Patanjali Ayurveda started in 2006 by Yoga Guru Baba Ramdev has seen an exponential rise in the past few years with revenues increasing from Rs 450cr in FY12 to Rs 5000cr in FY16. It can offer low prices to consumers due to very low selling, administrative and general costs at 2.5% of revenues.
Patanjali follows a 2 stage distribution strategy in general trade. Stage 1: Create a strong alternative distribution system for demand creation and building word-of-mouth advocates. Stage 2: Pivot to general trade once a sizeable consumer base in generated from Stage 1.
In a new market, Patanjali 1st drives trials and consumption using dedicated stores. These stores are essentially Ayurveda clinics run by entrepreneurs entirely with their own investment. Patanjali trains and certifies medical practitioners nominated by these stores and provides usage of Patanjali brand name.
These stores provide various services which include free consultation by certified medical practitioners. This results in high footfalls and building a large scale of early adopters. On the days, when the practitioner is absent, the sales fall by 30-40%.
Select players have adopted ‘flanker’ strategy to bypass competition, entrench their position, encircle and then launch a frontal attack in mainstream channels. Examples include Starbucks’ consumer packaged goods (CPG) business. It leveraged its retail store footprint to build a flourishing CPG business.
Yellow Diamond Wafers targeted a relatively lesser contested space- smaller mom and pop retailers within the intensely competitive market. They also provided higher margins than their competition. This resulted in it growing to Rs 700 crores in 6 years.