products. Balkrishna has confirmed that the firm’s sales have slowed down because of its supply chain and distribution network could not keep pace with its growth. They were growing very fast but servicing the trade channels, infrastructure and the GST rollout impacted majorly. Balkrishna said that to expand the business to the next level of growth, they need little time to work on supply chain and distribution. They have strengthened their distribution network now and the results will be visible in the coming years. The Baba Ramdev –the led company has also restructured its business with key categories such as biscuits and noodles not being included under Patanjali Ayurved, and instead of being classified under different group companies.
The Ayurveda company’s MD expects that the situation will ease down in the coming months. FMCG products are consumed by the masses, and the interest in these products persist so the market won’t go down in the future. The Rs 10,000 crore worth company is going to witness the increase in valuation as the company has ventured in two-three more areas. Balkrishna said, the FY19-20 will be good and are hopeful.